Question
In: Finance
Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,250 monthly. The contract...
Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,250 monthly. The contract currently sells for $75,000.
a. What is the monthly return on this investment vehicle?
b. What is the APR?
c. What is the effective annual rate?
Solutions
Expert Solution
a. Monthly Rate =Monthly Payment/Current Price =1250/75000
=1.6667% or 1.67%
b. APR =12*Monthly Rate =12*1250/75000 =20.00%
c. EAR=(1+Monthly Rate)^n-1 =(1+1250/75000)^12-1 =21.94%
jeff jeffy answered 2 years agoRelated Solutions
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a.
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(Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
b.
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.)
c.
What is the effective annual return?...
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Live Forever Life Insurance Co. is selling a perpetuity
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Required:
(a) What is the monthly effective return on this investment
vehicle?
(b) What is the APR? (Do not round your intermediate
calculations.)
(c) What is the effective annual rate (EAR)? (Do not round
your intermediate calculations.)
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a.
What is the monthly return on this investment vehicle?
(Enter your answer as a percent rounded to 2 decimal
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b.
What is the APR? (Do not round intermediate calculations
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e.g., 32.16.)
c.
What is the effective annual return? (Do not round
intermediate calculations and...
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calculations.)
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