Question

Which of the following statements correctly describes the relationship between annuity units and their value during the payout period of a variable annuity?

A) the number of units remains constant, the unit value remains constant.
B) the number of units remains constant, the unit value varies.
C) the number of units varies, the unit value remains constant.
D) the number of units varies, the unit value varies.

Answer 1

During the payout period of a variable annuity, the number of annuity units remains constant, but the unit value can fluctuate based on the performance of the underlying investments.

Step-by-step explanation:

The relationship between annuity units and their value during the payout period of a variable annuity can be described as follows: the number of units remains constant, but the unit value varies. This means that when you enter the payout phase of a variable annuity, you are allocated a certain number of annuity units based on the amount of money you have in the annuity and the current unit value. Once the payout period begins, the number of units you own does not change. However, the value of each unit can go up or down because it is tied to the performance of the investment options underlying the annuity. As a result, your payouts may vary from period to period, reflecting the changes in the value of the underlying investments.