The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you
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The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $18,000 per year forever. If the required return on this investment is 4.3 percent, how much will you pay for the policy? Suppose the company told you the policy costs $445,000. At what interest rate would this be a fair deal?
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The time line is This cash flow is a perpetuity To find the PV of a perpet...View the full answer
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Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-1259289903
5th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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