Standards Life Insurance offers a perpetuity that pays annual payments of $12,000. This contract sells for...
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Standards Life Insurance offers a perpetuity that pays annual payments of $12,000. This contract sells for $300,000 today. What is the interest rate? P
Please show the formula you used for the problem first thank you.
Homework Answers
The interest rate is computed as shown below:
Selling price of contract = Annual payments / Interest rate
$ 300,000 = $ 12,000 / Interest rate
Interest rate = $ 12,000 / $ 300,000
Interest rate = 4%
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