Q7 in the Practice questions, it says: The income yield for a given amount invested in a life-only immediate annuity is higher for an older person than for a younger person. the justification is all else equal, the income yield is higher when expected longevity is shorter; therefore, the income yield will be higher for an older person.
It sounds counter-intuitive, should the income yield be not higher for a younger person as he will receive more no. of annuities.
Not really. Income Yield = Annuity/Purchase Price.
Older the person, higher the annuity or lower the price in the case of Life only immediate annuity. Insurance company hopes that the annuitant will expire early.
Hence high income Yield.