Variable Annuity/AIR Question

FINRA FINRA Series 7
1

I’m stumped on this quiz question.

I understand why April’s payout is lower than whatever the initial annuity payment was (since March’s 2% return is lower than the 3% AIR), but I don’t understand why April’s payout is lower than March’s payout. I’m assuming the March payout would be based on the the -4% February return, which is even lower than the 3% AIR comparatively. What am I missing? I’ve read the explanation but I still don’t understand.

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2

Hi, good question.

The adjustment is determined by comparing the account’s performance to the AIR. If the account beats the AIR, the payout will increase. If the account underperforms as compared to the AIR, the payout will decrease.

It’s always compared to the AIR - not to the previous performance of the account!

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