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An annuitant would like to determine the current value of her annuity. To do this, she multiplies the number of "accumulation units" she owns times the unit value of the "separate account". What kind of annuity BEST matches this description?

- A) Fixed annuity
- B) Variable annuity
- C) Immediate annuity
- D) Deferred annuity

1 Answer

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Final answer:

The correct answer is option b. The annuity mentioned, involving multiplication of accumulation units and their unit value, refers to a Variable annuity where investments in a separate account determine the return.

Step-by-step explanation:

The type of annuity described in the question, where the annuitant multiplies the number of accumulation units by the unit value of the separate account, is characteristic of a Variable annuity. In a variable annuity, the value of each accumulation unit is tied to the performance of a separate investment account, which can fluctuate over time based on market conditions.

The annuitant's payments go into this separate account, which is invested in a variety of instruments, such as stocks or bonds, leading to a variable return on the investment.

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