Question
The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $14,000 per year forever. a.
| The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $14,000 per year forever. |
| a. | If the required return on this investment is 5 percent, how much will you pay for the policy? (Round your answer to 2 decimal places, e.g., 32.16.) |
| b. | Suppose the Perpetual Life Insurance Co. told you the policy costs $300,000. At what discount rate would this be a fair deal? |
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Pricing And Liquidity Of Complex And Structured Derivatives
Authors: Mathias Schmidt
1st Edition
3319459694, 978-3319459691
