Products & Their RisksQuestion 77 of 398
In a fixed annuity, who bears the investment risk?
a.The insurance company, which guarantees a stated rate of return
b.The annuitant, whose payments vary with market performance
c.The broker-dealer that sold the contract
d.A separate account managed by a portfolio manager
Explanation
A fixed annuity guarantees a minimum rate of return and a fixed payout, so the insurance company assumes the investment risk and funds the contract from its general account. Because there is no securities investment risk to the buyer, a fixed annuity is an insurance product and generally not a security.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
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