Question 1

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?

Accepted Answer

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.

Question 2

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) Flexible Premium Deferred annuity Variable annuity Immediate annuity Straight Life annuity

Accepted Answer

Immediate annuities start providing income payments usually starting within 30 days from the purchase date. Deferred annuities start providing income payments after the first year.

Question 3

The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)

Accepted Answer

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.

Question 4

Equity indexed annuities are invested in

Accepted Answer

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.

Question 5

If an annuity is terminated prior to beginning of the income payment period, the contract owner receives

Accepted Answer

The contract surrender value at that time.

Question 6

Which of the following is a characteristic of a variable annuity? Underlying equity investments Does not have surrender chargers Does not provide a transfer of ownership Selling this product requires only a life license

Accepted Answer

Underlying equity investments.

Question 7

Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT? The income from the TSA is received income tax-free The amount contributed is deductible from taxable income The interest earnings are tax deferred A tax-sheltered annuity is available to employees of non-profit organizations

Accepted Answer

The income from the TSA is received income tax-free. Upon retirement, payments received by employees from the accumulated savings in tax-sheltered annuities are treated as ordinary income.

Question 8

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

Accepted Answer

Flexible Installment Deferred

Question 9

G purchased a $50,000 single premium, Straight Life Annuity 2 years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer

Accepted Answer

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.

Question 10

An 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. This type of annuity is called

Accepted Answer

A Cash Refund annuity. A Cash 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.

Question 11

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) Flexible Premium Deferred annuity Variable annuity Immediate annuity Straight Life annuity

Accepted Answer

Immediate annuity. Immediate annuities start providing income payments usually starting within 30 days from the purchase date. Deferred annuities start providing income payments after the first year.

Question 12

An individual who purchases a Life annuity is given protection against

Accepted Answer

the risk of living longer than expected. A Life annuity offers protection against the risk of living longer than anticipated.

Question 13

Which type of contract liquidates an estate through recurrent payments?

Accepted Answer

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

Question 14

The type of annuity that can be purchased with one monetary deposit is called a(n)

Accepted Answer

An immediate annuity

Question 15

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?

Accepted Answer

Fixed Deferred

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