Question

Maybepay Life Insurance Co. is selling a perpetual annuity contract that pays $2.500 monthly. The contract currently sells for $265,000. Requirement 1: What is the monthly return on this investment vehicle? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Monthly return Requirement 2: What is the APR? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Annual percentage rate Requirement 3: What is the effective annual return? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g.. 32.16).) Effective annual return

Answer 1

Monthly Rate = 2,500/265,000 = 0.9433%

APR = 12(0.009433) = 11.32%

EAR = (1 + 0.009433)¹² - 1

EAR = 11.93%