Question

Which of the following would NOT be appropriate for an immediate annuity?

A. A lottery winner who opted for a lump-sum payment.
B. A parent saving for a child's college.
C. A beneficiary collecting the face amount of a life insurance policy.
D. Someone who just won a large settlement.

Answer 1

An immediate annuity is a financial product that provides a fixed stream of income starting immediately, typically in exchange for a lump sum payment or a series of payments. It is not appropriate for a lottery winner who opted for a lump-sum payment as they already have a large sum of money.

Step-by-step explanation:

An immediate annuity is a financial product that provides a fixed stream of income starting immediately, typically in exchange for a lump sum payment or a series of payments. It is designed to provide a regular income during retirement or a specific period of time. Out of the options given, the one that would NOT be appropriate for an immediate annuity is A. A lottery winner who opted for a lump-sum payment.

A lottery winner who receives a lump-sum payment already has a large sum of money and may not need a regular income stream. An immediate annuity is best suited for individuals who need a consistent source of income in retirement or for specific financial goals.