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. Suppose a sales associate told you the policy costs $471,000. At what interest rate would this be a fair deal?
It means that a sum of money is received/paid forever. Here, in the question $26,000 shall be paid to the insured for forever indicating that the stream of cashflow is in the form of perpetuity.
Answer and Explanation:
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from Business 110: Business MathChapter 8 / Lesson 3