An Uncle of Yours Who Is About to Retire Wants

question 127

Multiple Choice

An uncle of yours who is about to retire wants to sell some of his stock and buy an annuity that will provide him with income of $50, 000 per year for 30 years, beginning a year from today.The going rate on such annuities is 7.25%.How much would it cost him to buy such an annuity today?

• A) $574, 924
• B) $605, 183
• C) $635, 442
• D) $667, 214
• E) $700, 575

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Definitions:

Salvage Value

The calculated future selling price of an asset at the end of its period of benefit.

Depreciation Expense

Dividing the expenditure associated with a tangible asset over its operational life.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting its decrease in value due to use, wear and tear, or obsolescence.

Depletion

The allocation of the cost of natural resources over their productive life, commonly used in industries like mining and forestry.