Contract owners of registered index-linked annuities (RILAS) can lose money based on decreases in the value of the stockmarket index, but they can limit their losses by using buffers and floors. For a given RILA, suppose that, at the end of theterm, the index dropped 35% in value, but the RILA's accumulated value decreased by 15%. With regard to buffers andfloors, this RILA has aO buffer of 5%O buffer of 15%O buffer of 20%O floor of 20%

Buffer annuities are annuities which provides some protection of in case of losses that upto buffer…

Answered: term, the index dropped 35% in value,…

term, the index dropped 35% in value, but the RILA's accumulated Value decreased by 15%. Wit floors, this RILA has a O buffer of 5% O buffer of 15% Obuffer of 20%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Contract owners of registered index-linked annuities (RILAS) can lose money based on decreases in the value of the stock
market index, but they can limit their losses by using buffers and floors. For a given RILA, suppose that, at the end of the
term, the index dropped 35% in value, but the RILA's accumulated value decreased by 15%. With regard to buffers and
floors, this RILA has a
O buffer of 5%
O buffer of 15%
O buffer of 20%
O floor of 20%

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