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# Risk Management and Insurance

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## Quiz 14 : Annuities and Individual Retirement Accounts

During the funding period,the premiums paid for a variable annuity are used to purchase
Free
Multiple Choice

D

Bridget started to fund a variable annuity.Three years later,she experienced financial difficulty.She called her agent and cancelled the contract.The insurer returned all but 4 percent of the account balance.The 4 percent kept by the insurer is a(n)
Free
Multiple Choice

D

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

D

With a fixed indexed annuity,what name is given to the method of crediting interest to the annuity?
Multiple Choice
Which of the following statements is (are)true with respect to a fixed 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.
Multiple Choice
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).Assume that Juanita receives 12 monthly payments of $500 the first year.How much taxable income must she report? Multiple Choice Answer: 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).What is the exclusion ratio in this case? Multiple Choice Answer: 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.The annuity payout option Cassie selected is
Multiple Choice
Under a fixed indexed annuity,what name is given to the percentage increase in the stock index that is credited to the contract?
Multiple Choice
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.
Multiple Choice
Stan paid an insurance company \$50,000 for a fixed annuity when he was 50 years old.At age 62,Stan plans to begin to receive payments from the insurer.There are no guarantees on the number of payments he will receive.Based on the description provided,this annuity can be described as a(n)
Multiple Choice
Life annuity payments are made up of all of the following EXCEPT
Multiple Choice
Insurers offering variable annuities charge a number of expenses.One category of expenses is to pay the fund manager and to pay brokerage fees.This expense is the
Multiple Choice
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.
Multiple Choice
Which of the following statements regarding the taxation of individual annuities is (are)true? I.The exclusion ratio is the percentage of the annuity income that is taxable. II.After the net cost of the annuity has been paid to the annuitant,the total annuity payment is taxable.
Multiple Choice
Which of the following statements about variable annuities is true?
Multiple Choice
Insurers offering variable annuities charge a number of fees and expenses.One category of fees and expenses is charged to cover the cost of record keeping,paperwork,and periodic reports to annuity owners.This expense is the
Multiple Choice
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 annuity payout options will provide Brad with the highest monthly income?
Multiple Choice
Which of the following statements is (are)true with respect to the cash 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.
Multiple Choice
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.
Multiple Choice