chapter 7 annuities quiz

Question 1

a variable annuity has which of the following characteristics

Answer 1

underlying equity investments

Question 2

a contract owner terminates an annuity before the income payment period begins. the owner will then recieve

Answer 2

the current contract surender value

Question 3

what is the basic function of an annuity

Answer 3

the systematic liquidation of accumulated funds

Question 4

a 45 year old woman won $100,000 in a scratch off lottery ticket. she purchased an annuity that will pay her $1500 per month beginning at the age of 60. which of these annuities did this woman purchase?

Answer 4

deferred fixed annuity

Question 5

which of the following are equity indexed annuities typically invested in

Answer 5

s&p 500

type of tax deferred annuity whose credited interest is linked to an equity index

Question 6

variable annuities may invest premiums in each of the following except

Answer 6

insureres coporate business account

Question 7

which of these is an element of a single premium annuity

Answer 7

lump sum payment

Question 8

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 an

Answer 8

installment refund annuity

this 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.

Question 9

the type of annuity that can be purchased with one monetary deposit is called

Answer 9

immediate annuity

Question 10

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

Answer 10

income derived from the TSA is received income tax free

upon retirement payments received by employees from the accumulated savings is tax sheltered annuitites are treated as ordianary income

Question 11

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

Answer 11

deferred

Question 12

T age 70 withdraws cash from a profit-sharing plan and purchases a straight life annuity. what will this transaction provide?

Answer 12

income that cannot be outlived by the owner

Question 13

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

Answer 13

payments are made to an annuitant for life