Question

Gracie owns a deferred annuity. The contract is tied to a market index, which was at 1000 when Gracie purchased the product and reached 1250 five years later at the end of the contract's crediting term. The 25 percent index gain is the basis for the amount of interest credited to the contract. What kind of annuity does Gracie own?

Answer 1

Point to point indexed annuity.

Explanation:

An indexed annuity is linked to specific index performance. Point to point indexed annuity is the one which gives interest on the basis of index percentage change. The interest credit is calculated by taking the percentage change between the beginning and end points of the index.