You Just Paid $750,000 for an Annuity That Will Pay

question 78

Multiple Choice

You just paid $750,000 for an annuity that will pay you and your heirs $42,000 a year forever.What rate of return are you earning on this policy?

• A)4.85 percent
• B)5.10 percent
• C)5.35 percent
• D)5.60 percent
• E)5.85 percent

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Definitions:

Net Realizable Value

The estimated selling price of inventory in the ordinary course of business minus any costs for completion, disposal, and transportation.

Bad Debt Expense

A financial accounting concept representing the amount of revenue considered uncollectible from customers or clients.

Percent Of Sales Method

A financial forecasting model that estimates future financial statements based on assumed sales growth and historical financial ratios.

Bad Debts

Unrecoverable amounts owed to a company by debtors that are deemed uncollectable and written off as a loss.