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Exam 14: Annuities and Individual Retirement Accounts

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Question 1

Multiple Choice

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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?

A) 33.33 percent
B) 40.00 percent
C) 50.00 percent
D) 66.67 percent

E) B) and D)
F) C) and D)

Correct Answer

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C

Question 2

Multiple Choice

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Which of the following statements is (are) true with regard to IRAs? I.Contribution limits are higher for workers aged 50 and older. II.A spouse who does not work outside of the home may make a fully deductible contribution to a traditional IRA even if his or her spouse is covered by a retirement plan at work.

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

E) A) and C)
F) A) and B)

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Question 3

Multiple Choice

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Which of the following statements about variable annuities is true?

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.

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)

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?

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.

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

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

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

Which of the following statements is (are) true about longevity insurance? I.If the annuitant dies during the deferral period,the purchase price of the annuity is forfeited. II.Longevity insurance is an example of an immediate annuity.

Under an equity-indexed annuity,what name is given to the percentage increase in the stock index that is credited to the contract?

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 is an advantage of longevity insurance?

An immediate life annuity offers all of the following benefits EXCEPT

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

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?

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(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.