Question

In: Accounting

Tony decided to invest in an annuity that he bought from AIG Corp. He bought the...

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

Solutions

Expert Solution

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.

ekkarill92 answered 1 year ago
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