week 12

Question 1

What is a life annuity ? how does it work?

Answer 1

An insurance company takes both longevity risk and capital market risk and promises to pay you an annual stream for as long as you live.

A life annuity is a financial product in the form of an insurance product; asks the buyer to pay for the series of future payments through a lumpsum amount prior to the onset of the annuity.