Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $43,000 per year forever. A representative for Curly's tells you the policy costs $680,000. At what interest rate would this be a fair deal?

rate = 6.3235%

At a market rate of 6.3235% this will be a fair deal

Explanation:

under perpetuities the principal is never redeem. the investor receive cash payment for an indefinite period of time

This means:

perpetuities present value = C/r

where:

C = annual payment

r = rate

680,000 = 43,000/rate

43,000/680,000 = rate

0.06323529 = rate

rate = 6.3235%