Chapter 9 Exam

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 start providing income payments usually starting within 30 days from the purchase date.

All of the following statements regarding a tax-sheltered annuity (TSA) are true except

Income derived from the TSA is received income tax-free

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 A Straight Life Annuity will provide an income that the owner cannot outlive.

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 A Straight Life Annuity will provide an income that the owner cannot outlive.

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

Variable annuities may invest premiums in each of the following, EXCEPT:

Insurer's corporate business account

What of these statements concerning an individual straight life annuity is accurate

Payments are made to an annuitant for life

Which of the following are equity indexed annuities typically invested in

S&P 500 An indexed annuity is a type of tax deferred annuity whose credited interest is linked to an equity index typically the S&P 500

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

Variable A variable annuity's cash value will depend on the results of its investment funds.

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

Variable annuity Straight life annuity Flexible premium deferred annuity

Variable annuities may invest premiums in each of the following

Common stock, junk bonds, money market securities

P is a forty year old woman and would like to 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 An immediate annuity is designed to make its first benefit payment to the annuitant at one payment interval from the date of purchase.

P is a forty year old woman and would like to 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 is designed to make its first benefit payment to the annuitant at one payment interval from the date of purchase.

Which type of contract liquidates an estate through recurrent payments?

Annuity A contract that provides for the liquidation of all or part of an estate through periodic payments is known as an annuity.

What is included in an annuity contract?

Beneficary, Free-Look Period, Nonforfeiture Benefit

What is considered to be a characteristic of an immediate annuity

Benefit payments start within one payment period of purchase

A 45 year old woman won $100,000 on a scratch off lottery ticket. She purchased an annuity that will pay her $1500 per month beginning of the age of 60. Which of these annuities did this woman purchase

Deferred fixed annuity Because the annuity will pay a fixed amount beginning at a future date

N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?

Fixed Deferred A Fixed Deferred annuity pays out a fixed amount for life starting at a future date.

The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own?

Flexible Installment Deferred

The type of annuity that can be Purchased with one monetary deposit is called an

Immediate annuity

Which of the following is NOT included in an annuity contract?

Accidental Death & Dismemberment (AD&D) rider.

N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?

*Fixed Deferred A Fixed Deferred annuity pays out a fixed amount for life starting at a future date.

P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following could she have bought

1. A straight life deferred annuity 2. A straight life annuity 3. A deferred annuity

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(n)

Straight Life annuity The Straight Life annuity pays the largest monthly benefit to a single annuitant because it is based only on life expectancy, but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company.

K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)

installment refund annuity Promises that if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid

An immediate annuity consists of a

single premium An immediate annuity has a single premium.

A contract owner terminates an annuity before the income payment period begins. The owner will then receive

the current contract surrender value

An individual who purchased a life annuity is given protection against

the risk of living longer than expected

A(n) ________ annuity pays benefits based on units rather than stated dollar amounts

variable A variable annuity pays benefits based on units rather than specific dollar amounts

All of the following statements regarding a tax-sheltered annuity (TSA) are true

1. TSA's are available to public school employees 2. Contributions to the TSA are tax-deductible 3. Interest earned on the TSA is tax deferred

P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following should she buy?

A deffered annuity, A straight life annuity, and A straight life deffered annuity.

Which of the following is not included in an annuity contract

AD&D rider.

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 of annuity did P purchase?

Deferred In this situation, the type of annuity purchased is best described as deferred.

T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company

Does not have to make any further payments With a straight life annuity, the insurer does not have to make further payments after the annuitant dies

N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?

Flexible Installment Deferred Annuity

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

Life Annuity with Period Certain This situation involves a Life Annuity with Period Certain.

Which of these is an element of a single premium annuity

Lump-sum payment" A lump-sum payment is required for a Single Premium annuity.

Equity indexed annuities are invested in which of the following

S&P 500 An indexed annuity is a type of tax-deferred annuity whose credited interest is linked to an equity index — typically the S&P 500.

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 Immediate Annuities are purchased with a single lump sum payment and will start providing income payments within the first year, but usually starting 30 days from the purchase date.

What is the basic function of an annuity

The systematic liquidation of accumulated funds

A variable annuity has which of the following characteristics

Underlying equity investments A variable annuity involves Underlying equity investments in a separate account

Which of the following is a characteristic of a variable annuity?

Underlying equity investments Variable annuities involve underlying equity investments in a separate account.