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Exam 14: Annuities and Individual Retirement Accounts

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Question 21

Multiple Choice

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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

A) investment management charge.
B) administrative charge.
C) surrender charge.
D) front-end load.

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Question 22

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

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

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Question 23

Multiple Choice

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Donna,age 50,is single and earns $50,000 annually.She is covered under her employer's retirement plan.Donna would like to start a traditional IRA and contribute $5,000 this year.Which of the following describes her ability to establish a traditional IRA and the tax treatment of her contribution?

Which of the following statements is (are) true with regard to an annuity payout option that includes a cost-of-living adjustment? I.The initial monthly payment is lower than the initial payment a fixed annuity would have provided if purchased at the same age. II.Periodic payments to the annuitant are adjusted for inflation.

Which of the following statements is (are) true regarding the Roth IRA? I.Roth IRA contributions are tax deductible. II.Roth IRA investment income accumulates income-tax free.

Which of the following statements is (are) true with regard to IRAs? I.Contribution limits are higher for workers aged 50 and older. II.The minimum distribution rules after attainment of age 70.5 do not apply to Roth IRAs.

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 is a permissible IRA investment alternative?

Which of the following is a characteristic of a longevity annuity?

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

Which of the following statements is (are) true with regard to Roth IRAs? I.The portion of a Roth IRA distribution that is attributable to investment income is taxable. II.There is a maximum income level above which Roth IRA contributions are not allowed.

An immediate life annuity offers all of the following benefits EXCEPT

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?

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?

With a fixed indexed annuity,what name is given to the method of crediting interest to the annuity?

Which statement is true regarding IRA distributions?

Which of the following statements is (are) true about a longevity annuity? I.Longevity annuities are low-cost because there are usually no cash values or death benefits in the policy. II.Longevity insurance is an example of an immediate annuity.

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

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?

Agnes and Mary Clare,two elderly sisters,own an annuity covering both of their lives.The annuity pays benefits to them until the first sister dies,then the annuity terminates.Agnes and Mary Clare own a(n)