Q:

The Shur-Gro variable annuity uses an AIR of 3% for those contract holders who are in the annuity stage. The past few months, the actual returns created by the separate account have been, respectively; 6%, 5.5%, 4% and 3.5%. Which of the following is a true statement regarding the payouts to annuitants?

A) Payments have not been affected
B) Payments have increased
C) Payments have steadily decreased
D) Payments have remained level

A:

The correct answer is b.
Any time the actual growth rate of the separate account exceeds the account’s AIR, the payment will increase compared to the previous month’s payment. Note that the mathematical reason for this is far beyond the scope of Series 6 exam.


RELATED FAQS

  1. For what types of financial instruments would I want to calculate the present value ...

    Learn about the types of financial instruments the present value of an annuity calculation is most useful for, including ...
  2. What is an annuity?

    An annuity is a contract between you and an insurance company in which you make a lump sum payment or series of payments ...
  3. What is the difference between a fixed and variable annuity?

    Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks ...
RELATED TERMS
  1. Deferred Payment Annuity

    An annuity where the payments received will start some time in ...
  2. Whole Life Annuity Due

    A financial product sold by insurance companies that requires ...
  3. Annuity Consideration

    The money that an individual pays to an insurance company in ...
  4. Immediate Payment Annuity

    An annuity contract that is purchased with a single lump-sum ...
  5. Delayed Annuity

    An annuity in which the first payment is paid at a later date ...
  6. Annuity Due

    An annuity whose payment is to be made immediately, rather than ...
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center