Hopkins Insurance Co. is selling a perpetuity contract that pays $1,200 monthly. The contract currently sells for
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Question:
Hopkins Insurance Co. is selling a perpetuity contract that pays $1,200 monthly. The contract currently sells for $100,000.
1) What is the monthly return on this investment vehicle?
2) If instead, the amount of the monthly interest grows at a 0.1% rate every month, how much should Hopkins Life Insurance Co. price this contract to offer the same monthly return rate?
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