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People Window Help Section Seloction Results > Connect 0 Required information The following information applies to the questions displayed below) Larry purchased an annuity from an insurance company that promises to pay him $11,000 per month for the rest of his life. Larry paid $1.156,320 for the annuity. Larry is in good health and he is 72 years old. Larry recelved the first annuity payment of $11,000 this month. Use the expected number of payments in Exhibit 5-1 for this problem a. How much of the first payment should Larry include in gross income? Amount to be included MacBook Air F3 3 5 9

Explanation / Answer

At age of 72 years of old, expected return Multiple is 14.6 ,

Total expected value [14.6 * $11000 * 12 per month] = $1927200

Return of capital [$11563200 / $1927200] = 60%

Return of capital per month payment[$11000 * 60%] = $6600

Gross income in per month payment [$11000 - $6600] = $4400

   = $11000

Therefore, First payment of $11000 includes $6600 of capital return and $4400 of gross income

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