Which of the Following Is a True Statement About the First

question 112

Multiple Choice

Which of the following is a true statement about the first payment received from a purchased annuity?

• A)The payment is included in gross income.
• B)A portion of the payment is a return of capital.
• C)The payment can only be taxed in the year after the annuity was purchased.
• D)The payment is not taxed until the annuity payments cease altogether.
• E)All of these choices are correct.

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Definitions:

Optimistic Bias

The tendency to believe that we are less likely to experience negative events compared to others.

Anchoring

Anchoring refers to the cognitive bias where an individual relies too heavily on an initial piece of information (anchor) when making decisions.

Stereotyping Heuristic

A cognitive shortcut that involves making judgments about an individual based on generalized beliefs about the group to which they belong.

Availability Heuristic

A mental shortcut used when judging the frequency or probability of events based on how easily examples come to mind.