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1) Live Forever Life Insurance is selling a perpetuity contract that pays $1500 a month.The contract sells for $115,000. a)What's the monthly return of this

1) Live Forever Life Insurance is selling a perpetuity contract that pays $1500 a month.The contract sells for $115,000.

a)What's the monthly return of this contract?

b)What's the APR?

c)What's the Effective Annual Return (EAR)?

The discount rate for the following cash flows is 7.38% per year.

What's present value of the cash flow?

Year 1: 2480, Year 2: 0, Year 3: 3920, Year 4: 2170

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