Curly's Life Insurance. Is trying to sell you an investment policy that will pay you and your heirs $25,000 per year forever. If the required return on this investment is 6 percent, how much will you pay for the policy?

pay for policy is $416666.67

Explanation:

given data

pay = $25000

rate = 6 % = 0.06

to find out

how much pay for policy

solution

to find out policy pay

we will apply here formula that is

pay = present value * r

so they pay here 25000 and rate 0.06

put these value we get present value

present value = pay / rate

present value = 25000 / 0.06

present value = 416666.67

so pay for policy is $416666.67