"Which statements are TRUE about variable annuities? I Contributions to the separate account are tax deductible II Contributions to the separate account are not tax deductible III Earnings in the separate account build tax-deferred IV Earnings in the separate account are taxable each year"

Answers

Answer 1

Answer:

Answer: II Contributions to the separate account are not tax deductible

III Earnings in the separate account build tax-deferred

Explanation:

Variable Annuities represent an investment vehicle where one puts money in a certain type of investment with the goal being that they will earn an income in retirement which is dependent on how their chosen investment performed therefore making the payout variable.

Contributions to the separate account are not tax deductible. The tax advantage of Variable annuity contracts instead is that the income earned from the annuity gets to build tax-deferred with taxes only applying to them when a withdrawal is made.

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Everything else the same, the higher the expected rate of inflation, _____. a. the lower the loss in purchasing power of investors
b. the higher the required rate of return on an investment
c. the lower the maturity premium required by the investors
d. the higher the money supply in the economy
e. the lower the tax rate in the economy

Answers

Answer: b. the higher the required rate of return on an investment

Explanation: Inflation is an increase in the general level of prices or in the cost of living. It is the decline in the value of money and as such it erodes the purchasing power of future cash flows or investments. All things being equal, higher inflation rates (current or expected) equates to rising yields across the yield curve. As a result, investors demand this higher yield to account for the risk of inflation. This makes option b the only option that is true and accurate.

Final answer:

The higher the expected rate of inflation, the higher the required rate of return on an investment.

Explanation:

The correct answer is b. The higher the expected rate of inflation, the higher the required rate of return on an investment. When the expected rate of inflation is high, investors require a higher rate of return to compensate for the loss in purchasing power of their money. This is because high inflation erodes the value of money over time, reducing the real return on an investment. Therefore, investors demand a higher rate of return to maintain their purchasing power.

Learn more about expected rate of inflation here:

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A company purchases a remote building site for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true?a. The cost of the building will not include the repainting and recarpeting costs.b. The cost of the building will include the cost of replacing the roof.c. The cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as Building Improvements.d. The wiring is part of the computer costs, not the building cost.

Answers

Answer:

B. The cost of the building will include the cost of replacing the roof.

The end of the year is approaching, and Maxine has begun to focus on ways of minimizing her income tax liability. Several years ago she purchased an investment in Teal Limited Partnership, which is subject to the at-risk and the passive activity loss rules. (Last year Maxine sold a different investment that was subject to these rules and that produced passive activity income.) She believes that her investment in Teal has good long-term economic prospects. However, it has been generating tax losses for several years in a row. In fact, when she was discussing last year's income tax return with her tax accountant, he said that unless "things change" with respect to her investments, she would not be able to deduct losses this year.a. What was the accountant referring to in his comment?
b. You learn that Maxine’s current at-risk basis in her investment is $1,000 and that her share of the current loss is expected to be $13,000. Based on these facts, how will her loss be treated?
c. After reviewing her situation, Maxine’s financial adviser suggests that she invest at least an additional $12,000 in Teal to ensure a full loss deduction in the current year. How do you react to his suggestion?
d. What would you suggest Maxine consider as she attempts to maximize her current year deductible loss?

Answers

Answer:

Explanation:

a) What was the accountant referring to in his comment?

The accountant was referring to the fact that because passive activity losses can only offset passive activity income, she will not be able to deduct the losses in this year. However, she would be able to carry forward the loss to future years to offset any passive activity income generated in those years.

b) You learn that Maxine's current at-risk basis in her investment is $1,000 and that her share of the current loss is expected to be $13,000. Based on these facts, how will her loss be treated?

Based upon the fact that her basis in her investment is only $1000, her losses will be of that amount because of the at-risk limitation, which limits the taxpayer’s deduction by the amount “at risk”. If there is no passive activity income, this would be carried forward to when Maxine would dispose of her entire interest.

c) After reviewing her situation, Maxine's financial adviser suggests that she invest at least an additional $12,000 in Teal to ensure a full loss deduction in the current year. How do you react to his suggestion?

I believe that her financial adviser’s advice to Maxine is a good idea because if her current lossis expected to be $13,000, by contributing $12,000 in Teal, she would be able to deduct the full basis of $13,000 invested into the company. If there is no passive activity income, this would be carried forward to when Maxine would dispose of her entire interest in Teal.

d) What would you suggest Maxine consider as she attempts to maximize her current year deductible loss? She should consider the advice given to her by her accountant.

It costs $1,200 to produce 50 pounds of a chemical and it costs $2,200 to produce 150 pounds. The chemical sells for $15 per pound x is the amount of chemical; y is in dollars. a. Find the cost function. b. What is the fixed cost? c. How many pounds must be sold to break even? d. Find the cost and revenue at the break-even point.

Answers

Answer:

C(y) = mx + b

y = cost in dollars

x = amount of chemical

m = per unit variable cost

b = fixed cost

Use High low Method to calculate the Variable cost from the total cost given

Variable Cost = ( Highest activity cost - Lowest activity cost ) / ( Highest Number of Units - Lowest Number of Units )

Variable Cost = ( $2,200 - $1,200 ) / ( 150 - 50 )

Variable Cost = $1,000 / 100

Variable Cost = $10 per unit

Fixed Cost = $2,200 - ( 150 x $10 )

Fixed Cost = $2,200 - $1,500

Fixed Cost = $700

Contribution Per Unit = Price - Variable cost

Contribution Per Unit = $15 - $10

Contribution Per Unit = $5

Break-even point = $700 / $5

Break-even point = 140 Pounds

Revenue = 140 x $15 = $2,100

Cost = 140 x 10 = $1,400

Enterprise zones are: A. government-owned properties that are available for entrepreneurial ventures at a reduced cost.B. similar to incubator facilities but strictly run by city and state governments.C. blighted areas that contain toxic materials making them unsuitable for business operations.D. specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks for operating in these areas.

Answers

Answer: Option D

Explanation: Enterprise zones are established by the government with the objective of development and economic growth in the local neighborhood.

The investors are attracted to make their business centers or production units in such areas by giving them incentives such as tax exemptions or other such benefits.

These are made usually in under developed areas. In countries like China and India, these areas are called special economic zones.

You are a U.S. investor who purchased British securities for 2,340 pounds one year ago when the British pound cost $1.52. No dividends were paid on the British securities in the past year. Your total return based on U.S. dollars was __________ if the value of the securities is now 2,440 pounds and the pound is worth $1.61.

Answers

Answer:

Total Return = 10.45%

Explanation:

To calculate the return, we must first determine the appreciation in the value of the securities in terms of the US dollar.

The initial investment in terms of US dollar was of,

Initial Investment in USD = Investment in Pounds * Exchange rate

Initial Investment in USD = 2340 * 1.52

Initial Investment in USD = $3556.8

The current value of the investment in terms of USD is,

Current value of investment in USD = 2440 * 1.61

Current value of investment in USD = $3928.4

The formula to calculate total return is,

Total Return = (Current Value - Initial Value) / Initial Value

So, the total return based on US dollars was:

Total return = (3928.4 - 3556.8) / 3556.8

Total Return = 0.10447 or 10.447% rounded off to 10.45%

Final answer:

The total return for the U.S. investor in U.S. dollars is a profit of $371.60, calculated by assessing the change in the value of British securities from 2,340 to 2,440 pounds and considering the exchange rate shift from $1.52 to $1.61 per pound.

Explanation:

The question involves calculating the total return for a U.S. investor based on the change in the value of British securities and exchange rates. The investor originally purchased British securities for 2,340 pounds at an exchange rate of $1.52 per pound. One year later, the securities are worth 2,440 pounds, and the exchange rate is $1.61 per pound. The initial U.S. dollar investment would have been 2,340 pounds × $1.52 = $3,556.80. The value of the securities in U.S. dollars after one year is now 2,440 pounds × $1.61 = $3,928.40.

This results in a profit of $3,928.40 - $3,556.80 = $371.60, which represents the investor's total return based on U.S. dollars.

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