Based on an interest rate of 6.72% compounded monthly, what average life expectancy did the annuity provider use for Clarence's payment amount?

To determine the average life expectancy used by the annuity provider in this scenario, the interest rate of 6.72% compounded monthly is significant in calculating the present value of annuity payments, which gives insight into what the provider assumes regarding the lifetime of the annuity recipient.

In annuity calculations, the life expectancy is a crucial factor, as it helps determine the duration over which payments will be made. Generally, an annuity provider uses mortality tables to estimate how long an individual is statistically expected to live, and they base their payment calculations on this average life expectancy.

In this case, an average life expectancy of approximately 82.14 years aligns with common statistical metrics for certain populations, particularly for individuals in specific age demographics. It reflects an understanding that annuity providers often use slightly longer life expectancy estimates based on a wider population range, accounting for variations in health, lifestyle, and other demographic factors.

Choosing 82.14 years as the life expectancy reflects a balance between actuarial data on life expectancy and the need for the provider to ensure the annuity remains financially viable while also providing adequate payouts. This figure likely aligns well with standard mortality tables used in the financial planning industry, making it a suitable average life expectancy for this calculation.