Accumulation period/units: If a $5,000 premium deposit is made into a variable annuity with unit price $5, how many accumulation units are purchased?

Accumulation period/units: If a $5,000 premium deposit is made into a variable annuity with unit price $5, how many accumulation units are purchased?

• A. 1000 accumulation units
• B. 500 accumulation units
• C. 250 accumulation units
• D. 2000 accumulation units

Answer: (A)

In a variable annuity, you convert the premium into accumulation units at the current price per unit. The number of units bought is the premium amount divided by the unit price. Here, 5,000 divided by 5 equals 1,000 accumulation units. Those units represent your ownership in the subaccounts, and their total value will change with the performance of the investments, as the unit price moves up or down over time.

In a variable annuity, you convert the premium into accumulation units at the current price per unit. The number of units bought is the premium amount divided by the unit price. Here, 5,000 divided by 5 equals 1,000 accumulation units. Those units represent your ownership in the subaccounts, and their total value will change with the performance of the investments, as the unit price moves up or down over time.