Chapter 7 Exam Annuities

How does an indexed annuity differ from a fixed annuity?

Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index

Which of these statements concerning an individual straight life annuity is accurate?

Payments are made to an annuitant for life

P is a forty year old woman and would like to a purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?

An immediate annuity

Which of the following are Equity indexed annuities typically invested in?

S&P 500

An immediate annuity consists of a

Single premium

S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?

Single premium

K has inherited a large sum of money. K purchases an annuity with this sum on July 1, and starts receiving payments August 1. These payments will continue for as long as she and her spouse lives. Which type of annuity did K purchase?

Single premium immediate joint with survivor annuity

The annuity that represents the largest possible monthly payment to an individual annuitant is a

Straight life annuity

What is the basic function of an annuity?

The systematic of accumulated funds

What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?

Variable

T, age 70, withdraws cash from a profit-sharing plan and purchases a straight life annuity. What will this transaction provide?

Income that cannot be outlived by the owner

What is considered to be a characteristic of an immediate annuity ?

Benefit payments start within one payment period of purchase

P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type annuity did P purchase?

Deferred

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)

immediate annuity

Which of these is an element of a single premium annuity?

Lump-sum payment

An individual who purchases a Life annuity is given protection against

The risk of living longer than expected