Question

Gramps purchased a joint survivor annuity that pays $700 monthly over his remaining life and that of his wife, Gram. Gramps is 70 years old and Gram is 65 years old. Gramps paid $145,530 for the contract. How much income will Gramps recognize on the first payment?

Answer 1

Answer:

$54.95 interest income

Explanation:

We look int othe legal tables to recognize income in this type of annuities considering the age of each participant

Table VI - Ordinary Joint Life and Last Survivor Annuities; Two Lives - Expected Return Multiples

multiplier at cross 75 / 70 : 18.8

we take the annual income of 700 x 12 = 8,400

and multiply by the 18.8 = 157,920

now we solve for part of capital and interest:

145,530/157,920 = 0.92154 = 92.15%

principal returns are 92.15% while interest the remaining 7.85%

700 x 7.85% interest = $54.95 interest income