$7$ Calculating Perpetuity Values $[$LO$1]$ The Maybe Pay Life Insurance

Co$.$ is trying to sell you an investment policy that will pay you and your

heirs $$30,000$ per year forever. If the required return on this investment is

$5\mathrm{.}6$ percent, how much will you pay for the policy?

Calculating Perpetuity Values $[$LO$1]$ In the previous problem, suppose a

sales associate told you the policy costs $$525,000.$ At what interest rate

would this be a fair deal?

Calculating EAR $[$LO$4]$ Find the EAR in each of the following cases:

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