SIE practice questionmediumInflation/purchasing power risk
An investor’s fixed annuity pays the same monthly amount for 20 years. Which risk is most prominent?
- ALiquidity risk
- BConcentration risk
- CInflation risk✓ Correct answer
- DInterest rate risk
Explanation
Why C — Inflation risk
If inflation rises, the annuity's fixed payments buy less, indicating inflation risk. Liquidity, concentration, and interest rate risks are not directly related to fixed payments.
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