This Year Larry Received the First Payment from an Annuity

question 133

Essay

This year Larry received the first payment from an annuity that promises to pay him $3,000 per month for the rest of his life. The IRS tables indicate that given Larry's age, he should expect to receive 310 monthly payments. The cost of the annuity to Larry was $620,000. How much of the first $3,000 payment should Larry include in gross income?

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Definitions:

Senatorial Election

An electoral process in which citizens vote to elect representatives to the Senate, the upper chamber of the legislature in some countries.

Confidence Interval

An interval of values, obtained from statistics of a sample, anticipated to envelop the value of a not yet identified parameter of the population.

Proportion Difference

A measure of the difference in proportions or percentages between two groups in comparative studies.

Pooled Proportion

The weighted average of proportions from different samples or groups, used in statistical analysis.