In a variable annuity, the Assumed Interest Rate (AIR) is defined as the rate of growth used to determine payout.

• A. The rate of growth built into the annuity table which determines payout on a variable annuity
• B. The guaranteed minimum interest rate
• C. The current market interest rate
• D. The rate charged for management fees

Answer: (A)

The payout calculations for a variable annuity hinge on a notional growth rate that the insurer uses to project future benefits. This rate, called the Assumed Interest Rate, is embedded in the payout table and converts the contract’s accumulated value into an estimated stream of payments. It’s a modeling tool, not a guarantee, and it isn’t the actual market rate or a fee.

That’s why this choice fits best: it describes the AIR as the rate of growth built into the annuity’s payout table used to determine how much will be paid out. The guaranteed minimum interest rate described in another option is a separate feature, often associated with guarantees in other types of products, not the AIR for a variable annuity. The current market rate is live and affects actual returns, not the predetermined payout shown in the insurer’s table. And management fees are unrelated to the AIR, which is about projected growth used in payout calculations rather than costs.