Question

Three types of annuities are
a. Annuity certain
b. Annuity contingent
c. Annuity perpetual
d. All of the above

Answer 1

Hint: First, we need to learn the definition of the annuity. We shall understand the types of annuities here.
Here, we were asked to choose the appropriate option which refers to the three types of annuities.
An annuity is nothing but a contract between us and an insurance company in which we can make a lump payment after retirement.

Complete step by step answer:
An annuity is a plan that helps you to get regular payment for life after making a lump sum investment, which can be optimized for income or long-term growth, but they are not short-term investment strategies.
An annuity is a customizable contract issued by an insurance company that converts an investor’s premiums into a guaranteed fixed income stream and it is a sequence of equal payments made at equal intervals of time, with compound interest on these payments in which we can make a lump payment after retirement.
Hence, an annuity is a contract between us and an insurance company in which we can make a lump payment after retirement.
We shall move on to the types of annuities.
a) The first is annuity certain, which is an annuity that starts and ends on certain fixed dates contracted between us and an insurance company.
Here, the payments can be made unconditionally for a fixed date.
b) The second is annuity contingent, which is an annuity in which the payments are made till the happening of an event like the marriage event, the death event, and so on.
c) The third is a perpetual annuity, which is an annuity where the payments will continue till the death of the person who signed the contract.

So, the correct answer is “Option d”.

Note: We notice that an annuity is a contract between us and an insurance company in which we can make a lump payment after retirement. The three types of annuities are annuity certain, annuity contingent, and perpetual annuity. Hence, option d is correct.