Series 7 practice questionmediumPackaged Products — Variable Annuities
During the annuitization phase, a variable annuity's payments are determined by:
- AA fixed interest rate set at the time of purchase
- BThe consumer price index (CPI)
- CThe general account's guaranteed rate of return
- DThe performance of the separate account's underlying investments✓ Correct answer
Explanation
Why D — The performance of the separate account's underlying investments
During annuitization, variable annuity payments fluctuate based on the performance of the underlying investments in the separate account. Each payment is determined by comparing the actual investment return to the assumed interest rate (AIR). If the actual return exceeds the AIR, payments increase; if it falls below, payments decrease.
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