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Sever21 [200]
3 years ago
8

Sophia purchased a variable annuity contract with a purchase payment of $75,000. Surrender charges begin with 7 percent in the f

irst year and decline by 2 percent each year. In addition, Sophia can withdraw 10 percent of her contract value each year without paying surrender charges. In the first year, Sophia needed to withdraw $13,000. Assume that the contract value had not increased or decreased because of investment performance. What was the surrender charge Sophia had to pay
Business
1 answer:
Mila [183]3 years ago
3 0

Answer:

"$385" would be the appropriate answer.

Explanation:

The given values are:

Variable annuity contract value,

= $75,000

Surrender changes,

= 7%

i.e.,

= 0.07

Withdrawn amount,

= $13,000

Withdrawn limit percent,

= 10%

i.e.,

= 0.10

Withdrawal limit,

= 0.10\times 75000

= 7500 ($)

Now,

Excess withdrawn amount will be:

= Amount \ withdrawn-Annual \ withdrawal \ limit

On substituting the values, we get

= 13000-7500

= 5500 ($)

hence,

Sophia needs to pay the charges will be:

= Excess \ withdrawn \ amount\times Surrender \ charges

= 5500\times 0.07

= 385 ($)

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