With an assumed interest rate (AIR) of 4%, if an initial payment is $1000 and investment performance is 4%, what will the next payment be?

When evaluating an annuity with an assumed interest rate (AIR) of 4%, it is important to understand how the payments adjust based on the performance of the underlying investments. The AIR essentially serves as a benchmark against which the actual performance of the investment is measured.

In this scenario, if the initial payment is $1000 and the investment performance is exactly 4%, which matches the AIR, the next payment will remain the same as the initial payment. This is because when the actual return aligns with the AIR, no adjustment is made to the payment amount. The payment remains stable, reflecting the consistent performance of the underlying investments as projected by the AIR.

Consequently, it’s clear why the next payment would stay the same as the prior month's payment. Understanding this concept is crucial in assessing how annuities work and how they respond to market performance in relation to the assumed interest rate.