13. Peter purchased a deferred annuity with a typical surrender charge provision. The charge is 7 percent in the first contract year and declines by 1 percent each year to 0 percent at the end of the seventh contract year. If he fully surrenders his annuity during contract year 4 when his accumulated value is $100,000, and he has a $10,000 gain on the contract, what will his surrender charge be? a. $400 b. $3,200 c. $3,600 d. $4,000
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So, in the fourth year, the surrender charge would be 7% - 3% = 4%. The surrender charge is applied to the accumulated value of the annuity, which is $100,000. So, the surrender charge would be 4% of $100,000, which is $4,000. Show more…
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