John cashed in an annuity contract and received $10,000.John bought the contract 24 years ago for $5,000.These amounts indicate a contract rate of approximately 3%.

Question

Quizplus · Accepted Answer

To calculate the approximate contract rate, divide the amount received ($10,000) by the original amount paid ($5,000) and then divide by the number of years (24):

($10,000/$5,000)/24 = 0.0417 or approximately 4.17%. Therefore, the statement is false as the contract rate is approximately 4.17%, not 3%.

John Cashed in an Annuity Contract and Received $10,000