FIN 321 Ch 14

Which of the following is a permissible IRA investment alternative? A) mutual funds B) fine art C) antiques D) life insurance

A

All of the following are circumstances under which withdrawals from a traditional IRA may be made prior to age 59.5 without incurring a substantial penalty EXCEPT A) The withdrawal is in substantially equal installments paid over the individual's life expectancy. B) The withdrawal is used to pay living expenses after unemployment insurance benefits cease. C) The distribution is to the beneficiary of a deceased IRA owner. D) The withdrawal is because of income needed due to the individual's disability.

B

Cassie, age 62, paid a life insurer $100,000 in exchange for a life annuity. If Cassie dies before receiving 120 monthly payments from the insurer, the remaining payments will be made to a beneficiary. If Cassie dies after receiving 120 payments, no additional payments are made by the insurer. The annuity option Cassie selected it A) life annuity, no refund. B) life annuity with period certain. C) installment refund annuity. D) cash refund annuity.

B

Daryl, age 42, quit his job. His employer offered a defined contribution pension plan, and the balance in the account was $30,000 when Daryl quit. He can avoid immediate taxation of these funds by A) taking a lump-sum distribution. B) using an IRA rollover account. C) receiving the money through four equal installments. D) using the funds to purchase common stock issued by the former employer.

B

Which of the following statements is (are) true regarding the Roth IRA? Roth IRA contributions are tax deductible. Roth IRA investment income accumulates income-tax free. A) I only B) II only C) both I and II D) neither I nor II

B

Which of the following statements is true concerning traditional and Roth IRAs? A) The investment income portion of Roth IRA distributions must be reported as taxable income. B) Roth IRA contributions are tax deductible. C) There are minimum distribution requirements for traditional IRAs. D) There are no limits on the tax deductibility of traditional IRA contributions once the account owner has reached age 50.

C

All of the following statements about traditional and Roth IRAs are true EXCEPT A) Traditional IRA contributions may be fully, partially, or not income tax deductible. B) Qualified distributions from Roth IRAs are received income tax free. C) Contributions to Roth IRAs are made with after-tax dollars. D) Traditional IRAs are exempt from the penalty tax on premature distributions.

D

When selling life annuities, what risk is the insurer pooling? A) bad investment performance B) premature death C) bad expense experience D) excessive longevity

D

Which statement is true regarding IRA distributions? A) The minimum distribution rules apply to Roth IRAs, but not to traditional IRAs. B) Distributions from a Roth IRA are taxed at the individual's marginal tax rate. C) The IRA penalty tax applies to all traditional IRA distributions before age 59.5 with no exceptions. D) Unless a life annuity is issued, a retiree may still be alive when the IRA account is exhausted.

D