Today is your birthday. You are a 75 - year - old single man. You have $500,000 in the bank and $35,000 in yearly taxable income. You decided to buy an immediate fi xed annuity with a $350,000 premium, leaving the remaining $150,000 in the bank for emergencies.

Assume that your savings bank pays 5% and your annuity pays 7.5% APR. What will your total after - tax income be? Round off numbers a bit for convenience. Also, assume that when you fi lled out your tax return, you found that your taxable income is $10,000 less than your total income and that you live in a state with no state income tax.