James Bought an Annuity for $42,000 Several Years Ago

question 121

Multiple Choice

James bought an annuity for $42,000 several years ago. The annuity will pay him $250 per month from age 66 until he dies. During the current year, James turns 66 and received his first annuity payment. His life expectancy is 25 years.
I.If James receives more than 260 payments, all payments received after those are totally included in income.
II.James should include $50 of each payment in adjusted gross income.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Strike Call

A term likely meant to be "Call Strike Price," which is the set price at which an option holder can buy an underlying asset.

Interest Rate

Interest Rate is the cost of borrowing funds or the return on investment for savings, expressed as a proportion of the principal, usually displayed on an annual basis.

Expiration

The point in time when a financial contract such as an option or futures contract ceases to exist.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.