What is an annuity?
A. A single lump sum payment
B. A series of equal payments at regular intervals
C. An irregular series of payments
D. A one-time investment
Answer (2)
An annuity is a series of equal payments made at regular intervals. It is commonly used for retirement planning and can be calculated using specific formulas. The correct multiple choice option is B.
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An annuity is a financial product that represents a series of equal payments made at regular intervals. Therefore, the correct answer to the question is b. A series of equal payments at regular intervals .
What is an Annuity?
In the context of finance and business, an annuity is designed to provide a steady stream of income over time. They are commonly used in various financial arrangements, including insurance and retirement plans. Annuities can come in different forms, such as fixed or variable, but the defining feature is the regular, equal payments.
Why Are Annuities Used?
Retirement Planning: Annuities are popular among retirees as they provide a guaranteed income stream, which can help cover living expenses.
Investment: Investors may use annuities to ensure a steady cash flow in the future.
Types of Annuities:
Fixed Annuity: Provides fixed payments over the specified period.
Variable Annuity: Offers payments that can vary based on the performance of the investment options within the annuity.
How are Annuities Paid?
Payments can be made monthly, quarterly, annually, or at any other regular interval.
Who Provides Annuities?
Financial institutions such as insurance companies typically sell annuities.
In summary, an annuity is a useful financial tool for ensuring long-term financial stability and is characterized by a series of equal payments at regular intervals.
