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The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will...

The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $26,000 per year forever. If the required return on this investment is 5.3 percent, how much will you pay for the policy? Present Value?

Solutions

Expert Solution

Present Value:

= Annual cash flows/Required return

= $26,000/5.30%

= $490,566

Hence, present value is $490,566

jeff jeffy answered 2 years ago
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