Final answer:
The amount of each payment Kelly receives from a variable annuity will depend on the performance of the investment options tied to the accumulation units. Payments can vary, with future values calculated based on present value, interest rates, and time until payment.
Step-by-step explanation:
When Kelly decides to receive withdrawals from a variable annuity based on a number of accumulation units, the amount of each payment will depend on the value of each accumulation unit at the time of payment. The value of the units is linked to the performance of the underlying investment options. Therefore, payments can fluctuate and are not a fixed amount.
The future value of payments that Kelly might receive would be calculated using the formula: Future Value = Present Value x (1 + Interest Rate)number of years t. For example, if a firm promises to pay $15 million now, $20 million in one year, and $25 million in two years, the future value of these payments would need to take into account the respective interest rates applied over the time periods until each payment is made.