Curly’s Life Insurance Co. is trying to sell you an investment policy that will

Question

Curly’s Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $27,000 per year forever. Assume the required return on this investment is 7.7 percent.

How much will you pay for the policy? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

How much will you pay for the policy? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

This is the case i which the cash flow is perpetual i.e through out the life time

given Perpetuity payment =$27,000

Rate=7.7%

Present value to be paid=(27,000)/7.7%=$350,649.35

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