The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and...
Question:
The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $24,000 per year forever. If the required return on this investment is 6.3 percent, how much will you pay for the policy?
A Perpetuity:
A perpetuity is a bond or security that provides a series of periodic cash flows which goes for an infinite amount of time. A perpetuity is a form of an ordinary annuity and there a are very few in existence.
Answer and Explanation: 1
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View this answerWe can pay $380,952.38 for the policy
To find out the Cost of policy:
Present value of all the future cash flows should be equal to the cost of...
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What is a Perpetuity? - Definition & Formula
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Chapter 6 / Lesson 4
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Learn what perpetuity is in finance. Understand the meaning and definition of perpetuity, its characteristics and how its present value can be found using a formula.
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