Which financial instrument is designed to pay a stream of payments to the owner at a later date?

• A. Skip person
• B. Sliding scale
• C. Annuity
• D. Fair market value

Answer: (C)

The concept being tested is converting a lump sum into a guaranteed stream of payments that starts in the future. An annuity does exactly that: you fund it with a premium (or transfer assets) and the insurer promises periodic payments to you, beginning after a defined deferral period (and often continuing for a set term or for life). This makes an annuity a classic tool for securing future income.

The other terms don’t fit because they aren’t instruments that provide a guaranteed, ongoing payment stream over time. A skip person relates to generation-skipping transfer planning, not a payment contract. A sliding scale describes how amounts might adjust under some formula, not a formal income stream. Fair market value is a valuation concept, not a payment instrument.