Question

Arline is a 70-year-old widow with no dependents. She wants to invest in an annuity that will produce income now. She has $100,000 to invest and wants to receive the most she can in monthly income. Which of the following is the most suitable annuity for Arline based on her objectives?

A) A longevity annuity
B_ A 20-year term certain, fixed annuity
C) An immediate, single premium life annuity
D) A deferred, fixed annuity

Answer 1

The most suitable annuity for Arline, a 70-year-old widow with no dependents, who wants to generate income now with a $100,000 investment, is option C) an immediate, single premium life annuity.

Step-by-step explanation:

Based on Arline's objectives, the most suitable annuity for her is option C) an immediate, single premium life annuity. An immediate annuity allows Arline to start receiving income right away, which aligns with her goal of generating income now. A single premium annuity means that Arline will make a lump sum payment upfront, in this case, her $100,000 investment. Lastly, a life annuity will provide Arline with income for the rest of her life, ensuring that she receives the most she can in monthly income.