Assume That You Own an Annuity That Will Pay You

question 89

Multiple Choice

Assume that you own an annuity that will pay you $15,000 per year for 12 years,with the first payment being made today.Your uncle offers to give you $120,000 for the annuity.If you sell it,what rate of return would your uncle earn on his investment?

• A)6.85%
• B)7.21%
• C)7.59%
• D)8.41%

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Definitions:

Materials Quantity Variance

This refers to the difference between the expected amount of materials needed for production and the actual amount used, which can impact manufacturing costs.

Predetermined Overhead Rate

A calculated rate used to allocate manufacturing overhead costs to products or job orders, based on a specific activity basis.

Variable Overhead

Costs that fluctuate with the level of production output, such as utilities or materials, unlike fixed overhead costs.

Total Overhead Variance

The difference between the actual overhead costs incurred and the overhead costs that were applied or allocated based on standard costing procedures.