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lyudmila [28]
3 years ago
14

Gramps purchased a joint survivor annuity that pays $500 monthly over his remaining life and that of his wife, Gram. Gramps is 7

0 years old and Gram is 65 years old. Gramps paid $97,020 for the contract. How much income will Gramps recognize on the first payment?
Business
1 answer:
Bezzdna [24]3 years ago
6 0

Answer:

$150

Explanation:

Calculation of how much income that Gramps will recognize on the first payment.

Since joint survivor annuity has 23.1 as the annual return multiple .

Calculation for Expected return

Expected return =Annual payment *Return multiple

($500*12) =$6,000

$6,000×23.1

=$138,600

Therefore :

$97,020/$138,600

=0.7×100

=70%

The 70% of each of the payment will be the return of capital while the 30%(100%-70%) will be the income.

Hence the first payment be:

30%×500

=$150

Therefore the amount of income that Gramps will recognize on the first payment will be $150

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