# 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 $33,000 per year forever. If the required return on this investment is 5.8 percent, how much will you pay for the policy?

## Perpetuity:

Perpetuity is a financial asset that pays a fixed amount indefinitely. The present value of a perpetuity is simply the amount of periodic payment divided by the required periodic return.

## Answer and Explanation: 1

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View this answerYou will pay no more than $5,689,655.

The investor should pay no more than the present value of the cash flows from the investment. Since the...

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Chapter 6 / Lesson 4Learn 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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