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 eight payments.Terri's final return should reflect a loss of $20,000 ($100,000 - $80,000).

Question

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If Terri only received 8 payments of $10,000 each, she would have received a total of $80,000, not $100,000. Therefore, her final return would reflect a loss of $20,000 compared to the initial investment of $100,000, but not compared to the payments she actually received.

Terri Purchased an Annuity for $100,000