Which of the following is an annuity that is linked to a market-related index?

• A. Immediate annuity
• B. Equity-indexed annuity
• C. Deferred annuity
• D. Fixed annuity

Answer: (B)

Verified step by step guidance

1. Understand the concept of an annuity: An annuity is a financial product that provides a series of payments made at regular intervals, often used for retirement planning.
2. Learn about the types of annuities: Immediate annuity starts payments right after purchase, deferred annuity delays payments to a future date, fixed annuity provides guaranteed payments, and equity-indexed annuity links payments to a market-related index.
3. Focus on the equity-indexed annuity: This type of annuity combines features of fixed and variable annuities. It offers a guaranteed minimum return while allowing for additional returns based on the performance of a specific market index, such as the S&P 500.
4. Compare the options provided in the question: Immediate annuity, deferred annuity, and fixed annuity do not involve linking payments to a market-related index. Equity-indexed annuity is the correct choice because it is explicitly tied to a market index.
5. Conclude the reasoning: The equity-indexed annuity is the correct answer because it is the only type of annuity among the options that links its returns to the performance of a market-related index.