A client invests in an equity indexed annuity that has a guaranteed rate of 3% annual return, a 10% cap and 80% participation. i

Question

e-lub [12.9K]

3 years ago

6

A client invests in an equity indexed annuity that has a guaranteed rate of 3% annual return, a 10% cap and 80% participation. i

n a year when the reference index increases by 15%, the invester will be credited with interate at the rate of?

Business

1 answer:

34kurt · Answer 1 · 2022-01-11T14:43:39+03:00

Answer:

10%

The investor will be credited with the interest at the rate of 10%.

Explanation:

Cap on interest rate which is going to be credited = 10%

Participation=80%

Increase in reference index = 15%

As the participation rate is 80% so the investor can credit the amount of 80% * 0.15= 12% (15% of 80%) but as it is given in the question, the cap of 10% is put on the interest rate credited so the investor will be credited with the interest at the rate of 10%.