Assume You Are Analyzing Two Separate Annuity Pools

question 3

Multiple Choice

Assume you are analyzing two separate annuity pools. Pool A has significantly higher mortality (deaths/thousand) than Pool B. Holding other factors constant,which pool will make higher payments per month to each annuitant?

• A) A
• B)B
• C)the monthly liquidation payments will be equal
• D)we cannot say, because mortality is not an important factor in calculating annuity payments

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Definitions:

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.

Permissible

Allowed or permitted within a set of rules, laws, or regulations.

Exculpatory Clause

A contract provision that relieves one party of liability if damages are caused during the execution of the contract.

Liability

A legal responsibility or obligation that may arise from any number of legal claims or is imposed by law.