The Exclusion Ratio for a Purchased Annuity Is the Cost

question 58

True/False

The exclusion ratio for a purchased annuity is the cost of the annuity divided by the interest rate.

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Definitions:

Cash Flow

The total amount of money being transferred into and out of a business, particularly affecting liquidity.

Cost Of Capital

The return rate that a company must earn on its investment projects to maintain its market value and attract funds.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project by discounting future cash flows.

Cash Flow

Cash flow represents the net amount of cash and cash equivalents being transferred into and out of a business, crucial for assessing its liquidity, flexibility, and overall financial health.