Morris Dell owns a variable annuity contract that contains a guaranteed lifetime withdrawalbenefit (GLWB). This benefit guaranteesthat a specified portion of Mr. Dell's annuity will be invested in a fixed account rather than insubaccountsO that Mr. Dell can receive a minimum annuity payment amount annually based on theannuitization of the contract's benefit baseOthat Mr. Dell can take annual withdrawals of a specified percentage of a protected value forlife without annuitizing the contractO that the annuity contract's death benefit will be equal to the greater of either (a) thepremiums paid, less any withdrawals or (b) the contract's accumulated value

Annuity -Annuities are insurance contracts wherein current contributions are exchanged for future…

Answered: hat contains a guaranteed metime…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed, but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement. a. Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at 30%. (Round your answers to 2 decimal place.) > Answer is complete but not entirely correct. 20-year consumption stream (assuming monthly payouts) $ 27,462.69
You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving the insurance proceeds. You can receive a lump sum of $400,000 today or receive payments of $16,000 a year for 15 years. You can earn 6 percent on your money. Which option should you take and why?
Assume that a pension plan offers to pay $500,000 on a person's retirement (his/her sixty-fifth birthday) or a semi-annual annuity for the remainder of the person's life – i.e., starting 6 months from the date of retirement and including his/her date of death. Interest rates are 7 percent compounded annually, and a person's life expectancy has been determined statistically as being 78.5 years. Calculate the amounț of the annuity that would make a person indifferent between the options?l .Ysm
Professor’s Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $350,000 at age 65, the firm will pay the retiring professor $2,800 a month until death. If the professor’s remaining life expectancy is 30 years, what is the monthly rate on this annuity? What is the effective annual rate?
15 Under the NBA deferred compensation plan, payments made at the end of each year accumulate up to retirement and then retirees are given two options. Option 1 allows the retiree to select the amount of the annual payment to be received, and option 2 allows the retiree to specify over how many years payments are to be received. Assume Hardaway has had $8,000 deposited at the end of each year for 30 years, and that the long-term interest rate has been 7%. Required: How much has accumulated in Hardaway’s deferred compensation account? How much will Hardaway be able to withdraw at the beginning of each year if he elects to receive payments for 16 years? How many years will Hardaway be able to receive payments if he chooses to receive $85,000 per year at the beginning of each year?
A perpetuity paying $3, 000 at the beginning of each two years has the same present value as another perpetuity with level payments, this one having payments at the end of each three years. Express the level payment amount of the second perpetuity, P, as a function of the annual effective interest rate i.
Samantha receives a 10,000 life insurance benefit. If she uses the proceeds to buy an n-year annuity-immediate, the annual payout will be 1,824. If a 2n-year annuity-immediate is purchased, the annual payout will be 1,028. Calculate the effective annual interest rate.
A company will receive payments of $1,500 per year for the next four years under a subscription contract. The first payment will be made at the beginning of the contract. Assuming an annual interest rate of 3% is appropriate, the present value of an ordinary annuity is 3.71710 x $1,500 = $5,576, and the present value of an annuity due is 3.82861 x $1,500 = $5,743. Which amount must the company record for this sale in accordance with generally accepted accounting principles (GAAP) if collection is reasonably assured? $0 $5,576 $6,000 $5,743
Mr. Thompson wants to receive a fixed monthly payment of $800 for 10 years from an ordinary simple annuity. If the annuity offers an annual interest rate of 5%, compounded monthly, calculate the present value of the annuity.
Which one of the following statements regarding annuities is NOT true? OA) A joint and full survivor annuity guarantees a level payment as long as either annuitant is alive OB) A single-premium variable deferred annuity generally permits additions to the invested amount once each year C) A flexible premium variable annuity generally limits changes in the investment mixto some extent. D) A life annuity with ten years certain and continuous will pay benefits for at least ten years if the annuitant dies six years after the initial distribution is made
Bridget Jones has a contract in which she will receive the following payments for the next five years: $3,000, $4,000, $5,000, $6,000, $7,000. She will then receive an annuity of $10,500 a year from the end of the sixth year through the end of the fifteenth year. The appropriate discount rate is 13 percent. a. What is the present value of all future payments? (Use Excel to arrive at the answer. Round the final answer to the nearest dollar amount.) Present value b. If she is offered a buyout of the contract for $32,000, should she do it? Yes No
Pension data for Sterling Properties include the following: Service cost, 2021 Projected benefit obligation, January 1, 2021 Plan assets (fair value), January 1, 2021 Prior service cost-AOCI (2021 amortization, $8) Net loss-AOCI (2021 amortization, $1) Interest rate, 8% Expected return on plan assets, 12% Actual return on plan assets, 13% Service cost Interest cost Required: Determine pension expense for 2021. (Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign.) Pension Expense Expected return on plan assets Amortization of prior service cost Amortization of net loss Pension expense $ ($ in thousands) $ 117 0 600 700 87 108

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