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10 November, 10:25

Curly's Life Insurance. Is trying to sell you an investment policy that will pay you and your heirs $25,000 per year forever. If the required return on this investment is 6 percent, how much will you pay for the policy?

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  1. 10 November, 12:38
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    pay for policy is $416666.67

    Explanation:

    given data

    pay = $25000

    rate = 6 % = 0.06

    to find out

    how much pay for policy

    solution

    to find out policy pay

    we will apply here formula that is

    pay = present value * r

    so they pay here 25000 and rate 0.06

    put these value we get present value

    present value = pay / rate

    present value = 25000 / 0.06

    present value = 416666.67

    so pay for policy is $416666.67
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