Income Intermediate: Annuity Risks

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
An indexed annuity would be attractive to an investor who was pursuing the greatest guaranteed return possible.
Choose wisely. There is only one correct answer.
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.
Choose wisely. There is only one correct answer.
True. Mortality risk, the risk associated with the "payments for life" feature of annuities, can affect both the annuitant and the insurance company.
3.
If the index appreciates in value, the annuitant's account is credited with _______.
Choose wisely. There is only one correct answer.
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.
4.
Investment risk is the risk that your underlying assets will default, depreciate, or lose purchasing power over time.
Choose wisely. There is only one correct answer.
True. Investment risk is the risk that your underlying assets will default, depreciate, or lose purchasing power over time.
5.
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.
Choose wisely. There is only one correct answer.
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.