Investment Vehicles Round 2

what is a collar?

used to maintain the price of a security within a desired range long out the money put AND short an out the money call

Which recommendation is appropriate for a client who is subject to the AMT (Alternative Minimum Tax)? "You should invest in an existing housing real estate limited partnership for stable income sheltered by depreciation deductions" private activity municipal bond investment is suitable for you because of its tax-free income" "Don't exercise any incentive stock options granted by your employer" "You should be making investments in foreign corporations"

"Don't exercise any incentive stock options granted by your employer" The AMT (Alternative Minimum Tax) applies a minimum flat tax rate under an alternative calculated income if an individual relies on too many "tax preferences" in the tax code to reduce regular taxable income. These tax preferences are added back to regular taxable income to arrive at AMT income, which is taxed at a flat 26-28% rate. Among the items added back are Excess depreciation deductions from real estate investments. (The "add back" is the excess of accelerated depreciation deductions taken over straight line depreciation.) Private activity municipal bond interest income. (This is usually federally tax free, but it is added back as a tax preference and becomes taxable under the AMT. Since tax-free municipal bonds are typically purchased by high income individuals, this makes sure that they don't shelter "too much" of their income from some form of federal tax). The exercise of incentive stock options, where there is a "bargain element." (For example, if an employee has the option to buy that employer's stock at $20 and exercises when the stock is worth $50, the $30 per share discount is added into AMT, even though the employee has not sold that stock position.) Difference between the foreign tax credit claimed on an individual's regular tax return (for taxes withheld on income from a foreign investment in a foreign country) and the lesser amount of foreign tax credit allowed under the AMT. (Again, the "idea" is that wealthy individuals are the ones who will invest in foreign securities, so this increases their tax due.)

A customer has $20,000 in passive losses from a limited partnership investment. If the customer has no other passive income for that tax year, the customer may deduct:

0 $

A customer, age 63, has made payments into a non-tax qualified variable annuity contract totaling $10,000. The investment in the separate account is now worth $16,000. The customer wishes to withdraw $5,000 from the account. The tax implications of the withdrawal are: $5,000 as what? any penalty?

$5,000 taxable as ordinary income once you get to orginal investment it is not taxable no penalty after 59 1/2

Compute the non-compounded annualized inflation adjusted rate of return for the following investment held for 3 years. Initial Investment Value: $5,000 Ending Investment Value: $4,400 Dividends Received Over The Period: $900 Inflation Rate Over The Period: 6%

0% The original investment is $5,000. Over 3 years, the customer lost $600 on the investment and received $900 in dividends, for a net return of $300, earned over 3 years. Annualized, the customer earned $100 per year on $5,000 invested = 2%. However, the rate of inflation over 3 years was 6%, or 2% per year (ignoring compounding). Therefore, the inflation adjusted rated of return over the 3 year period is 2% - 2% = 0%.

The amount of surety bond coverage that is typically posted by a broker-dealer for initial registration in a state is:

10,000

Payments received by the owner of a tax qualified variable annuity are taxed as

100% investment income

A customer, age 55, is in the 30% tax bracket. The customer has a non-tax qualified variable annuity separate account to which he contributed $12,000 that has a current market value of $30,000. The customer takes a distribution of $10,000 from the account. The tax that will be due on this distribution is:

4,000 30% taxable 10% early fee

A customer is dollar cost averaging by investing $400 per month into a mutual fund. Over 4 months, the customer has made purchases at $13 per share, $10 per share, $8 per share, and $9 per share. The customer would break even if the NAV of the fund is:

400 / 13 = 30 400 / 10 = 40 400 / 8 = 50 400 / 9 = 44 400 x 4 = 1600 30, 40, 50, 33 = 165 The average cost per share is: $1,600/165.213 shares = $9.68 per share. The customer will break even if the shares are redeemed at this price.

Given the formula: X =Municipal Yield % / (1 - Tax Bracket %) X is equal to the:

A Taxable Equivalent Yield

alternative minimum tax

AMT- can be used to offset passive income

Which individual is defined as an agent under the Uniform Securities Act? A An individual representing a broker-dealer who takes phone messages from clients that wish to purchase or sell listed stocks B An individual representing a broker-dealer who takes unsolicited orders for partnership units C An individual representing an investment adviser who provides advice to clients about investing in securities D An individual who works for an issuer selling that issuer's stock to the issuer's employees

An individual representing a broker-dealer who takes unsolicited orders for partnership units

A customer invests $1,000 over a 10 year time horizon. At the end of 10 years, the investment is worth $4,000. The compounded annual rate of return is approximately:

Another (simpler) way of approximating the answer is to use the Rule of 72, which calculates how many years it takes for an investment value to double. If $1,000 is invested today, it must double to $2,000 in value and then double again to $4,000 in value within 10 years. 72 / 10 years = 7.2% yield for the investment value to double from $1,000 to $2,000. Since this amount doubles again to $4,000 within that time frame, double 7.2% = 14.40% (approximate) yield. There is only 1 choice offered that is even close to this result, 15% which is Choice A. 15%

An IAR is preparing a financial plan for a young married couple with 2 small children. They both work and have sufficient income to pay their current bills, including the large mortgage on their house. They have a small emergency reserve and, after paying expenses, have an extra $500 per month that they can put towards investments. They currently have no life insurance, and if one dies, the remaining spouse would not have enough income to meet monthly expenses. The IAR recognizes that they need to buy insurance as part of the plan, but the IAR is not a licensed insurance agent in the State. Which statement is TRUE?

B The IAR cannot prepare a financial plan that includes life insurance needs unless another IAR licensed as an insurance agent in the State co-authors the plan

A primary government dealer that is short Treasury Bonds could hedge the position by: I Buying T-Bond futures contracts II Selling T-Bond futures contracts III Buying T-Bond forward contracts IV Selling T-Bond forward contracts

Buying T-Bond futures contracts III Buying T-Bond forward contracts The best answer is A. If a T-Bond trader is short, the risk is that price of the T-Bonds will rise. The purchase of a futures contract (right to buy at a fixed price at a future date) will protect from an upward market move. The purchase of a forward contract will also protect the trader, since the T-Bonds are then "prebought" at a fixed price.

An Investment Adviser Representative writes a blog published on the Internet about how to achieve the best returns for clients, while minimizing risk. Which statement is TRUE about this?

C This can only be done if the Investment Advisory firm that employs the IAR both approves the content and authorizes the distribution of the communication

Which of the following are "critical" pieces of information that MUST be collected from a customer to open a new account? I Name II Date of Birth III Telephone Number IV Social Security Number

Customer Name Address Date of Birth Social Security Number not phone number

A 20-year, 6% bond is quoted by a dealer on a 5% basis. The bond is callable in 10 years at par. To calculate the dollar price for the bond, the dealer would use the:

D call date to find the number of years over which the premium would be lost

A bond portfolio consists of: $100,000 par value of 1-year zero coupon bonds $100,000par value of 3-year zero coupon bonds $100,000 par value of 5-year zero coupon bonds$ 100,000 par value of 9-year zero coupon bonds The duration of the portfolio is:

Duration is the number of years until the $1,000 par principal of a bond is paid back. Since a zero-coupon bond makes no interest payments, the entire $1,000 par principal amount is paid back at the maturity date, making the duration the same as the number of years to maturity. To calculate portfolio duration, the weighted average of the bond durations in the portfolio is calculated. In this example, each bond position has the exact same weight ($100,000 par), so taking the arithmetic average of the 4 maturities ( 1 + 3 + 5 + 9 = 18 / 4) gives a portfolio duration of 4.5.

Which of the following are considered when evaluating a customer's tax status? I Age II Citizenship III Total earnings as of the last day of the tax period IV Residency

I Age II Citizenship IV Residency

Which of the following are risks of investing in a Real Estate Limited Partnership (RELP)? I Business risk II Liquidity risk III Regulatory risk IV Reinvestment risk

I Business risk II Liquidity risk III Regulatory risk

Which information is required to be on an order ticket prior to entry of the order? I Customer name or account number II Customer address III Customer social security number IV Registered representative name or number

I Customer name or account number IV Registered representative name or number

Which of the following orders MUST be retained as a record by broker-dealers? I Executed orders II Unexecuted orders III Canceled orders IV Subscription orders

I Executed orders II Unexecuted orders III Canceled orders

A broadly diversified portfolio: I is subject to market risk II is not subject to market risk III can have its systematic risk reduced by the purchase of index puts IV cannot have its systematic risk reduced because it is fully diversified

I is subject to market risk III can have its systematic risk reduced by the purchase of index puts

Annual audited reports are required to be sent by investment advisers to their clients if the adviser: I holds customer funds II has discretionary control under a full power of attorney over customer accounts III has solicited the customer for advisory business IV has a conflict of interest that has been disclosed to the customer

I holds customer funds II has discretionary control under a full power of attorney over customer accounts

Index ETFs are: I passively managed II actively managed III negotiable IV redeemable

I passively managed III negotiable

A customer buys a $1,000 par Treasury Inflation Protection security with a 4% coupon and a 10 year maturity. If the inflation rate during the first year of the security's life is 5%, the: I coupon rate is adjusted to 9% II coupon rate remains at 4% III principal amount is adjusted to $1,050 IV principal amount remains at $1,000

II coupon rate remains at 4% III principal amount is adjusted to $1,050 The best answer is C. Treasury "TIPS" are Treasury Inflation Protection Securities - the principal amount of these securities is adjusted upwards with the rate of inflation. Even though the interest rate is fixed, the holder receives a higher interest payment, due to the increased principal amount. When the bond matures, the holder receives the higher principal amount. Thus, there is no purchasing power risk with these securities.

Dollar Weighted Average Return is the same as:

IRR

The term "loan value" when applied to equity securities, is the: I percentage of the purchase price that must be deposited when the securities are bought II percentage of the purchase price that can be borrowed when securities are bought III reciprocal of the Regulation T requirement IV complement of the Regulation T requirement

IV complement of the Regulation T requirement II percentage of the purchase price that can be borrowed when securities are bought

When comparing an options contract to a futures contract, which statement is FALSE? A Both are exchange traded B Both are standardized C If not closed by trading, both require delivery of the underlying asset D Both are regulated

If not closed by trading, both require delivery of the underlying asset

unit refund life annuity

If the annuitant dies before receiving the full investment value from the separate account, his estate gets a "refund" of the remaining value.

Under IRS guidelines, which of the following is NOT earned income? Wages Municipal bond interest Commissions Social Security

Municipal bond interest

only closed end funds can trade for less than

NAV

Which of the following is an advantage of investing in a real estate limited partnership? Federal tax liability is paid by the partnership before any after-tax earnings are distributed to the limited partners Each limited partner shares equally in income and loss Partnership earnings can be softened by depreciation deductions when they flow through to the limited partners Earnings can be retained in the partnership without being distributed to the limited partners, lessening potential federal tax liability for the limited partners

Partnership earnings can be softened by depreciation deductions when they flow through to the limited partners

ETN

RETURN LINKED to a market index set maturity date backed by the credit rating of issuing bank HAVE credit risk no liquidity risk tax efficiency

An ETN does NOT have which risk? Market risk Credit risk Marketability risk Reinvestment risk

Reinvestment risk

All of the following would be included in the evaluation of a viatical or life settlement EXCEPT: Life expectancy of insured/viator Amount of discount from policy face value Availability of investors Tax consequence to the viator of selling the contract

Tax consequence to the viator of selling the contract A "viatical settlement" is a contract between a life insurance policyholder (the "viator") and a viatical settlement provider, where, the policyholder gets an immediate cash payment in exchange for transferring ownership of the policy to the viatical settlement provider - the purchaser of the policy. These typically appeal to insured individuals who are terminally ill, who can get immediate cash to pay for medical and support needs by selling the policy. The policy is sold at a discount to face value, and the purchaser assumes the responsibility for making the premium payments until the insured individual/viator dies. When the insured person dies, the purchaser of the policy (the viatical settlement provider) who now owns the policy gets the policy face amount.

has solicited the customer for advisory business then the customer must be provided with

a brochure for ADV part 2A

A broker-dealer has a client who is recently retired. The broker-dealer and the customer are both located in Minnesota, and the broker-dealer is registered in that State. The customer has just purchased a second home in Florida, and now intends to spend November through March there. The broker-dealer is not currently registered in Florida. Can the broker-dealer do business with the client while he is in Florida?

The best answer is C. The "vacationing" customer exemption only applies to customers who are temporarily in another State, which, though not defined by State law, is generally viewed as a stay of less than 30 days. A client who is in Florida for 5 months is not vacationing. He or she is viewed as a resident of the State and the broker-dealer (and agent) must register in the State to continue doing business with the client.

Which of the following would cause payment of a term life policy death benefit claim to be denied? A The policy names a minor as the beneficiary B The policy has lapsed because of non-payment of premiums C The policy has completed the contestability period D The policy was in force at the time of death

The policy has lapsed because of non-payment of premiums

Which statements are TRUE when comparing a 15-year period certain annuity to a life annuity with a 15-year period certain?

The purchaser of 15-year period certain annuity will only receive payments for 15 years and can outlive the annuity payments The purchaser of a 15-year period certain annuity will receive larger payments than the holder of a life annuity with a 15-year period certain

A customer that is long ABC stock in his portfolio buys call options on that stock. Why would the customer do this? A To protect the ABC stock position from an adverse market move B To derive additional income from the ABC stock position C To speculate on the price of the stock going down D To lock in a price at which shares can be added to the portfolio

To lock in a price at which shares can be added to the portfolio

If it is expected that the price of an asset will rise in the future, which strategy is profitable? with a future?

buy a future

Insurers generally give a variable life insurance owner investment choices including which of the following investments? I Common stock funds II Bond funds III Money market funds

all of them as well as more

tax preference items for AMT

accelerated depreciation in excess of straight line excess intangible drilling cost deductions excess percentage depletion deductions muni interest income from bond issues that are qualified private activity bonds and limited dollar amounts of non essential use, private activity, bonds exercise incentive stock options where there is a bargain element

instead of buying shares of the separate account the contract holder purchaser

accumulation units

An agent moves from one broker-dealer to another. Notification of the change of employer must be made by the:

agent old broker new broker

An investment adviser charges a fee for an overall financial plan. Which of the following facts must be disclosed to the customer? I The adviser will receive a commission on recommended U.S. Government securities transactions II The adviser will receive a commission on recommended equity securities transactions III The adviser will receive a commission on recommended life insurance transactions IV The adviser will receive a commission on recommended real estate transactions

all

Under the provisions of ERISA (Employee Retirement Income Security Act), the use of index options is: prohibited because of the speculative nature of these instruments Correct answer B. You did not choose this answer. allowed only if the strategies followed are in compliance with the objectives and restrictions of the plan allowed only if the plan trustee maintains physical possession of the underlying securities allowed without restriction as long as the investment manager acts in a prudent manner

allowed only if the strategies followed are in compliance with the objectives and restrictions of the plan

limited partnership does or doesn't allow through flow through of gain and loss?

allows for it

who assumes investment risk and where are purchased made in variable annuity?

annuitant assumes purchases made in separate account

variable annuity contracts payout is determined by the number of _ varies and _ is fixed

annuity units value varies, number of units is fixed

how to ETF's keep price at NAV?

arbitrage mechanisms that let large institutional investors buy the price discounted and short the shares in underlying portfolio

AIR

assumed interest rate

factors to consider in limited partnership

blind pool- objectives are stated but specific investments are not known track record- what has been the performance

EIA equity indexed annuities return tied to

broad based index have participation rate to give caps min guaranteed rate of return

In an over-the-counter agency trade, the member firm executing the order: I is a broker II is a dealer III charges a mark-up IV charges a commission

broker commission

option contract

buyer is the holder

if your net capital follows below you must notice and report when?

give notice to admin by close of next business day report the day after that

ELN characteristics

cap on return floor on return participation rate

Which of the following investments trades in the market independent of NAV?

closed end

point to point method

compares the index value at purchase date to end date

most EIA use what type of interst

compound interest annual interest credit is added to the principal value

life annuity

continue for the life of the annuitant highest periodic payment

limited partnership taxability

corporation is taxable partnership is not

oil and gas LP tax benefits

cost of drilling for oil is deductible in full as oil is sold, the depletion deduction allows for an arbitrary deduction based as a % of the value of oil sold, rather than the actual cost of oil

swap derivative

counterparties exchange the benefits (usually cash flows) of 1 side's financial instrument for those of the other side made for large financial institutions

permanent insurance

coverage is permanent cash value can be used to pay premiums can change the death benefit and premium payments

life annuity with period certain

covers life but if they die early covers some time period lower than simple life

what are mandatory reinvestments?

interest payments dividend payments capital gains

risks assumed by insurance company in fixed annuity

mortality risk expense risk

annual reset

returns achieved each year over life and adds interest to the annuity based on annual reset

If the writer of an equity put contract is exercised, the writer MUST:

deliver cash in 2 days

real estate LP tax benefit

depreciated on straight line basis over 27.5 year life interest on mortgage is deductible in full tax credits available for qualified low income housing and certified hsitoric structure rehab

limited partnership is what type of participation program

direct participation program bc directly participate in profit and loss

A "market maker," as defined under the Securities Exchange Act of 1934: effects securities trades for the account of others on anagency basis effects securities trades for the account of others on aprincipal basis effects trades with others out of his or her own account effects trades on a discretionary basis for the account of customers

effects trades with others out of his or her own account

Which statements are TRUE regarding structured products? maturity date standardization?

fixed not standardized

how many annuity units are there and what is the price

fixed units fluctuating price

universal life

flexible insurance cash value coverage and premiums may vary change both premium and death benefit min payment amount to pay for the cost of insurance

variable universal life

flexible life with excess premiums invested in sep account premiums adjustable

futures contract to take delivery of an asset at a __ date at a _ price

future date fixed price holder must take delivery

short put

gain = premium loss =strike - premium

short stock long call gain and loss

gain = short sale price - premium loss = premium (offset by difference between short sale price and call strike price)

Which business form has a limited life? S corporation general partnership Limited liability company C Corporation

general partnership

fixed annuity rate of return? subject to what regulation?

guaranteed rate of return subject to state regulation

hedge funds have _ fees and ___ investment strategies __ regulated formed under what structure?

high fees aggressive lightly regulated limited partnership

EIAs have ___ expenses

higher expenses than both fixed and variable annuities steep surrender fees only regulated by insurance companies

joint and last survivor annuity

if the annuitant dies, the annuity continues for the life of another person each payment is less with this option since it covers 2 person's lifespans

annuitant assumes what risk in fixed annuities

inflation rissk

fixed annuity contracts options

installments for designated period or amount

who assumes investment risk in fixed annuities

insurnace company

Under the Investment Advisers Act of 1940, all of the following can be considered to be compensation received by an investment adviser EXCEPT: A a commission received on the sale of a life insurance policy to an advisory client B interest paid on a margin loan by an advisory client C a fee for creating a financial plan that is refundable if the client purchases anannuitycontract D shares of stock received from a client for creating anasset allocationplan

interest paid on a margin loan by an advisory client

The difference between a cash forward contract and a commodity futures contract is that the forward contract:

is traded over the counter

with fixed annuities, the insurance company invests premiums in

its general account for conservative investments such as fixed income securities

variable annuity payments -what about inflation?

keep pace w inflation

Which of the following risks is the primary concern when investing in a municipal bond? what type of risk? purchasing power risk market risk credit risk legislative risk

legislative risk

option income sttrategies

long stock + short call short stock + short put

hedging with options protect a long stock position by protect a short stock by

long stock, (long) buy put short stock, buy call

LEAP

long term option

traditional CD, prior to maturity might result in a loss of _ but not _

loss of interest not principal

The Securities Act of 1933 requires that new issues of securities be registered with the SEC if the: A issue will be sold within 1 State only to residents of that State B mails, or other means of interstate commerce, are used to sell the securities C value of the securities offering exceeds $5,000,000 D securities offering will be made to more than 35accredited investors

mails, or other means of interstate commerce, are used to sell the securities

what risk do market index linked CD have?

market risk liquidity risk credit riskhn

short call

max = premium max loss = unlimited

long put

max gain = strike price - premium loss = premium

long stock long put gain and loss

max gain = unlimited loss = premium (offset between difference of stock cost and put strike price)

A variable universal life (VUL) insurance policy has all of the following characteristics EXCEPT: flexible premium payment variable cash value variable death benefit min cash value

min cash value

certificate of limited partnership

must be filed

closed end shares are

negotiable

forward contracts can be closed on by trading on an exhange? or no? are they standardized?

no no standard

An investment in Treasury Bills has: interest rate risk purchasing power risk credit risk no risk

no risk

can an agent publish and distribute reports detailing the performance of recommended transactions?

no. Broker-dealers, on the other hand, may do so, but the State Administrator can require the filing of these reports.

most variable annuity contracts are ____ tax qualified

non tax qualified no deduction for the contribution earnings must be reinvested and build tax deferred

variable annuities- rate of return is

not guaranteed

forward contracts are __ for a date in ___

not standardized for future date not on an exchange

which have investment options? whole life variable life universal life variable univesral life

only available to separate accounts

period certain annuity

only pays for a certain time period

most etfs are ___ funds registered under ___

open end investment company act of 1940

All material adviser conflicts of interest must also be disclosed

part 2a for adv

whole life insurance

permanent insurance straight life premium set at higher than inital term life but remains level extra amount is cash value and invested in insure's general account and grows with interest at a guaranteed minimum rate

variable life

permanent insurance w cash value invested in separate account premium fixed death benefit can increased considered to be a securitiy like variable annuities requires prospectus

non deductible items in AMT

personal exemption standard deduction state and local tax deduction misc. deductions such as tax preparation fees

index performance measures

point to point annual reset high water mark

cash value of a universal life insurance policy

premium payments - cost of insurance + interest

variable life insurancy policy premiums cash value death benefit policy laons

premiums- payments are level and fixed cash value- increased based on equity investments death benefit- can be increased policy loans- will reduce the amount paid at death

Sending out "blanket" e-mail solicitations that recommend securities or advisory services to customers is

prohibited and unethical practice The underlying issue is that there has been no suitability determination performed, so there is no basis upon which to make a recommendation.

ETF: the purchaser is required to be delivered a ___

prospectus

term life insurance

pure insurance no cash value non renewable after a certain age

An offering of fractional interests in oil and gas programs would be registered in a state by:

qualification The Uniform Securities Act specifically says under the definition of an "issuer" that fractional interests in oil and gas programs have "no issuer." This was done to ensure that these must go through Registration by Qualification before being offered in a State, since it is available to anyone, while the other 2 registration methods are only available to securities that have "issuers."

major types of direct participation programs

real estate oil and gas

open end shares are

redeemable

market index linked CD return lninked to

s& p 500i ndex

structured products

securities based on a basket of securities

A farmer who is worried about declining corn prices should: with futures

sell a futures contract

variable annuities: separate account accumulation units allow for ____ the costs and fees are ___ than mutual funds the sep account growth is ____ until ___ there are ___ limits on the amount that an individual can invest

separate account accumulation units allow for participation in equity markets the costs and fees are higher than mutual funds the sep account growth is tax deferred until distributions commence there are no limits on the amount that an individual can invest

short stock short put breakeven

short sale price + premium

futures contracts are ___ and ___ to deliver something ___

standardized exchange traded future date

An investment would be made in a variable annuity in order to get: A tax-deferred growth of an equity investment B tax-free income at retirement age C immediate income while contributions are being made D life insurance coverage at no additional cost

tax-deferred growth of an equity investment

All of the following life insurance policies offer cash values to the policy owners EXCEPT:

term life

A broker-dealer registered in States A and B has an agent that is registered in State A. The agent takes an unsolicited order from a customer in State B. The agent will have to register in State B if: A this is an existing customer who resides in State A but is temporarily vacationing in State B B the customer is the issuer of the securities involved in the transaction C this is an isolated transaction D the customer is an accredited investor

the customer is an accredited investor

long call holder

unlimited upside max loss is premium paid

In order for an investment adviser to be compensated with a performance fee, all of the following must be disclosed in writing EXCEPT: the periods that will be used to measure performance and their significance in the computation of the fee the fee arrangement is based solely on realized capital gains the nature and significance of any index used as a comparative measure the reason why the adviser believes that any comparative index used is appropriate

the fee arrangement is based solely on realized capital gains

Under partnership democracy provisions, the partnership agreement must give detailed disclosure of all of the following EXCEPT: the procedures for allocating profits from investments to the limited partners the procedures for allowing limited partners to assign specific properties the general partner's compensation arrangement D the limited partners' claim to assets upon dissolution

the procedures for allowing limited partners to assign specific properties

what happens in a variable annuity

trust invests in management company shares to fund annuities

A customer wants to buy permanent life insurance. He has no desire to participate in the market and may have additional money to add to premiums in the future. The best recommendation for this client is:

universal life With a universal life insurance policy, the policy owner can change the schedule of premium payments. After the cash value increases, the owner can skip a premium payment or the policy owner can use the cash value to buy additional insurance. The cash value is not invested in equities, but is invested in the insurer's general account. Any cash value policy is "permanent insurance" - the insurer cannot choose to "non-renew" the policy as long as the premiums are paid.

when is the actual AIR set?

when the contract is annuitized

An updating amendment to Form ADV must be filed by an investment adviser with the SEC:

within 90 days of business fiscal year end

high water to mark

yearly as of anniversary date of purchase and bases the interest added on the highest index value over the product life vs. date of purchase

is there a cap on investment return for market index linked CDs?

yes via participation rate or by caps