Interest Rate
Not what you're looking for?
An Insurance company has just approached you with a proposal that they consider as a good deal, "You are to pay them $150 a year for 8 years and they will pay you $150 a year thereafter in perpetuity." If this is a fair deal, what is the rate of interest?
Purchase this Solution
Solution Summary
The solution explains how to calculate the implied interest rate between annuity payments and perpetuity returns
Solution Preview
If this a fair deal then the Future Value of the amount deposited should be equal to the Present Value of the annuity received.
Let r be the interest rate.
The present value of the perpetuity is 150/r ( the formula is ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.