An Indexed (Equity Indexed) Annuity has interest rates linked to what?

An Indexed (Equity Indexed) Annuity has interest rates linked to what?

• A. Inflation rate
• B. A bond index
• C. A stock market index such as the S&P 500
• D. Mortgage rates

Answer: (C)

An Indexed (Equity Indexed) Annuity credits interest based on changes in a stock market index. The common example is a broad index like the S&P 500. You don’t own stocks in the index; instead, the contract links the credited interest to the index’s performance, usually with features such as a participation rate, a cap, or a spread. There’s typically a minimum guaranteed return (a floor), so you don’t lose money if the index falls, but the credited amount won’t exceed the cap and isn’t tied to inflation, mortgage rates, or a bond index. This setup is why the interest rates are linked to a stock market index rather than those other measures.

An Indexed (Equity Indexed) Annuity credits interest based on changes in a stock market index. The common example is a broad index like the S&P 500. You don’t own stocks in the index; instead, the contract links the credited interest to the index’s performance, usually with features such as a participation rate, a cap, or a spread. There’s typically a minimum guaranteed return (a floor), so you don’t lose money if the index falls, but the credited amount won’t exceed the cap and isn’t tied to inflation, mortgage rates, or a bond index. This setup is why the interest rates are linked to a stock market index rather than those other measures.