Which of the following is TRUE of an equity-indexed annuity?

An equity-indexed annuity is designed to combine elements of fixed and variable annuities, allowing policyholders to benefit from stock market performance while still having a level of security. The statement that it has a guaranteed minimum interest rate is accurate; this feature ensures that the investor will receive at least a certain minimum return regardless of market conditions. This makes equity-indexed annuities attractive to conservative investors who want some exposure to market gains but also want to minimize risk.

The guaranteed minimum interest rate is a key selling point because it provides a safety net in volatile market environments. Hence, if the equity index performs poorly, the policyholder still benefits from the minimum interest, which is typically set by the issuing insurance company. This safety aspect is a fundamental characteristic that distinguishes equity-indexed annuities from other more volatile investment options.