Question

Which of these is an example of a single-payment fixed annuity?A. An annuity with an APR of 3.4% into which you invest $2500 eachyearB. An annuity with an APR of 3.4% into which you invest a lump sumof $12,500C. An annuity with a minimum APR of 3.4% into which you invest$2500 each yearD. An annuity with a minimum APR of 3.4% into which you invest alump sum of $12,500Hi

Answer 1

Let's begin by explaining key terminologies used:

A single-payment fixed annuity refers to a contract in which the client pays a lump sum of money to the insurance firm. In return, the insurance firm pays the client a certain amount periodically over a set period of time & at a specified interest rate or APR

For options A & D, the client makes yearly payment to the insurance firm (this is contrary to the lump sum that should originally be paid). Option D does not indicate a specified interest rate, it only gave an estimate of "minimum APR of 3.4%"

Option B has a specified APR of 3.4% & the client pays a lump sum upfront

Hence, option B is the correct answer