Which statement about the assumed interest rate (AIR) is NOT true?

The statement regarding how the assumed interest rate (AIR) operates within the context of variable and fixed annuities clarifies its role in determining the value of investment units. The assumed interest rate is particularly relevant for variable annuities, where it serves as a benchmark to determine how much of the account value is credited to the annuity holder’s account based on the performance of the underlying investments.

During the accumulation period of a variable annuity, the AIR plays a crucial role because it helps in calculating the performance of the investment units. If the investments perform better than the assumed interest rate, the account value increases accordingly; if they perform worse, the value adjusts downward. Therefore, the AIR has a direct impact on the value of the units.

In contrast, fixed annuities operate under a different mechanism. In fixed annuities, the crediting rate is guaranteed and does not change based on market performance or an assumed interest rate. This is why the statement that the AIR does not affect the value of units during the accumulation period of a fixed annuity is true; the values in fixed annuities are set and guaranteed rather than dependent on an assumed rate that fluctuates with market conditions.

Thus, identifying that the AIR does not