Question: Calculating the Surrender Charge. You purchase a variable annuity contract with a exist10,000 purchase payment. The contract has a schedule of surrender charges, beginning with

Calculating the Surrender Charge. You purchase a variable annuity contract with a exist10,000 purchase payment. The contract has a schedule of surrender charges, beginning with a 7 percent charge in the first year and declining by 1 percent each year. In addition, you are allowed to withdraw 10 percent of your contract value each year free of surrender charges. In the first year, you decide to withdraw exist5,000, or one-half of your contract value of exist10,000 (assuming that your contract value has not increased or decreased because of investment performance). What amount can you withdraw without surrender charges? What is the total surrender charge you will have to pay

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