By JLP | January 10, 2010
Tell me if you see something wrong with this slide from a Prudential video for an annuity feature they are offering:
Correct me if I’m wrong but if $100,000 grows 200%, it’s worth $300,000:
Remember, the formula for future value is Present value times one plus the rate of return (expressed as a decimal).
As the wording on their graphic stands, it’s misleading. UPDATE: As BG states in the comments below, Prudential does include a disclaimer “As a percentage of starting value.” Regardless, it’s still misleading because most people do not look at financial math in that way. They (Prudential) knows this and that’s why they worded it this way. Is your insurance company REALLY looking out for you?
And, the real question is: Does the $100,000 grow by 200% to $300,000 or does it grow 100% to $200,000? Somehow, being that it’s an insurance company, I’m pretty sure it’s the latter.
One other thing: how did this get past compliance?