Problem 6-10 Calculating Perpetuity Values [LO1]
The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $26,000 per year forever. If the required return on this investment is 5.3 percent, how much will you pay for the policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Amount will be paid equal to the present value
Present value of perpetuity = Annual Cash flow/Discount rate
= 26,000/5.3%
= $490,566.04
Problem 6-10 Calculating Perpetuity Values [LO1] The Maybe Pay Life Insurance Co. is trying to sell...
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