Equity Indexed Annuity
An equity indexed annuity is an annuity that, when purchased, yields return on invested assets based on a specified equity index. Examples of equity indexes include S&P 500, NASDAQ 100, and DJIA.
To credit interest, equity indexed annuities use a method based on fluctuations in the index that the annuity is linked to. This formula decides how to calculate and credit additional interest, if any exists. They also assure a minimum interest rate and protect against loss of the principal investment.