Ask Question
26 August, 08:59

Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,600 monthly. The contract currently sells for $117,000. a. What is the monthly return on this investment vehicle?

+5
Answers (1)
  1. 26 August, 09:13
    0
    The monthly return on this investment vehicle is 1.37%

    Explanation:

    A perpetuity contract is one which lasts forever, It does not any time limit. Live Forever Life Insurance Co will pay $1,600 for indefinite time on today's investment of #117,000.

    Monthly return will be calculated using following formula:

    Present value of Perpetuity = Perpetuity Received / Interest rate

    $117,000 = $1,600 / r

    r = $1,600 / $117,000

    r = 1.37%

    Monthly return on the perpetuity is 1.37% for this perpetuity.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,600 monthly. The contract currently sells for $117,000. a. ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers