Multiple Choice
An annuity promises that if the annuitant dies before receiving all scheduled payments, which of the following typically occurs?
144
views
7. Receivables and Investments
Introduction to Investments in Securities
Multiple Choice
Which of the following is an annuity that is linked to a market-related index?
A
Immediate annuity
B
Equity-indexed annuity
C
Deferred annuity
D
Fixed annuity
Verified step by step guidance1
Understand the concept of an annuity: An annuity is a financial product that provides a series of payments made at regular intervals, often used for retirement planning.
Learn about the types of annuities: Immediate annuity starts payments right after purchase, deferred annuity delays payments to a future date, fixed annuity provides guaranteed payments, and equity-indexed annuity links payments to a market-related index.
Focus on the equity-indexed annuity: This type of annuity combines features of fixed and variable annuities. It offers a guaranteed minimum return while allowing for additional returns based on the performance of a specific market index, such as the S&P 500.
Compare the options provided in the question: Immediate annuity, deferred annuity, and fixed annuity do not involve linking payments to a market-related index. Equity-indexed annuity is the correct choice because it is explicitly tied to a market index.
Conclude the reasoning: The equity-indexed annuity is the correct answer because it is the only type of annuity among the options that links its returns to the performance of a market-related index.
Related Videos
Related Practice
