Live Forever Life Insurance Company is selling a perpetuity contract that pays $2,0 monthly. The contract currently sells for $125,000. a. What is the monthly return on this investment vehicle? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g 32.16.) b. What is the APR? (Do not round intermediate calculations and enter your answer a percent rounded to 2 decimal places, e.g.. 32.16.) c. What is the effective annual return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.) a. Monthly return b. APR c. EAR % % %

Live Forever Life Insurance Company is selling a perpetuity contract that pays $2,0 monthly. The contract currently sells for $125,000. a. What is the monthly return on this investment vehicle? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g 32.16.) b. What is the APR? (Do not round intermediate calculations and enter your answer a percent rounded to 2 decimal places, e.g.. 32.16.) c. What is the effective annual return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.) a. Monthly return b. APR c. EAR % % %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Types of Insurance Contract

Insurance is a contract wherein an individual or entity gets financial protection from the insurance company for any damages or losses incurred. The individual or entity is called the insured, whereas the insurance company is called the insurer. The insured and the insurer enter a legal contract for a fixed term called the insurance term, and the contract is called an insurance policy.

Question

Live Forever Life Insurance Company is selling a perpetuity contract that pays $2,000
monthly. The contract currently sells for $125,000.
a. What is the monthly return on this investment vehicle? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal places, e.g..
32.16.)
b. What is the APR? (Do not round intermediate calculations and enter your answer as
a percent rounded to 2 decimal places, e.g., 32.16.)
c. What is the effective annual return? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a. Monthly return
b. APR
c. EAR
%
%
%
D

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Ricky Ripov’s Pawn Shop charges an interest rate of 18.25 percent per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. a. What rate should the shop report? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the effective annual rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
TABLE 14.2 Loan amortization table (monthly payment per $1,000 to pay principal and interest on installment loan) Terms in months 6 12 18 24 30 36 42 48 54 60 7.50% $ 170.34 86.76 58.92 45.00 36.66 31.11 27.15 24.18 21.88 20.04 8.00% $ 170.58 86.99 59.15 45.23 36.89 31.34 27.38 24.42 22.12 20.28 8.50% 9.00% $ 170.83 $ 171.20 87.22 87.46 59.37 59.60 45.46 45.69 37.12 37.35 31.57 31.80 27.62 27.85 24.65 24.77 22.36 22.59 20.52 20.76 10.00% $ 171.56 87.92 60.06 46.14 37.81 32.27 28.32 25.36 23.07 21.25 10.50% $ 171.81 88.15 60.29 46.38 38.04 32.50 28.55 25.60 23.32 21.49 11.00% $ 172.05 88.38 60.52 46.61 38.28 32.74 28.79 25.85 23.56 21.74 11.50% $ 172.30 88.62 60.75 46.84 38.51 32.98 29.03 26.09 23.81 21.99 12.00% $ 172.55 88.85 60.98 47.07 38.75 33.21 29.28 26.33 24.06 22.24 12.50% $ 172.80 89.08 61.21 47.31 38.98 33.45 29.52 26.58 24.31 22.50 13.00% $ 173.04 89.32 61.45 47.54 39.22 33.69 29.76 26.83 24.56 22.75 13.50% $ 173.29 89.55 61.68 47.78 39.46 33.94 30.01 27.08 24.81 23.01…
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