Interest credited to a fixed annuity is guaranteed not to be lower than which of the following?

A fixed annuity is a financial product in which the insurer guarantees a minimum rate of interest on the invested funds over a specified period. The correct answer, indicating that the interest credited to a fixed annuity is guaranteed not to be lower than the contract guaranteed rate, highlights a fundamental feature of fixed annuities.

The contract guaranteed rate is predetermined in the contract and serves as a security for the policyholder, ensuring that the interest earned will meet or exceed this specified level regardless of market conditions. This guarantee provides peace of mind for investors, as they can expect a consistent minimum return on their investment.

In contrast, options like a variable contract rate rely on market performance and can fluctuate, making them less predictable. The current rate of inflation and the prime rate are also influenced by economic conditions and are not guaranteed by the terms of the annuity contract, meaning that they do not provide the same level of security as the contract guaranteed rate does. Thus, the emphasis on the contract guaranteed rate as the minimum level of interest underscores the assurance fixed annuity holders receive from their investment.