The Eternal Gift Insurance Company is offering you a policy that will pay you and your heirs $10,000 a year forever. The cost of the policy is $285,000. What is the rate of return on this policy?

Question

Quizplus · Accepted Answer

The rate of return is calculated by dividing the annual payment by the cost of the policy. In this case, the annual payment is $10,000 and the cost of the policy is $285,000. Therefore, the rate of return is $10,000/$285,000 = 3.51%.

The Eternal Gift Insurance Company Is Offering You a Policy