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mezya [45]
3 years ago
15

The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $18,500 per year fo

rever. a. If the required return on this investment is 5.9 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.) b. Suppose the company told you the policy costs $460,000. At what interest rate would this be a fair deal? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
Zina [86]3 years ago
6 0

Answer:

a. $313,559.32

b. 0.0402, or 4.02%

Explanation:

The computation is shown below:

Here we use the following equation

PV = C ÷ r

Present value

= $18,500 ÷ 0.059

= $313,559.32

b. Now the interest rate is  

As we know that

PV = C ÷ r

$460,000 = $18,500  ÷ r

r = $18,500 ÷ $460,000

= 0.0402, or 4.02%

We simply applied the above formula so that the correct value could come

And, the same is to be considered  

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Diano4ka-milaya [45]

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In this case the preferred stock is 5% of $100 par value and is cumulative. This means that every year the company needs to pay 5% times $100 par value on each stock, and there is 1,000 shares, so the total is $5,000 in preferred stock dividends.

In year one and two they did not declare enough dividends to pay this full amount. In year one they declared $2,000 and year two they declared $6,000. At the end of year two they should have received $10,000, but only received $8,000. In year three they need to pay the preferred stockholders the $2,000 that are in arrears, plus the $5,000 for year three, for a total of $7,000. Since there was $32,000 in dividends declared and $7,000 is going to the preferred stockholders, it means that there is $25,000 left for the common stockholders. $25,000/10,000 shares equals $2.50 dividend per share.

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3 years ago
Henry's savings account has an APR of 3.65%
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Answer:

and Leah is saving her account APR of

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3 0
3 years ago
Sally brings home $50,000 a year to help provide financial support to her family, comprised of her husband and two children. She
svp [43]

Answer:

$386,080

Explanation:

In order to find the Coverage of sally's investment in life insurance for 10year can be done by making 10-year table

Year     Cashflow    Discount factorI5%)    Present Value

                 $                       $                                  $

1           50,000              0.9524                        47,620

2           50,000              0.9070                       45,350

3           50,000              0.8638                        43,190

4           50,000              0.8337                        41,135

5           50,000              0.7835                        39,175

6           50,000              0.7462                        37,310

7           50,000              0.7107                         35,535

8           50,000              0.6768                        33,840

9           50,000              0.6446                        32,230

10          50,000              0.6139                        30,695

NPV =  Sum of all present values

NPV = $386,080

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Answer:

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