Which of the following is a description of how the annuity exclusion ratio is calculated for an annuity paid over a fixed period?
A)The expected return is divided by the number of payments.
B)The original investment is divided by the prevailing interest rate.
C)The original investment is divided by the number of payments.
D)The expected return is divided by the prevailing interest rate.
E)None of these choices are correct.

Question

Quizplus · Accepted Answer

The annuity exclusion ratio for an annuity paid over a fixed period is calculated by dividing the original investment in the annuity by the total number of payments expected to be received. This ratio determines the portion of each payment that is considered a return of the investor's principal and therefore not subject to tax.

Which of the Following Is a Description of How the Annuity