Live Forever Life Insurance Company is selling a perpetuity contract that pays $1,750 monthly. The contract currently sells for $275,000. a. What is the monthly return on this investment vehicle? b. What is the APR? c. What is the effective annual return? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
ChapterM: Time Value Of Money Module
Section: Chapter Questions
Problem 7MC
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Live Forever Life Insurance Company is selling a
perpetuity contract that pays $1,750 monthly.
The contract currently sells for $275,000.
a. What is the monthly return on this investment
vehicle?
b. What is the APR?
c. What is the effective annual return?
Note: Do not round intermediate calculations
and enter your answer as a percent rounded to 2
decimal places.
Transcribed Image Text:Live Forever Life Insurance Company is selling a perpetuity contract that pays $1,750 monthly. The contract currently sells for $275,000. a. What is the monthly return on this investment vehicle? b. What is the APR? c. What is the effective annual return? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places.
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