Products & Their RisksQuestion 79 of 398
An equity-indexed annuity typically credits interest based on:
a.The performance of a single subaccount chosen by the owner
b.A rate that floats daily with short-term Treasury yields
c.The performance of a securities index, subject to a cap and a guaranteed minimum
d.The dividend rate declared quarterly by the insurer's board
Explanation
An equity-indexed (or fixed-indexed) annuity credits interest linked to the return of a market index, such as the S&P 500, but limits the upside with a participation rate or cap and provides a guaranteed minimum return. It sits between a fixed and a variable annuity in risk and reward.
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