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5 May, 18:05

A client invests in an equity indexed annuity that has a guaranteed rate of 3% annual return, a 10% cap and 80% participation. in a year when the reference index increases by 15%, the invester will be credited with interate at the rate of?

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  1. 5 May, 21:45
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    10%

    The investor will be credited with the interest at the rate of 10%.

    Explanation:

    Cap on interest rate which is going to be credited = 10%

    Participation=80%

    Increase in reference index = 15%

    As the participation rate is 80% so the investor can credit the amount of 80% * 0.15 = 12% (15% of 80%) but as it is given in the question, the cap of 10% is put on the interest rate credited so the investor will be credited with the interest at the rate of 10%.
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