Ask Question
BusinessBusiness
18 February, 10:07

Maybepay Life Insurance Co. is selling a perpetual annuity contract that pays $3,000 monthly. The contract currently sells for $326,000. What is the monthly return on this investment vehicle? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) Monthly return % What is the APR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) Annual percentage rate % What is the effective annual return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) Effective annual return %

+3
Answers (1)
  1. 18 February, 10:33
    0
    Solution:

    1 : The interest rate that fits the lifetime cash flows to the PV of cash flows is expected here.

    PV of an equation of perpetuity:

    PV = C / r

    $326,000 = $3,000 / r

    With the interest rate, we could now solve the following:

    r = $3,000 / $326,000

    r = 0.0092 or 0.92% per month

    2 : The interest rate per month is 0.92 percent.

    In order to calculate the APR, the number of months in a year is determined by:

    APR = (12) 0.92%

    APR = 11.04%

    3 : And using the equation to find the EAR, we find:

    EAR = [1 + (APR / m) ]m - 1

    EAR = [1 + 0.0092]12 - 1

    EAR = 0.1162 or 11.62%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Maybepay Life Insurance Co. is selling a perpetual annuity contract that pays $3,000 monthly. The contract currently sells for $326,000. ...” 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
You Might be Interested in
Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $49,000, and it estimates that 5% will be uncollectible.
Answers (1)
Suppose that you have entered a 5-year swap to receive Japanese Yen and Pay 1-year Libor with notional principal of USD 10,000,000. At the time the swap agreement was completed the swap quote was 0.50% bid and 0.
Answers (1)
Which force in porter's competitive forces model would describe an organization that loses customers due to its product prices being too high?
Answers (1)
Salley Corporation produces a single product. Last year, the company had net operating income of $40,000 using variable costing. Beginning and ending inventories were 22,000 and 27,000 units, respectively.
Answers (1)
Deimos Corporation has 500,000 shares of $2 par-value common stock issued and outstanding when the market price per share is $22 per share. By what amount will total equity increase when the company declares a 2:1 stock split
Answers (1)
New Questions in Business
Inc.'s capital structure features 40 percent equity, 60 percent debt, and that its before-tax cost of debt is 9 percent, while its cost of equity is 15 percent. What will be TapDance's WACC? (Round your answer to 2 decimal places.) WACC %.
Answers (1)
Which of the following choices is NOT a use for project plans in the workplace? A. event planning B. teacher lesson plans C. architectural blueprints D. memos about new corporate meeting times
Answers (1)
Maria is worried about the representativeness of her study. she is conducting interviews, but each one seems to last at least 3 hours. given that she has one month to collect her data, what strategy might she use to increase her sample size?
Answers (1)
What are some drawbacks and risks to a broad generic strategy? To a focused strategy?
Answers (1)
Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $640,000. The lot was recently appraised at $810,000.
Answers (1)
Home » Business » Maybepay Life Insurance Co. is selling a perpetual annuity contract that pays $3,000 monthly. The contract currently sells for $326,000.
Sign Up Forgot Password?