By an annuity, say of L100, now bought, is meant that the buyer is to have for his money L100 in a year, if he be then alive, L100 at the end of two years, if then alive, and so on. It is clear that he would buy a life annuity if he should buy the first L100 in one office, the second in another, and so on. All the difference between buying the whole from one office and buying all the separate contingent payments at different offices, is immaterial to calculation. Mr. Lee would have agreed with the rest of the world about the payments to be made to the several different offices, in consideration of their several contracts: but he differed from every one else about the sum to be paid to _one_ office. He contended that the way to value an annuity is to find out the term of years which the individual has an even chance of surviving, and to charge for the life annuity the value of an annuity certain for that term. {158} It is very common to say that Lee took the average life, or expectation, as it is wrongly called, for his term: and this I have done myself, taking the common story. Having exposed the absurdity of this second supposition, taking it for Lee's, in my _Formal Logic_,[345] I will now do the same with the first. A mathematical truth is true in its extreme cases. Lee's principle is that an annuity on a life is the annuity made certain for the term within which it is an even chance the life drops. If, then, of a thousand persons, 500 be sure to die within a year, and the other 500 be immortal, Lee's price of an annuity to any one of these persons is the present value of one payment: for one year is the term which each one has an even chance of surviving and not surviving. But the true value is obviously half that of a perpetual annuity: so that at 5 percent Lee's rule would give less than the tenth of the true value. It must be said for the poor circle-squarers, that they never err so much as this.