What type of investments typically fund a fixed annuity?

What type of investments typically fund a fixed annuity?

• A. Stocks and real estate
• B. High-growth technology companies
• C. Conservative long-term securities
• D. Short-term bonds and T-bills

Answer: (C)

Fixed annuities are primarily funded through conservative long-term securities. This includes investments that are stable and offer a steady return, such as government bonds, corporate bonds, and other fixed-income securities. The nature of a fixed annuity is to provide a guaranteed payout at a fixed interest rate for a specified period or for the annuitant's lifetime, which relies on the predictable income generated by these conservative investments. Conservative long-term securities provide the necessary stability and reliability that insurance companies require to manage the obligations they have towards annuity holders. These types of investments are less volatile than equities or real estate, making them suitable for the more cautious investment philosophy that fixed annuities represent. The goal of a fixed annuity is to minimize risk while ensuring that the annuitant receives their promised returns, which is best achieved through these types of securities.

Fixed annuities are primarily funded through conservative long-term securities. This includes investments that are stable and offer a steady return, such as government bonds, corporate bonds, and other fixed-income securities. The nature of a fixed annuity is to provide a guaranteed payout at a fixed interest rate for a specified period or for the annuitant's lifetime, which relies on the predictable income generated by these conservative investments.

Conservative long-term securities provide the necessary stability and reliability that insurance companies require to manage the obligations they have towards annuity holders. These types of investments are less volatile than equities or real estate, making them suitable for the more cautious investment philosophy that fixed annuities represent. The goal of a fixed annuity is to minimize risk while ensuring that the annuitant receives their promised returns, which is best achieved through these types of securities.