Which of the following is a method of funding an annuity?

An annuity can be funded through various methods, and one of the most common approaches is through single premium or periodic payments. This means that an individual can choose to either make one large, upfront payment (lump sum) or contribute smaller amounts over time through regular, periodic payments. This flexibility allows the annuity owner to tailor their investment according to their financial situation and goals.

Choosing the single premium option typically provides the investor with an immediate income, while periodic payments can help individuals spread the cost over time, making it more accessible for those who may not have a large sum to invest at once. This method is significant because it aligns with diverse financial strategies and accommodates different liquidity needs.

Other funding methods may exist, like annual or monthly payments, but they essentially fall under the broader category of periodic payments. The inclusion of both single premium payments and periodic contributions as valid funding methods emphasizes the versatility of annuities in personal finance planning.