Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
What happens under a market value adjustment (MVA) annuity when the owner withdraws funds early and interest rates have risen since issue?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A market value adjustment annuity permits the insurer to adjust the cash value at withdrawal to reflect changes in interest rates since purchase. If rates have risen, the insurer would have to reinvest withdrawn money at the new higher rates, so the value is adjusted downward; if rates have fallen, the adjustment is favorable. MVA products still typically carry a guaranteed minimum and are designed to discourage market-timing withdrawals.
Why the other options are wrong
- B) Rising rates produce a downward adjustment, not a bonus; the adjustment protects the insurer's reinvestment position.
- C) MVA products are defined precisely by their rate-driven adjustment; paying full value unconditionally would negate the feature.
- D) MVAs do not force annuitization; the adjustment applies at partial or full withdrawals unless contract guarantees state otherwise.
Memory hook
MVA = rates up, value down. The insurer squares its books before you walk with cash.