Series 7 Exam Question 231: Answer and Explanation

Question: 231

Which of the following are true about the annuitization of a variable annuity?

I. The value of the annuity units is fixed.

II. The number of annuity units is fixed.

III. The value of the annuity units varies.

IV. The number of annuity units varies.

• A. I and II
• B. II and III
• C. II and IV
• D. None of the above

Correct Answer: B

Explanation:

B. When an investor of a variable annuity starts withdrawing money from the annuity, the accumulation units are converted into a fixed number of annuity units. However, the value of the annuity units varies based on the performance of the securities held in the separate account.