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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Products

Caselet: Sunita, aged 58, is risk-averse and wants guaranteed lifelong income for herself and, after her death, the return of the purchase price to her son. Which annuity option best suits this requirement?

A life annuity with return of purchase price fits best. It pays Sunita a guaranteed income for as long as she lives and then returns the original purchase price to her son after her death. Other options either stop at death or do not provide lifelong income.

  1. ALife annuity with return of purchase priceCorrect
  2. BLife annuity with no return of purchase price
  3. CAnnuity certain for 5 years only
  4. DDeferred annuity with no death benefit

Explanation

A life annuity with return of purchase price pays income for life and returns the purchase price to the nominee on the annuitant's death. A plain life annuity pays nothing after death, an annuity certain is not for life, and a deferred annuity with no death benefit fails both needs.

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