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Lostsunrise [7]
3 years ago
7

A 65-year-old retiree wishes to convert the cash value of his insurance policy into an annuity. He can select an annuity that wi

ll last 15 years or one that lasts 20 years. If the cash value is $450,000 and interest rates are 5.25%, how much less per year will he receive if he chooses the 20-year annuity
Business
1 answer:
insens350 [35]3 years ago
5 0

Answer:

The annual difference between Option 1 (15 years) and Option 2 (20 years) is $7,211.19 in favor of the first one.

Explanation:

Giving the following information:

Option 1:

Number of years= 15

FV= 450,000

i= 0.0525

Option 2:

Number of years= 20

FV= 450,000

i= 0.0525

To calculate the annual cash flow, we will use the following formula on each option:

A= (FV*i)/{[(1+i)^n]-1}

A= annual cash flow

<u>Option 1:</u>

A= (450,000*0.0525) / [(1.0525^15) - 1]

A= $20,464.72

<u>Option 2:</u>

A= (450,000*0.0525) / [(1.0525^20) - 1]

A= $13,253.53

The annual difference between Option 1 (15 years) and Option 2 (20 years) is $7,211.19 in favor of the first one.

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Avia Company sells a product for $150 per unit. Variable costs are $70 per unit, and fixed costs are $1200 per month. The compan
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Answer:

$80 per unit

Explanation:

Data provided in the question:

Per unit selling cost of the product = $150

Per unit variable cost of the product = $70

Total fixed cost per month = $1200

Now,

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unit contribution margin = Selling price per unit - Variable cost per unit

Thus,

unit contribution margin = $150 - $70

or

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Hence,

The correct answer is option $80 per unit

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Provincial Inc. reported the following before-tax income statement items: Operating income $ 520,000 Loss on discontinued operat
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Answer:

$176,800

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4 0
3 years ago
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The W. J. Clinton Company issued 750 shares of $1 stated value common stock in exchange for land from the Whitewater Investment
MrMuchimi

Explanation:

The journal entry is as follows:

Land  Dr $70,000

Additional paid in capital  $5,000

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3 years ago
Kohl's Corporation decided to discontinue its Kohl's credit card operations. What factors would this department store company ha
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How would a business person be most likely to use a seed capital
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