Buying power = A/(1+inflation)^n
= 2500000/(1+0.029)^20
= 2500000/1.771362699
= 1411343
Help av Homework 6 You just made an investment in an insurance policy that is guaranteed...
- Example: An insurance company issues a guaranteed investment contract (GIC) for $10,000. If the GIC has a five-year maturity and a guaranteed interest rate of 8%, i t promises to pay $10,000 x 1.085= $14,693.28 • The company can choose to fund its obligation with $10,000 of 8% annual coupon bonds, selling at par value, with six years to maturity. As long as the market interest rate stays at 8%, the company has fully funded the obligation. Why? •...
10A) The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $30233 per year forever. If the required return on this investment is 8 percent, how much will you pay for the policy? 10B) The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $27437 per year forever. Suppose a sales associate told you the policy costs $501647....
You have purchased a guaranteed investment contract (GIC) from an insurance firm that promises to pay you a 7% compound rate of return per year for 5 years. If you pay $15,000 for the GIC today and receive no interest along the way, you will get __________ in 5 years (to the nearest dollar).
Once you graduate college and start working, you expect that you'll be able to save $6 thousand every year at the start of each year, an amount that will grow with inflation. Inflation is anticipated to be 2% per year. You think you will need $1 million of invested assets, as measured in today's purchasing power, in order to reach financial independence. You also anticipate an average nominal rate of return on your investment of 8.4%. How long will it...
Immunization . Example: An insurance company issues a guaranteed investment contract (GIC) for $10,000. If the GIC has a five-year maturity and a guaranteed interest rate of 8%, i t promises to pay $10,000 x 1.085= $14,693.28 . The company can choose to fund its obligation with $10,000 of 8% annual coupon bonds, selling at par value, with six years to maturity. As long as the market interest rate stays at 8 %, the company has fully funded the obligation....
You have purchased a guaranteed investment contract (GIC) from an insurance firm that promises to pay you a 7% compound rate of return per year for 7 years. If you pay $15,000 for the GIC today and receive no interest along the way, you will get __________ in 7 years (to the nearest dollar). $22,350 $24,500 $24,087 $22,511
30. You have purchased a guaranteed investment contract() from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years. If you pay $10,000 for the GIC today and receive no interest along the way, you will get in 6 years (to the nearest dollar). (C) $13,401 $13,676 $12,565 $13,000
2) The Maybe Pay Life Insurance company is trying to sell you an investment policy that will pay you and your heirs $40,000 per year forever. If the required rate of return for this investment Is 5.1% , how much will you pay for the policy?
Joe's insurance company, is trying to sell you a investment policy that will pay you and your heirs $27,000 per year forever. Assume the required return on this investment is 7.7 %. How much will you pay for this policy? Please show all calculations and answers.
The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $35,000 per year forever. If the required return on this investment is 5.3 percent, how much will you pay for the policy?