Juanita paid a life insurer $45,000 in exchange for an immediate life annuity.Juanita will receive $500 per month from the insurer,and her life expectancy is 15 years (180 months).What is the exclusion ratio in this case?

Question

Quizplus · Accepted Answer

The exclusion ratio is calculated by dividing the investment in the contract by the expected return. The expected return is $500 per month for 180 months, which equals $90,000 ($500 * 180). The investment in the contract is $45,000. Therefore, the exclusion ratio is $45,000 / $90,000 = 0.5 or 50.00 percent.

Juanita Paid a Life Insurer $45,000 in Exchange for an Immediate