The variable return within a variable annuity is based on the performance of which of the following?

• A. The insurance company's general account
• B. The inflation rate as determined by the Consumer Price Index (CPI)
• C. A fixed interest rate set by the insurance company
• D. The underlying investment portfolio selected by the annuity holder

Answer: (D)

Verified step by step guidance

1. Understand the concept of a variable annuity: A variable annuity is a type of investment product offered by insurance companies that allows the annuity holder to invest in a portfolio of underlying assets, such as mutual funds, and the returns are based on the performance of these investments.
2. Clarify the term 'variable return': In the context of a variable annuity, the variable return refers to the fluctuating earnings or losses that depend on the performance of the underlying investment portfolio chosen by the annuity holder.
3. Eliminate incorrect options: The insurance company's general account, inflation rate (CPI), and fixed interest rate are not relevant to the variable return of a variable annuity. These options pertain to other types of financial products or fixed annuities.
4. Focus on the correct option: The variable return is directly tied to the performance of the underlying investment portfolio selected by the annuity holder. This portfolio typically includes stocks, bonds, or mutual funds, and its value changes based on market conditions.
5. Conclude the explanation: The key takeaway is that the variable return within a variable annuity is not fixed or guaranteed but depends entirely on the investment choices made by the annuity holder and the market performance of those investments.