Question 1

All of the following statements about variable annuities are true EXCEPT

Accepted Answer

A) The periodic payments received by the annuitant fluctuate. 
B) Variable annuities typically provide a guaranteed death benefit payable to a beneficiary if the annuitant dies prior to retirement. 
C) Insurers offering variable annuities charge a variety of fees and expenses. 
D) Although the value of annuity units fluctuates,accumulation units have a fixed value. 
A) The periodic payments received by the annuitant fluctuate. 
B) Variable annuities typically provide a guaranteed death benefit payable to a beneficiary if the annuitant dies prior to retirement. 
C) Insurers offering variable annuities charge a variety of fees and expenses. 
D) Although the value of annuity units fluctuates,accumulation units have a fixed value. D

Question 2

Which of the following statements is (are)true with respect to variable annuities?
I.The price at which accumulation units can be purchased fluctuates during the funding period.
II.The value of annuity units fluctuates over time.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II C

Question 3

Which of the following statements is (are)true with respect to an equity-indexed annuity?
I.The maximum percentage gain is usually capped.
II.There is no downside protection against loss of principal if the annuity is held to term.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II A

Question 4

Brad funded a life annuity through installment payments.At age 60,he decided to elect an annuity settlement option and to begin to receive payments.Which of the following life income options will provide Brad with the highest monthly income?

Accepted Answer

A) life annuity (no refund) 
B) life income with payments guaranteed for 5 years 
C) life income with payments guaranteed for 10 years 
D) installment refund annuity 
A) life annuity (no refund) 
B) life income with payments guaranteed for 5 years 
C) life income with payments guaranteed for 10 years 
D) installment refund annuity

Question 5

Donna is single and earns $30,000 annually.She is covered under her employer's retirement plan.Donna would like to start a traditional IRA and contribute $3,000 this year.Which of the following describes her ability to establish a traditional IRA and the tax treatment of her contribution?

Accepted Answer

A) Her contribution is fully tax deductible. 
B) Her contribution is partially tax deductible. 
C) No portion of the contribution is tax deductible. 
D) Donna is not eligible to establish a traditional IRA,so no contribution can be made. 
A) Her contribution is fully tax deductible. 
B) Her contribution is partially tax deductible. 
C) No portion of the contribution is tax deductible. 
D) Donna is not eligible to establish a traditional IRA,so no contribution can be made.

Question 6

Stan paid an insurance company $50,000 for an annuity when he was 50 years old.At age 62,Stan plans to begin to receive payments from the insurer.Based on the description provided,this annuity can be described as a(n)

Accepted Answer

A) deferred annuity. 
B) life annuity with guaranteed payments. 
C) immediate annuity. 
D) variable annuity. 
A) deferred annuity. 
B) life annuity with guaranteed payments. 
C) immediate annuity. 
D) variable annuity.

Question 7

Cassie,age 62,paid a life insurer $100,000 in exchange for a life annuity.If Cassie dies before receiving 120 monthly payments from the insurer,the remaining payments will be made to a beneficiary.If Cassie dies after receiving 120 payments,no additional payments are made by the insurer.Cassie has purchased a

Accepted Answer

A) variable annuity. 
B) life annuity with guaranteed payments. 
C) installment refund annuity. 
D) cash refund annuity. 
A) variable annuity. 
B) life annuity with guaranteed payments. 
C) installment refund annuity. 
D) cash refund annuity.

Question 8

All of the following are circumstances under which withdrawals from a traditional IRA may be made prior to age 59.5 without incurring a substantial penalty EXCEPT

Accepted Answer

A) The withdrawal is in substantially equal installments paid over the individual's life expectancy. 
B) The withdrawal is used to pay living expenses after unemployment insurance benefits cease. 
C) The withdrawal is used to pay unreimbursed medical expenses that exceed 7.5 percent of adjusted gross income. 
D) The withdrawal is because of income needed due to the individual's disability. 
A) The withdrawal is in substantially equal installments paid over the individual's life expectancy. 
B) The withdrawal is used to pay living expenses after unemployment insurance benefits cease. 
C) The withdrawal is used to pay unreimbursed medical expenses that exceed 7.5 percent of adjusted gross income. 
D) The withdrawal is because of income needed due to the individual's disability.

Question 9

Which of the following statements is/are true concerning the joint and survivor annuity settlement option?
I.Under this option,payments begin after the first annuitant dies.
II.This settlement option is often selected by married couples.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 10

Which of the following statements is (are)true with respect to annuities?
I.Annuities are the opposite of life insurance.
II.The fundamental purpose of annuities is to replace lost income in case of premature death.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 11

Daryl,age 42,quit his job.His employer offered a defined contribution pension plan,and the balance in the account was $30,000 when Daryl quit.He can avoid immediate taxation of these funds by

Accepted Answer

A) taking a lump-sum distribution. 
B) using an IRA rollover account. 
C) receiving the money through four equal installments. 
D) using the funds to purchase common stock issued by the former employer. 
A) taking a lump-sum distribution. 
B) using an IRA rollover account. 
C) receiving the money through four equal installments. 
D) using the funds to purchase common stock issued by the former employer.

Question 12

With an equity-indexed annuity,what name is given to the method of crediting excess interest to the annuity?

Accepted Answer

A) the capitation method 
B) the indexing method 
C) the distribution method 
D) the earnings method 
A) the capitation method 
B) the indexing method 
C) the distribution method 
D) the earnings method

Question 13

Life annuity payments are made up of all of the following EXCEPT

Accepted Answer

A) return of premiums. 
B) interest earnings. 
C) unliquidated principal of annuitants who live too long. 
D) unliquidated principal of annuitants who die early. 
A) return of premiums. 
B) interest earnings. 
C) unliquidated principal of annuitants who live too long. 
D) unliquidated principal of annuitants who die early.

Question 14

Rita is 66 years old.She earned $20,000 this year working part-time at a store and her modified adjusted gross income was $28,000.Rita is considering making a $3,000 contribution to her traditional IRA.Which of the following statements is true regarding this contribution?

Accepted Answer

A) Rita cannot contribute to her traditional IRA because she is over age 65. 
B) Rita can make a $3,000 contribution to her traditional IRA,but it is not tax deductible. 
C) Rita can make a $3,000 contribution to her traditional IRA,but it is only partially tax deductible. 
D) Rita can make a $3,000 contribution to her traditional IRA,and it is fully tax deductible. 
A) Rita cannot contribute to her traditional IRA because she is over age 65. 
B) Rita can make a $3,000 contribution to her traditional IRA,but it is not tax deductible. 
C) Rita can make a $3,000 contribution to her traditional IRA,but it is only partially tax deductible. 
D) Rita can make a $3,000 contribution to her traditional IRA,and it is fully tax deductible.

Question 15

When selling life annuities,what risk is the insurer pooling?

Accepted Answer

A) bad investment performance 
B) premature death 
C) bad expense experience 
D) excessive longevity 
A) bad investment performance 
B) premature death 
C) bad expense experience 
D) excessive longevity

Question 16

Which of the following persons can establish a traditional IRA?
I.Persons whose only income received is from investments.
II.Employed persons under age 70.5 who are not active participants in an employer-sponsored retirement plan.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 17

Which of the following statements is (are)true with respect to a joint-and-survivor annuity?
I.Some joint-and-survivor annuities reduce the income payment after the first annuitant dies.
II.No payments are made after the first annuitant dies.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 18

Which of the following statements is (are)true with respect to the cash (lump sum)annuity settlement option?
I.The taxable portion of the distribution is subject to federal and state income taxes.
II.The option results in adverse selection against the insurer as those in poor health are more likely to take cash than to annuitize the funds.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 19

Juanita paid a life insurer $45,000 in exchange for an immediate life annuity.Juanita will receive $500 per month from the insurer,and her life expectancy is 15 years (180 months).If Juanita is alive 20 years later,how much of the $6,000 received during the year is taxable?

Accepted Answer

A) nothing 
B) $3,000 
C) $4,500 
D) $6,000 
A) nothing 
B) $3,000 
C) $4,500 
D) $6,000

Question 20

All of the following statements about traditional and Roth IRAs are true EXCEPT

Accepted Answer

A) Traditional IRA contributions may be fully,partially,or not income tax deductible. 
B) Qualified distributions from Roth IRAs are received income tax free. 
C) Contributions to Roth IRAs are made with after-tax dollars. 
D) Traditional IRAs are exempt from the penalty tax on premature distributions. 
A) Traditional IRA contributions may be fully,partially,or not income tax deductible. 
B) Qualified distributions from Roth IRAs are received income tax free. 
C) Contributions to Roth IRAs are made with after-tax dollars. 
D) Traditional IRAs are exempt from the penalty tax on premature distributions.

Exam 14: Annuities and Individual Retirement Accounts

All of the following statements about variable annuities are true EXCEPT

Which of the following statements is (are)true with respect to variable annuities? I.The price at which accumulation units can be purchased fluctuates during the funding period. II.The value of annuity units fluctuates over time.

Which of the following statements is (are)true with respect to an equity-indexed annuity? I.The maximum percentage gain is usually capped. II.There is no downside protection against loss of principal if the annuity is held to term.

Brad funded a life annuity through installment payments.At age 60,he decided to elect an annuity settlement option and to begin to receive payments.Which of the following life income options will provide Brad with the highest monthly income?

Donna is single and earns $30,000 annually.She is covered under her employer's retirement plan.Donna would like to start a traditional IRA and contribute $3,000 this year.Which of the following describes her ability to establish a traditional IRA and the tax treatment of her contribution?

Stan paid an insurance company $50,000 for an annuity when he was 50 years old.At age 62,Stan plans to begin to receive payments from the insurer.Based on the description provided,this annuity can be described as a(n)

All of the following are circumstances under which withdrawals from a traditional IRA may be made prior to age 59.5 without incurring a substantial penalty EXCEPT

Which of the following statements is/are true concerning the joint and survivor annuity settlement option? I.Under this option,payments begin after the first annuitant dies. II.This settlement option is often selected by married couples.

Which of the following statements is (are)true with respect to annuities? I.Annuities are the opposite of life insurance. II.The fundamental purpose of annuities is to replace lost income in case of premature death.

Daryl,age 42,quit his job.His employer offered a defined contribution pension plan,and the balance in the account was $30,000 when Daryl quit.He can avoid immediate taxation of these funds by

With an equity-indexed annuity,what name is given to the method of crediting excess interest to the annuity?

Life annuity payments are made up of all of the following EXCEPT

Rita is 66 years old.She earned $20,000 this year working part-time at a store and her modified adjusted gross income was $28,000.Rita is considering making a $3,000 contribution to her traditional IRA.Which of the following statements is true regarding this contribution?

When selling life annuities,what risk is the insurer pooling?

Which of the following persons can establish a traditional IRA? I.Persons whose only income received is from investments. II.Employed persons under age 70.5 who are not active participants in an employer-sponsored retirement plan.

Which of the following statements is (are)true with respect to a joint-and-survivor annuity? I.Some joint-and-survivor annuities reduce the income payment after the first annuitant dies. II.No payments are made after the first annuitant dies.

Juanita paid a life insurer $45,000 in exchange for an immediate life annuity.Juanita will receive $500 per month from the insurer,and her life expectancy is 15 years (180 months).If Juanita is alive 20 years later,how much of the $6,000 received during the year is taxable?

All of the following statements about traditional and Roth IRAs are true EXCEPT

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