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Live forever life insurance co. is selling a perpetuity contract that pays $2,000 monthly. the contract currently sells for $125,000. what is the monthly return on this investment vehicle?
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Live forever life insurance co. is selling a perpetuity contract that pays $2,000 monthly. the contract currently sells for $125,000. what is the monthly return on this investment vehicle?

User Vojtiik
by
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1 Answer

3 votes
Value of contract = Monthly income / r where 'r' is the monthly return
$125,000 = $2,000 / r
r = $2,000 / $125,000
= 1.6%
User Dmytro Krasnikov
by
8.1k points
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