Question
In: Finance
An insurance company is trying to sell you an investment policy that will pay you and...
An insurance company is trying to sell you an investment policy that will pay you and your heirs $100,000 per year forever. If the required return on this investment is 6.5 percent, how much will you pay for the policy? A. $1,538,461.54 B. $925,925.93 C. $1,265,455.25 D. $2,627,950.42
Solutions
Expert Solution
Present value of perpetuity=Annual inflows/required return
which is equal to
=$100,000/0.065
which is equal to
=$1,538,461.54 (Approx).
jeff jeffy answered 2 years agoRelated Solutions
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