Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,90

Question

Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,900 monthly. The contract currently sells for $123,000.

What is the monthly return on this investment vehicle? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What is the APR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What is the effective annual return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,900 monthly. The contract currently sells for $123,000.

What is the monthly return on this investment vehicle? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Answer:The monthly return on this investment vehicle is:

=($1900/$123000)*100=1.545%

Answer: The APR is:

=Monthly return *12 months

=1.545%*12=18.54%

Answer:Effective annual return=20.1995%

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