Question

Terri purchased an annuity for $100,000. She was to receive $10,000 per year and her life expectancy was 20 years. She died after receiving 8 payments. Terri's final return should reflect a loss of $20,000 ($100,000 - $80,000).

Which of the following statements regarding Terri's annuity is correct?
A) Terri's final return should reflect a loss of $10,000.
B) Terri's final return should reflect a loss of $20,000.
C) Terri's final return should reflect a gain of $10,000.
D) Terri's final return should reflect a gain of $20,000.

Answer 1

The correct statement regarding Terri's annuity is Terri's final return should reflect a loss of $10,000.

Step-by-step explanation:

The correct statement regarding Terri's annuity is A) Terri's final return should reflect a loss of $10,000.

Terri purchased an annuity for $100,000 and was supposed to receive $10,000 per year. However, she died after receiving 8 payments. Since her life expectancy was 20 years, she received a total of $80,000 ($10,000 x 8) before her death. As a result, her final return should reflect a loss of $10,000 ($100,000 - $80,000).