Ace the Texas Funeral Prearrangement Test 2026 – Plan Your Path with Peace!

The correct answer is indexed annuity. This type of annuity is designed to provide a return based on a stock market index, such as the S&P 500. The interest credited to an indexed annuity can fluctuate depending on the performance of that index, meaning the interest rate may change from year to year based on how well the index performs. This offers the advantage of potential higher returns during strong market conditions while often providing some level of protection against losses in poor market conditions, as they typically include a guarantee that ensures the principal remains safe.

In contrast, a variable annuity allows the investor to allocate funds to different investment options, such as mutual funds, and the return can vary significantly based on the investment performance, but it is not directly linked to any index. A fixed annuity offers a predetermined interest rate that does not change and guarantees returns over time, thus avoiding the variability of earnings tied to company performance. A flexible premium annuity refers more to the payment structure allowing varying premium payments rather than affecting interest rates directly.