Question 1

After the total purchase price of an annuity has been excluded from income, the subsequent benefit payments are fully taxable.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would have the highest current value?

Accepted Answer

A)   an immediate joint and 100 percent survivor annuity for two 60-year-old people that will pay $1,000 per month, with a five-year period-certain guarantee,
B)   an immediate annuity for a 60 year old that will pay $1,000 per month,
C)   an immediate joint and 100 percent survivor annuity for two 60-year-old people that will pay $1,000 per month,
D)   a deferred straight life annuity for a 50 year old that will pay $1,000 per month beginning at age 60. A

Question 3

Match the descriptions with their terms:
-A/An _________________ is payable for a specified period of time, without regard to the life or death of the annuitant.

Accepted Answer

A)   annuitant
B)   annuity
C)   annuity certain
D)   annuity units
E)   cash refund guaranteeF)  exclusion ratioG)  flexible-premium annuityH)  immediate annuityI)  installment refund guaranteeJ)  joint and survivor annuityK)  single-premium annuityL)  straight life annuityM)  ten-year period-certain-life annuityN)  variable annuity

Question 4

An annuity that would be particularly suitable for saving from an unstable income for a retirement that will take place in several years is

Accepted Answer

A)   a single-premium annuity,
B)   a flexible-premium annuity,
C)   an annual-premium annuity,
D)   an immediate annuity.

Question 5

Annuities are generally purchased as a way to guard against the possibility that the annuitant will suffer a premature death.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a true statement regarding the income taxation of annuities?

Accepted Answer

A)   Investment earnings are taxed when withdrawn and not when accrued,
B)   Dividends on participating policies are not taxed when received,
C)   The exclusion ratio represents the amount of a benefit payment that can be excluded from taxable income,
D)   A penalty tax of 10 percent is charged for excess accumulations within the annuity if withdrawals are not started by age 59.5.

Question 7

Jill, age 39, can buy a deferred annuity that will pay $100 per month beginning at age 65 and will continue until her death for a single premium today of $1,000. Jack, age 37, can buy a deferred annuity that will pay $100 per month beginning at age 65 and will continue until his death for a single premium today of $900. What can be said about the single premium that would be required of Jill and Jack for a joint and 100 percent survivor annuity that will pay $100 per month beginning at age 65?

Accepted Answer

A)   The cost will be about $1,900,
B)   The cost will be between $900 and $1,000,
C)   The cost will exceed $1,000,
D)   It is impossible to determine anything about the price of the joint annuity because the differing ages of the annuitants would require the use of a mortality table to determine the price. C

Question 8

An early withdrawal penalty tax generally will be charged on withdrawals prior to

Accepted Answer

A)   the annuitant's attaining the age of 59.5,
B)   the expiration of the contract,
C)   the annuitant's attaining the age of 62,
D)   the retirement of the annuitant.

Question 9

Match the descriptions with their terms:
-A/An _________________ is paid for all at once.

Accepted Answer

A)   annuitant
B)   annuity
C)   annuity certain
D)   annuity units
E)   cash refund guaranteeF)  exclusion ratioG)  flexible-premium annuityH)  immediate annuityI)  installment refund guaranteeJ)  joint and survivor annuityK)  single-premium annuityL)  straight life annuityM)  ten-year period-certain-life annuityN)  variable annuity

Question 10

Match the descriptions with their terms:
-The _________________ represents the portion of each annuity payment that is not included in the recipient's taxable income.

Accepted Answer

A)   annuitant
B)   annuity
C)   annuity certain
D)   annuity units
E)   cash refund guaranteeF)  exclusion ratioG)  flexible-premium annuityH)  immediate annuityI)  installment refund guaranteeJ)  joint and survivor annuityK)  single-premium annuityL)  straight life annuityM)  ten-year period-certain-life annuityN)  variable annuity

Question 11

If a single-premium immediate variable annuity is purchased for $200,000 and the average return on investment in the last five years has been 5 percent, what can be said about the size of the first monthly annuity payment?

Accepted Answer

A)   The first payment will be $10,000,
B)   The first payment will be very close to $833,
C)   It is impossible to say because more premiums may be paid before the distribution is made,
D)   The amount of the first payment cannot be determined without further information.

Question 12

A 10-year period-certain guarantee

Accepted Answer

A)   is not available in conjunction with an annuity based on more than one life,
B)   when made in connection with a single-life annuity, will cease payments at the death of the annuitant or the expiration of 10 years, whichever occurs later,
C)   when made in connection with a single-life annuity, will cease payments at the death of the annuitant or the expiration of 10 years, whichever occurs first,
D)   will have a larger effect if the annuitant is relatively young. B

Question 13

A married couple with only one spouse currently working outside the home plans to retire in several years. An annuity that would be particularly suitable for saving for that retirement would be

Accepted Answer

A)   a straight life annuity on the life of the working spouse,
B)   a straight life annuity on the life of the nonworking spouse,
C)   a deferred joint and survivor annuity,
D)   an immediate joint and survivor annuity.

Question 14

An annuity certain contains a survivorship element.

Accepted Answer

A) True 
 B)False

Question 15

The benefits associated with variable annuities are expressed in terms of annuity units that fluctuate with the performance of an investment portfolio.

Accepted Answer

A) True 
 B)False

Question 16

Match the descriptions with their terms:
-The _________________ is the person who receives the annuity payments.

Accepted Answer

A)   annuitant
B)   annuity
C)   annuity certain
D)   annuity units
E)   cash refund guaranteeF)  exclusion ratioG)  flexible-premium annuityH)  immediate annuityI)  installment refund guaranteeJ)  joint and survivor annuityK)  single-premium annuityL)  straight life annuityM)  ten-year period-certain-life annuityN)  variable annuity

Question 17

Match the descriptions with their terms:
-A/An _________________ begins paying regular annuity distributions as soon as it is purchased.

Accepted Answer

A)   annuitant
B)   annuity
C)   annuity certain
D)   annuity units
E)   cash refund guaranteeF)  exclusion ratioG)  flexible-premium annuityH)  immediate annuityI)  installment refund guaranteeJ)  joint and survivor annuityK)  single-premium annuityL)  straight life annuityM)  ten-year period-certain-life annuityN)  variable annuity

Question 18

A penalty tax of 10 percent may be assessed on a withdrawal from an annuity made prior to age 59.5. This tax is in addition to ordinary income tax payable on the withdrawal.

Accepted Answer

A) True 
 B)False

Question 19

Match the descriptions with their terms:
-A/An _________________ is an annuity issued on more than one life and pays as long as either annuitant is alive.

Accepted Answer

A)   annuitant
B)   annuity
C)   annuity certain
D)   annuity units
E)   cash refund guaranteeF)  exclusion ratioG)  flexible-premium annuityH)  immediate annuityI)  installment refund guaranteeJ)  joint and survivor annuityK)  single-premium annuityL)  straight life annuityM)  ten-year period-certain-life annuityN)  variable annuity

Question 20

An immediate annuity is one in which benefits begin as soon as the annuity is purchased.

Accepted Answer

A) True 
 B)False

Exam 18: Retirement Planning and Annuities

After the total purchase price of an annuity has been excluded from income, the subsequent benefit payments are fully taxable.

Correct Answer
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Which of the following would have the highest current value?

Correct Answer
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A

Match the descriptions with their terms: -A/An _________________ is payable for a specified period of time, without regard to the life or death of the annuitant.

Correct Answer
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An annuity that would be particularly suitable for saving from an unstable income for a retirement that will take place in several years is

Correct Answer
verified

Annuities are generally purchased as a way to guard against the possibility that the annuitant will suffer a premature death.

Correct Answer
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Which of the following is not a true statement regarding the income taxation of annuities?

Correct Answer
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Correct Answer
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C

An early withdrawal penalty tax generally will be charged on withdrawals prior to

Correct Answer
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Match the descriptions with their terms: -A/An _________________ is paid for all at once.

Correct Answer
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Match the descriptions with their terms: -The _________________ represents the portion of each annuity payment that is not included in the recipient's taxable income.

Correct Answer
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If a single-premium immediate variable annuity is purchased for $200,000 and the average return on investment in the last five years has been 5 percent, what can be said about the size of the first monthly annuity payment?

Correct Answer
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A 10-year period-certain guarantee

Correct Answer
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B

A married couple with only one spouse currently working outside the home plans to retire in several years. An annuity that would be particularly suitable for saving for that retirement would be

Correct Answer
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An annuity certain contains a survivorship element.

Correct Answer
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The benefits associated with variable annuities are expressed in terms of annuity units that fluctuate with the performance of an investment portfolio.

Correct Answer
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Match the descriptions with their terms: -The _________________ is the person who receives the annuity payments.

Correct Answer
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Match the descriptions with their terms: -A/An _________________ begins paying regular annuity distributions as soon as it is purchased.

Correct Answer
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A penalty tax of 10 percent may be assessed on a withdrawal from an annuity made prior to age 59.5. This tax is in addition to ordinary income tax payable on the withdrawal.

Correct Answer
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Match the descriptions with their terms: -A/An _________________ is an annuity issued on more than one life and pays as long as either annuitant is alive.

Correct Answer
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An immediate annuity is one in which benefits begin as soon as the annuity is purchased.

Correct Answer
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Exam 18: Retirement Planning and Annuities

After the total purchase price of an annuity has been excluded from income, the subsequent benefit payments are fully taxable.

Correct AnswerverifiedShow Answer

Which of the following would have the highest current value?

Correct AnswerverifiedA

Match the descriptions with their terms: -A/An _________________ is payable for a specified period of time, without regard to the life or death of the annuitant.

Correct AnswerverifiedShow Answer

An annuity that would be particularly suitable for saving from an unstable income for a retirement that will take place in several years is

Correct AnswerverifiedShow Answer

Annuities are generally purchased as a way to guard against the possibility that the annuitant will suffer a premature death.

Correct AnswerverifiedShow Answer

Which of the following is not a true statement regarding the income taxation of annuities?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

An early withdrawal penalty tax generally will be charged on withdrawals prior to

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -A/An _________________ is paid for all at once.

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -The _________________ represents the portion of each annuity payment that is not included in the recipient's taxable income.

Correct AnswerverifiedShow Answer

If a single-premium immediate variable annuity is purchased for $200,000 and the average return on investment in the last five years has been 5 percent, what can be said about the size of the first monthly annuity payment?

Correct AnswerverifiedShow Answer

A 10-year period-certain guarantee

Correct AnswerverifiedB

A married couple with only one spouse currently working outside the home plans to retire in several years. An annuity that would be particularly suitable for saving for that retirement would be

Correct AnswerverifiedShow Answer

An annuity certain contains a survivorship element.

Correct AnswerverifiedShow Answer

The benefits associated with variable annuities are expressed in terms of annuity units that fluctuate with the performance of an investment portfolio.

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -The _________________ is the person who receives the annuity payments.

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -A/An _________________ begins paying regular annuity distributions as soon as it is purchased.

Correct AnswerverifiedShow Answer

A penalty tax of 10 percent may be assessed on a withdrawal from an annuity made prior to age 59.5. This tax is in addition to ordinary income tax payable on the withdrawal.

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -A/An _________________ is an annuity issued on more than one life and pays as long as either annuitant is alive.

Correct AnswerverifiedShow Answer

An immediate annuity is one in which benefits begin as soon as the annuity is purchased.

Correct AnswerverifiedShow Answer

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A

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C

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B

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