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The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $16,500 per year forever. a.
The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $16,500 per year forever. |
a. | If the required return on this investment is 5.5 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 $380,000. At what discount rate would this be a fair deal? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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