In: Accounting
Tony decided to invest in an annuity that he bought from AIG Corp. He bought the annuity for $20,000 . The annuity will pay him $500 per month for 10 years. What is Tony's income per year?
Select one:
a. $6,000
b. $2,000
c. $0
d. $4,000
Annuity Cost = $ 20,000
Annuity Cost per year = $ 20,000 / 10 = $ 2000
Annuity pay per month = $ 500
Annity pay per year = $ 500 * 12 = $ 6,000
Tony's income per year = Annuity pay per year – Annuity Cost per year
= $ 6,000 - $ 2,000
= $ 4,000
There for Tony's income per year= $ 4,000
Option D is correct answer.