An Immediate Annuity will have:

Rationale

An Immediate Annuity will have a single premium.

An Immediate Annuity is typically funded by a one-time payment, known as a single premium, which provides the annuitant with immediate income payments. This structure allows the annuitant to receive regular payments without the need for ongoing contributions.

A (an increasing premium) YOUR ANSWER

An increasing premium suggests a payment structure where the amount paid into the annuity grows over time. However, Immediate Annuities are characterized by a lump-sum payment at the outset, not fluctuating payments, making this choice incorrect.

B (a decreasing premium) YOUR ANSWER

A decreasing premium would imply that the amount paid into the annuity diminishes over time. This is not applicable to Immediate Annuities, which rely on a single, upfront payment rather than a series of decreasing payments, thereby invalidating this option.

C (a single premium) CORRECT

Immediate Annuities are funded by a one-time, upfront payment, referred to as a single premium. This premium is converted into an immediate stream of payments, distinguishing it from other types of annuities that may require ongoing contributions or multiple payments.

D (a level premium) YOUR ANSWER

A level premium indicates consistent, regular payments made over time. While some annuities do use level premiums, Immediate Annuities are specifically funded by a single payment, making this choice incorrect in the context of Immediate Annuities.

Conclusion

Immediate Annuities are defined by their structure of being funded through a single premium, allowing for immediate payouts to the annuitant. Unlike other annuity types that may involve ongoing payments or varying premium structures, the single premium ensures that the annuitant receives a set income stream without additional contributions. Understanding this distinction is crucial for evaluating different annuity products and their respective payment structures.

An Immediate Annuity will have:

An Immediate Annuity will have a single premium.

Related Questions

Related Quizzes

How familiar were you with this question?

Report an Issue

Rate this Practice Test