Question

Grace paid a life insurer $45,000 in exchange for an immediate life annuity. Grace 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?

Answer 1

the exclusion ratio is 0.50 or 50%

Step-by-step explanation:

The computation of the exclusion ratio is as follows:

= Investment made in contract ÷ expected return

= $45,000 ÷ ($500 × 180 months)

= $45,000 ÷ $90,000

= 0.50 or 50%

Hence, the exclusion ratio is 0.50 or 50%

We simply applied the above formula so that the correct value could come

And, the same is to be considered