Question

Thomas purchased an annuity for $20,000 that will pay him $500 per month for ten years. What amount should Thomas include in his income each year?

Answer 1

Answer:

amount that included in income is $4,000

Explanation:

given data

annuity = $20,000

pay  = $500 per month = $500 × 12 yearly

time = 10 year

solution

first we get here expected return that is

expected return = pay amount × time

expected return =  $500 × 12 × 10

expected return = $60,000

so here Exclusion will be

Exclusion $\frac{20000}{60000}$ × $6,000

Exclusion = $2,000

so here amount that included in income is

amount = $6,000 - $2,000

amount = $4,000