In a fixed immediate annuity, payment amounts are determined by which three factors?

• A. Principal and Interest
• B. The contract's income period
• C. Life expectancy
• D. Investment yield

Answer: (B)

In a fixed immediate annuity, you turn a lump sum into a guaranteed stream of payments that starts right away. The size of each payment is set by how long you want those payments to continue—the income period you choose in the contract. Shorter payout periods mean larger payments; longer periods mean smaller payments. This period defines how the principal is spread out at the fixed rate over time, so it directly determines the payment amount. Life expectancy isn’t relevant to the fixed payment amount since the contract isn’t contingent on how long you live, and investment yield is already reflected in the contract terms but the actual payment size is dictated by the chosen income period.