Future Business Leaders of America (FBLA) Agribusiness Practice Test

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Enhance your FBLA Agribusiness knowledge with our comprehensive test. Dive into flashcards and multiple-choice questions, complete with hints and explanations, to ensure exam success. Prepare confidently for a bright future!

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What is an annuity?

A type of investment that guarantees returns
A one-time payment made for insurance
A stream of payments or dividends over time
A form of debt that must be repaid

The correct answer is: A stream of payments or dividends over time

An annuity is defined as a stream of payments made over a specified period of time, which can be for a number of years or even for the lifetime of the recipient. This financial product is often used as a means to provide regular income, especially during retirement. The payments can be structured in various ways, including fixed or variable amounts, depending on the terms of the annuity contract. In contrast to other options, an annuity specifically focuses on the concept of receiving ongoing payments, rather than a single payment or one-time transaction. This makes it distinct from investments that might guarantee returns, as those often involve the risk of market volatility, and one-time payments for insurance are not designed to provide regular income over time, but rather cover specific risks. Additionally, a form of debt requiring repayment does not align with the annuity's purpose of providing income, as it involves borrowing rather than receiving a scheduled stream of payments.