1. Penny, age 45, purchased an annuity contract that cost $45,000. The contract will pay Penny $600 per month for 10 years after she reaches age 62. During the current year, Penny turns 62 and receives 4 payments under the contract. Penny's taxable income from the annuity payments is:

1. $900
2. $1,500
3. $1,708
4. $2,250
5. $2,400