In the separate account of a variable annuity, which of the following characteristics apply to annuity ...

By Investopedia Staff AAA
Q:

In the separate account of a variable annuity, which of the following characteristics apply to annuity units, but not accumulation units?
I. Fixed number of units
II. Actuarial factors have been applied
III. Variable number of units
IV. Loss of control by investor
a) III, IV
b) I, II, IV
c) I, II
d) II, III, IV

A:

The correct answer is b.
When the holder of a variable annuity contract annuitizes the contract, he/she is asking that the insurance company pay him/her for life. The company applies the actuarial factors for life expectancy and payout option to the value of the account and computes a fixed number of units to be cashed in each month. At the point of annuitization, the annuitant relinquishes all control of the account.


RELATED FAQS

  1. If an investor has a required rate of return of 10% on a 20-year zero ...

    The correct answer is d. The value of a zero coupon bond is the present value of the lump-sum principal payment. There is ...
  2. XYZ Corp. has an asset turnover ratio of 0.75. Because the economy is currently ...

    The correct answer is: b) Return on Assets = NI/Sales = Sales/Assets x NI/Sales
  3. At the beginning of the year, ABC Corp. began to lease a major piece of equipment ...

    The correct answer is: A) Under the capitalized lease method, the lessee must treat the asset as if it was purchased with ...
  4. Which of the following statements is (are) true with respect to the factors that ...

    The correct answer is: d) (I) is incorrect because if interest rates are expected to rise, banks will generally "increase" ...
RELATED TERMS
  1. Series 79

    A examination to ensure a candidate is qualified to become a ...
  2. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  3. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  4. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  5. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
  6. Series 28

    An exam given by the Financial Industry Regulatory Authority ...

You May Also Like

Related Articles
  1. Insurance

    Municipal Bond Tips For The Series 7 ...

  2. Retirement

    6 Proven Tips For Series 6 Success

  3. Insurance

    Tips For Passing The Series 6 Exam

  4. Professionals

    Banker Or Broker: Which Career Is Right ...

  5. Professionals

    Breaking Down Financial Securities Licenses

Trading Center