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Question: 1 the maybe pay life insurance co is trying to...

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1.) The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $30,000 per year forever. If the required return on this investment is 4.3 percent, how much will you pay for the policy? (Hint: Find PV of perpetuity)

2.) Find the EAR in each of the following cases:

a. APR 9% with quarterly compounding

b. APR 18% with monthly compounding

c. APR 14% with semi-annual compounding

3.) Find the APR, or stated rate, in each of the following cases:

a. EAR 11.5%, semi-annual compounding

b. EAR 12% with quarterly compounding

4.) Consider a 3-year bond with a face value of $1,000 that has a coupon rate of 7%, with semi-annual payments.

a. What is the dollar amount of each coupon from this bond?

b. How many times of coupon payments will be made to the maturity?

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