14.2a

Question 1

In order for a deferred annuity to mature, it must first go through the ______ in which either a lump-sum payment or a series of payments are paid into the annuity on an after-tax basis and then earn interest at a compounding rate.

Answer 1

‘accumulation period’

Question 2

A ______ will guarantee a certain rate of return on interest earned, while a variable annuity is matched up to an investment vehicle, so returns can either be favorable or unfavorable depending on the outcome of the market.

Answer 2

fixed annuity

Question 3

An annuity’s interest rate is determined by each insurer or other financial institution in the annuity market and is a major selling point for consumers in deciding with whom to begin an annuity contract. Most insurers promote an ‘initial rate’ which is often a promotional rate, guaranteed for a specified period of time. Once this promotional period ends, the annuity’s ______ is applied to the principal for the remainder of the accumulation period.

Answer 3

‘renewal rate’

Question 4

Insurers also promote a Minimum Guaranteed Rate of interest return to the contract owner based on the ______ and schedule (single, level, or flexible premiums) which is written into the annuity contract.

Answer 4

premium deposit amounts

Question 5

Tax is not collected on any interest earned during the ______, thus allowing the entire fund to continue to grow at a compounded rate until the annuity payout begins.

Answer 5

accumulation period