Under what condition is the interest rate guaranteed in a market value adjusted annuity?

Under what condition is the interest rate guaranteed in a market value adjusted annuity?

• A. When the contract has been held for the period specified in the policy
• B. Only if the holder is over the age of 65
• C. When the market is experiencing high volatility
• D. If the policyholder makes additional contributions

Answer: (A)

In a market value adjusted (MVA) annuity, the interest rate is guaranteed when the contract has been held for the period specified in the policy. This stipulation is essential because MVA annuities have features that adjust the value based on market conditions, typically to reflect the interest rate environment at the time of withdrawal or surrender. By ensuring that the contract is held for the designated period, the policyholder can benefit from a stable interest rate as outlined in the contract, which is crucial for planning and investment purposes. This guarantees that the policyholder will receive the specified interest rate, allowing for predictable growth of the annuity over time. Other conditions, such as age or market volatility, do not inherently guarantee the interest rate in an MVA annuity and are not related to the contractual agreements surrounding the guaranteed interest terms. Similarly, making additional contributions tends to influence the overall value of the annuity but does not impact the guarantee of the interest rate itself based on the holding period.

In a market value adjusted (MVA) annuity, the interest rate is guaranteed when the contract has been held for the period specified in the policy. This stipulation is essential because MVA annuities have features that adjust the value based on market conditions, typically to reflect the interest rate environment at the time of withdrawal or surrender.

By ensuring that the contract is held for the designated period, the policyholder can benefit from a stable interest rate as outlined in the contract, which is crucial for planning and investment purposes. This guarantees that the policyholder will receive the specified interest rate, allowing for predictable growth of the annuity over time.

Other conditions, such as age or market volatility, do not inherently guarantee the interest rate in an MVA annuity and are not related to the contractual agreements surrounding the guaranteed interest terms. Similarly, making additional contributions tends to influence the overall value of the annuity but does not impact the guarantee of the interest rate itself based on the holding period.