Which of the Following Statements About Variable Annuities Is True

question 44

Multiple Choice

Which of the following statements about variable annuities is true?

• A)The periodic payments received by the annuitant are fixed.
• B)Variable annuities typically provide a guaranteed death benefit payable to a beneficiary if the annuitant dies prior to retirement.
• C)Insurers offering variable annuities are not permitted to charge administrative fees.
• D)Although the value of annuity units fluctuates,accumulation units have a fixed value.

Understand the impact of payment timing (beginning of the period vs. end of the period) on investment growth and loan repayments.

Analyze the effects of changing conditions such as interest rates and compounding frequencies on the growth of investments and the repayment of loans.

Understand the concept of the time value of money and its application in calculating present and future values of various financial instruments.

Differentiate between General Annuity and Annuity Due and understand their financial implications.

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Definitions:

Covariance

A measure that indicates the extent to which two variables change together. If the greater values of one variable mainly correspond with the greater values of the other variable, and the same holds for the lesser values, the covariance is positive; otherwise, it is negative.

Coefficient Of Correlation

A statistical measure that calculates the strength of the relationship between the relative movements of two variables.

Stronger Correlation

Indicates a more pronounced relationship between two variables, often implied by a correlation coefficient closer to -1 or 1.

Least Squares Regression

A statistical method that minimizes the sum of the squares of the differences between observed and predicted values, used for fitting a linear model to data.