Question

Maybepay Life Insurance Co. is selling a perpetual contract that pays $3,894/year. The contract currently sells for $141,042. What is the rate of return on this investment? Enter answer as 4 decimals (e.g. 0.1234).

Answer 1

Answer:

2.76%

Explanation:

Let x be the yearly return

Sales price = $3,894 / x

$141,042 = $3,894 / x

x = $3,894 / $141,042

x = 0.0276088

x = 2.76%

So, the rate of return on this investment is 2.76%.