Addison pays $15,000 for an annuity that will pay $1,000 a year, starting this year. If...

Addison pays $15,000 for an annuity that will pay $1,000 a year, starting this year. If the annuity is for a term of 20 years, how much taxable income will Addison have from the annuity each year?

Group of answer choices

c. Addison will have $750 of taxable income from the annuity each year.

d. Addison will have $1,000 of taxable income from the annuity each year.

a. Addison will never have taxable income resulting from annuity distributions.

b. Addison will have $250 of taxable income from the annuity each year.

Expert Solution

Amount Invested	15,000

Total Recovery	20,000	=1000*20

Investment recovery % out of total recovery	75%	(15,000 / 20,000 )

Taxable Portion of annuity	25%	(1-75%)

Taxable income from the annuity each year	$ 250	=1000*25%

Correct answer is option b. ( i.e Addison will have $250 of taxable income from the annuity each year.)

ekkarill92 answered 2 years ago

What is the future value of a 5%, 10 year annuity due that pays $15,000 per...

What is the future value of a 5%, 10 year annuity due that pays $15,000 per year? What is the present value of a 5%, 10 year annuity due that pays $15,000 per year?

) What is the present value of an ordinary 12-year annuity that pays $1,000 per year...

) What is the present value of an ordinary 12-year annuity that pays $1,000 per year when the interest rate is 7%? a. $7,942.70 b. $8,942.71 c. $9,942.72 d. $10,942.56 e. None of the above.

Assume that you own an annuity that will pay you $15,000 per year for 13 years,...

Assume that you own an annuity that will pay you $15,000 per year for 13 years, with the first payment being made today. You need money today to start a new business, and 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. 8.25% b. 9.45% c. 10.97% d. 7.78% e. 11.07%

A 15-year annuity pays $1,000 per month, and payments are madeat the end of each...

A 15-year annuity pays $1,000 per month, and payments are made at the end of each month. The interest rate is 15 percent compounded monthly for the first six years and 14 percent compounded monthly thereafter. What is the present value of the annuity?Multiple Choice$108,515.59$72,323.18$867,878.16$70,876.72$73,769.64

you will purchase a financial paper in 2018 that will pay $1,000 starting from the year...

you will purchase a financial paper in 2018 that will pay $1,000 starting from the year 2021 for 4 years, and you can always generate 5.5% in the market each year. a. What is the fair price for the financial paper at year 2018 ? 3,149.21 3,322.42 3,505.15 3,776.27 none of the above

You just purchased an annuity that will pay you $24,000 a year for 25 years, starting today....

You just purchased an annuity that will pay you $24,000 a year for 25 years, starting today. What was the purchase price if the discount rate is 8%? $256,195 $251,409 $245,621 $276,690 $258,319

You are offered a deal that pays you $1,000/yr (end of year) for 5 years, starting...

You are offered a deal that pays you $1,000/yr (end of year) for 5 years, starting 5 y from today. At a discount rate of 6%, what’s that deal worth right now? (CF’s: 0,0,0,0,0,1000,1000,1000,1000,1000). Nominal annual interest is quoted at 7.50%. With monthly payments, what’s effective annual interest? (1pt) What about daily payments? (1pt) What about payments every other year?

A perpetuity will pay $1,000 per year, starting eight years after the perpetuity is purchased. What...

A perpetuity will pay $1,000 per year, starting eight years after the perpetuity is purchased. What is the present value (in $) of this perpetuity on the date that it is purchased, given that the interest rate is 4%? (Round your answer to the nearest cent.) $

You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year at...

You are considering an annuity which costs $100,000 today. The annuity pays $6,000 a year at the Beginning of each year. The rate of return is 4.5 percent. How many years of annuity payments will you receive? A. 24.96 years B. 29.48 years C. 28.73 years D. 33.08 years E. 38.00 years

Your best friend who owns an annuity that promises to pay $1,000 at the end of...

Your best friend who owns an annuity that promises to pay $1,000 at the end of each year, for 20 years, comes to you and offers to sell you all of the payments to be received after the 10th year for a price of $7,000. With an APR of 2.3% compounded quarterly, should you pay the $7,000 today to receive payment numbers 11 and onwards? Additionally, is he/she a good friend? Justify your answer (Note: If you buy the annuity,...

Question