Question: The Perpetual Life Insurance Co is trying to sell you
The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $ 15,000 per year forever. If the required return on this investment is 5.2 percent, how much will you pay for the policy? Suppose the Perpetual Life Insurance Co. told you the policy costs $ 320,000. At what interest rate would this be a fair deal?
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