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25 October, 06:58

Live forever life insurance co. is selling a perpetuity contract that pays $2,000 monthly. the contract currently sells for $125,000. what is the monthly return on this investment vehicle?

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  1. 25 October, 09:52
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    Value of contract = Monthly income / r where 'r' is the monthly return

    $125,000 = $2,000 / r

    r = $2,000 / $125,000

    = 1.6%
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