Question

If you are the beneficiary of a fixed annuity and interest rates rise, you will receive a higher payment.

a) True
b) False

Answer 1

If you are the beneficiary of a fixed annuity, you will not receive a higher payment if interest rates rise.

Step-by-step explanation:

The statement is false. If you are the beneficiary of a fixed annuity and interest rates rise, you will not receive a higher payment. An annuity is a financial product where you receive a fixed payment at regular intervals, typically monthly or annually. The payment amount is determined at the time of purchase and remains fixed throughout the annuity term, regardless of changes in interest rates.

Let's say you purchased a fixed annuity that pays you $1,000 per month. If interest rates rise, the annuity payment does not increase. You will continue to receive $1,000 per month for the duration of the annuity term.

In contrast, with a variable annuity, the payment amount is tied to the performance of underlying investments and can increase or decrease based on changes in interest rates or other factors.