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the maybe pay life insurance company is trying to sell you an investment policy that will pay you and your heirs $40,000 per year forever. if the required return on this investment is 6.3 percent, how much will you pay for the policy? (do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Respuesta :

Amount to be paid for the investment policy is 6,34,920.63

Given that investment policy pay PV = $40000/year, % investment return = 6.3%, r= 6.3% =6.3/100 = 0.063

Though we need to calculate the value for one year so we need to use one year as no. of period To find the final value of a lump sum, we use, FV = PV/r, FV = 40000/0.063 = 6,34,920.634920. On rounding to two decimal place amount will be 6,34,920.63.

An investment policy outlines the guidelines for investing public funds and specifies the goals, risk tolerance, and restrictions on the investment portfolio, as well as how the investment programme will be managed and tracked.

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