Question

Joanna and her husband, Tom, have a $40,000 annuity that pays them $200 a month. Tom dies and Joanna continues receiving the $200 monthly check as long as she lives. When Joanna dies, the annuity payments cease. This is an example of?

A) an installment refund annuity.
B) a life annuity.
C) a cash refund annuity.
D) a joint and full survivor annuity.

Answer 1

The scenario described is an example of a life annuity, where Joanna continues to receive $200 monthly after Tom's death.

Step-by-step explanation:

This scenario is an example of a life annuity. A life annuity is a financial contract that provides a stream of income for the rest of an individual's life. In this case, Joanna and Tom had a $40,000 annuity that paid them $200 a month, and when Tom dies, Joanna continues to receive the $200 monthly check as long as she lives.