If P, age 50, purchased an annuity that P will fund with $500/month for 15 years, what type of annuity did P purchase?

The correct answer is that P purchased a deferred annuity. This type of annuity allows the individual to make regular contributions, such as the $500 monthly payments over a defined period, in this case, 15 years, before the annuity begins to pay out. Deferred annuities are designed for individuals who want to accumulate funds over time and defer taxes on the investment growth until withdrawals begin at retirement or another specified point in the future.

Immediate annuities, on the other hand, begin making payments to the annuitant almost immediately after a lump sum payment is made. Variable and fixed refer to the nature of the investment; variable annuities have returns that can fluctuate based on the performance of underlying investments, while fixed annuities offer guaranteed returns. However, both variable and fixed can also be immediate or deferred. In this case, the key characteristic is the deferred nature of the payments, as P is still in the accumulation phase and will not start receiving benefits immediately.