On January 1, 2013, Brian deposited $100,000 in an equity-indexed annuity that e
ID: 2741567 • Letter: O
Question
On January 1, 2013, Brian deposited $100,000 in an equity-indexed annuity that employs the "ratchet" indexing method. During 2013, the stock market index decreased from a beginning value of 3,000 to an ending value of 2,700. During 2014, it increased from 2,700 to 2,800. Which of the following statements regarding Brian's equity-indexed annuity is true?
in 2014, excess interest is credited to the annuity since the ending index value is higher than 2,700
if Brian surrenders the annuity contract at the end of 2014, he is guaranteed to receive an amount that exceeds his initial $100,000 investment
in 2014, no excess interest is credited to the annuity since the ending index value is below its initial value of 3,000
in 2013, the annuity will increase in value despite the decline in the index because of the minimum guaranteed rate of return
a)in 2014, excess interest is credited to the annuity since the ending index value is higher than 2,700
b)if Brian surrenders the annuity contract at the end of 2014, he is guaranteed to receive an amount that exceeds his initial $100,000 investment
c)in 2014, no excess interest is credited to the annuity since the ending index value is below its initial value of 3,000
d)in 2013, the annuity will increase in value despite the decline in the index because of the minimum guaranteed rate of return
Explanation / Answer
a) in 2014, excess interest is credited to the annuity since the ending index value is higher than 2,700
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