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8. The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $20,000 per year forever. If the required return on this investment is 8%, how much will
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8. The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $20,000 per year forever. If the required return on this investment is 8%, how much will you pay for the policy

User Visortelle
by
4.2k points

1 Answer

7 votes

Answer:

the present value is $250,000

Step-by-step explanation:

The computation of the amount that pay for the policy is as follows;

Present Value is

= PMT ÷ required return

= $20,000 ÷ 8%

= $250,000

By dividing the pMT from the required rate of return we can easily determine the present value

hence, the present value is $250,000

User Netjeff
by
3.9k points
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