Question 23

A straight life annuity pays a periodic income during the annuitant's lifetime with no refund upon death.

A straight life annuity provides a regular income solely for the duration of the annuitant's life, and it does not offer any payment or refund to beneficiaries after the annuitant's death.

A) during the annuitant's lifetime with no refund upon death.

This option accurately describes a straight life annuity. It confirms that payments are made only while the annuitant is alive, and no further payments are made after the annuitant's death, aligning perfectly with the definition of this type of annuity.

B) with a guaranteed total amount to be paid either to the annuitant or the beneficiary.

This option describes a different type of annuity, likely a life annuity with a refund or period certain feature, where a total amount is guaranteed to be paid. In contrast, a straight life annuity does not guarantee any payments to beneficiaries after the annuitant's death.

C) guaranteed to be equal to the purchase price of the royalty.

This statement is incorrect as it does not pertain to annuities at all. The concept of a purchase price for a royalty does not apply to the structure or function of a straight life annuity, which focuses on the periodic payments during the annuitant's lifetime.

D) to two annuitants until one dies, after which all payments cease.

This option describes a joint life annuity, which involves multiple annuitants. A straight life annuity, however, is designed for a single annuitant and terminates upon their death without continuing payments to others.

Conclusion

The correct answer, option A, accurately reflects the fundamental nature of a straight life annuity, highlighting its provision of income during the annuitant's lifetime without any death benefits. Options B, C, and D each describe different financial products or features that do not align with the definition of a straight life annuity, thereby confirming A as the only correct choice.