Which of the following describes liquidity risk associated with annuities?

Liquidity risk in the context of annuities primarily refers to the challenges that policyholders may encounter when trying to access their funds. Specifically, the inability to withdraw funds for a specified period highlights how many annuity contracts have surrender periods or restrictions on withdrawals. During these periods, withdrawing funds can result in penalties or reduced amounts, illustrating how the investment may not be easily accessible during times of need. This reflects a fundamental characteristic of liquidity risk, which is the concern that an investor may not be able to quickly convert their investment into cash without facing significant costs.

The other options deal with different types of risks: market risk, interest rate risk, and commission-related concerns. Market fluctuations affect the principal value in certain types of investments but do not directly define liquidity risk. Interest rate changes may impact fixed annuities, but again, this is a different risk profile. Lastly, while commissions can certainly affect overall returns, they do not specifically pertain to the liquidity of funds. Therefore, the focus on withdrawal restrictions effectively encapsulates the essence of liquidity risk associated with annuities.