Terri purchased an annuity for $100,000.She was to receive $8,000 per year and her life expectancy was 20 years. She died after receiving 15 payments.Terri's final return should reflect a loss of $40,000 (5 payments not made ´ $8,000).

Question

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The question is asking if Terri's final return should reflect a loss of $40,000, which implies that the full $100,000 should have been paid out over the 20-year life expectancy. However, since Terri only received 15 payments, she would have been paid out $120,000 and therefore actually received a profit of $20,000 ($120,000 - $100,000). There is no loss of $40,000 to be reflected in her final return.

Terri Purchased an Annuity for $100,000