Question
In: Finance
Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,050 monthly. The contract...
Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,050 monthly. The contract currently sells for $80,000.
What is the monthly return on this investment vehicle?
What is the APR?
What is the effective annual rate?
Solutions
Expert Solution
Monthly return:
= $1,050/$80,000
= 1.3125%
APR:
= 1.3125%*12
= 15.75%
Effective annual rate:
= (1+1.3125%)^12-1
= 16.94%
jeff jeffy answered 2 years agoRelated Solutions
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