A state college receives an annuity gift of $200,000 from an individual. The individual is to receive $18,000 a year for 10 years. The present value of the payments to the individual is $150,000. How much revenues should the college report from this transaction?

Question

Quizplus · Accepted Answer

The college should report $50,000 in revenues from this transaction. The difference between the $200,000 annuity gift and the $150,000 present value of payments to the individual is $50,000. This $50,000 represents the revenue earned by the college from investing and managing the annuity funds.

A State College Receives an Annuity Gift of $200,000 from an Individual