What type of annuity guarantees a minimum interest rate tied to an equity index?

The choice of an equity indexed annuity is appropriate because this type of annuity is specifically designed to offer growth potential linked to a stock market index while also providing a minimum guaranteed interest rate. Equity indexed annuities achieve this by crediting interest based on the performance of a particular index, like the S&P 500, while ensuring that the policyholder will receive at least a minimum return, regardless of market performance.

This hybrid structure allows policyholders to participate in some upside of the stock market without the risk of losing their principal investment, as the minimum interest rate acts as a safety net. This is particularly appealing for individuals looking for growth potential from their investments without exposing themselves to the full volatility of the stock market.

In contrast, variable annuities do not guarantee a minimum interest rate, as they allow for investments in various sub-accounts that can fluctuate in value. Fixed annuities provide a guaranteed fixed interest rate but do not tie returns to an equity index, while immediate annuities provide income payments beginning soon after purchase, typically used for retirement income rather than growth or investment purposes. Thus, equity indexed annuities uniquely combine safety and growth, making them the correct answer.