8 - (Questions) Annuities

The systematic liquidation of a sum of money is provided by a(n)

annuity.

Logan accumulated $60,000 in his annuity. He is receiving $600/month, each unit is worth $3. How many units does he receive each month?

The calculation for this involves taking the monthly payment amount ($600) and dividing it by the value of each unit ($3.00).

What distinguishes a deferred annuity from an immediate annuity?

The difference between deferred and immediate annuities is when annuity benefit payments begin.

The monthly amount of benefit an annuitant receives is based on all of the following factors EXCEPT the

exclusion ratio applied The monthly amount of benefit an annuitant receives is based on the following factors: principal amount, rate of interest, and the length of the payout period.

The dollar value of an annuity unit is based on

the return on the equity portfolio supporting the annuity. An annuity's investment configuration will determine the amount of income the benefits pay.

Which of the following is NOT a feature of equity-indexed annuities?

Offers a maximum interest rate that increases annually.

An immediate annuity contract provides for

liquidation of a principal sum. Purchased with a single lump sum payment and will start providing income payments within the first year. Usually starting 30 days from the purchase date.

An annuity which is backed by a life insurer's separate account is called a(n)

variable annuity.

During the payout period of an annuity, the interest portion of the payment is

taxed as ordinary income During the payout period of an annuity, the interest portion of the payment is taxed as ordinary income.

All of the following statements regarding annuities are correct EXCEPT

Generally, annuity contracts isseud today require fixed, level funding payments