Chapter 3

Question 1

Needs met by immediate annuities (3)

Answer 1

• Convert capital into lifelong income.
• Remove uncertainty of how quickly capital should be spent
• Protect level of future income.

Question 2

Risk that expense reserves are inadequate may be due to (3)

Answer 2

• Inflation higher than expected
• Company less efficient than expected
• Expenses higher than allowed for in pricing

Question 3

Annuities do not usually allow for withdrawal (with benefit) except when:

Answer 3

You can prove that you are in good health at withdrawal. Basically proving you are not selecting against the office.