ProductsQuestion 18 of 110
A variable annuity contract has an assumed interest rate (AIR) of 4%. In a month when the separate account earns 6%, the annuitant's next payment will:
a.Increase compared with the prior payment
b.Decrease compared with the prior payment
c.Remain the same, because the AIR guarantees a level payment
d.Be suspended until performance returns to the AIR
Explanation
The AIR is the benchmark used to price annuity payments, so performance above it raises the annuity unit value and the payment goes up. Performance below the AIR would lower the payment, and performance exactly equal to it would hold the payment level. The AIR is a calculation assumption, not a guarantee, and payments are never suspended for poor performance.
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