Income Intermediate: Annuity Risks

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1.
An indexed annuity would be attractive to an investor who was pursuing the greatest guaranteed return possible.
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False. An indexed annuity would be attractive to many conservative investors, but could result in a return that was less than that of a guaranteed fixed annuity.
2.
Mortality risk can affect both the buyer of an annuity and the insurance company.
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True. Mortality risk, the risk associated with the "payments for life" feature of annuities, can affect both the annuitant and the insurance company.
3.
Investment risk is the risk that your underlying assets will default, depreciate, or lose purchasing power over time.
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True. Investment risk is the risk that your underlying assets will default, depreciate, or lose purchasing power over time.
4.
Liquidity risk is the risk that an investment's proceeds will not be available when you need them, or will be available only at a significantly reduced value.
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True. Liquidity risk is the risk that proceeds will not be available when you need them, or will be available only at a significantly reduced value.
5.
If the index appreciates in value, the annuitant's account is credited with _______.
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A percentage of that increase. If the index appreciates, the annuity is credited with a percentage of that increase, based upon a pre-determined participation rate.