Participation Rate
Definition
- As it relates to indexed annuities, a participation rate determines the percentage at which changes in a stock index will affect the profits of an indexed annuity. For example, if the annuity's participation rate is 80% and the stock index increases by 10% in a year, the annuity will see a profit of 8% that year (80% of 10%).
Synonyms
percentage, performance rate
Related Terms and Acronyms
- Annual Crediting Cap — Definition,
- The highest rate that can be credited to an equity-indexed annuity in a year.
- Indexed Annuity — Definition,
- An annuity where investment performance is pegged to a stock index.
- Margin — Definition,
- The difference between the cost and the selling price.
- Expressed as percentage points, the amount that a lender adds to an index to arrive at the final interest rate. For example, if the index is 9 percent and the margin 2.75 percent, the final interest rate is 11.75 percent.
