Question 1

The amount paid for an annuity divided by the expected return from the annuity is the:

Accepted Answer

A)  FICA deduction ratio 
B)  rate of return on the annuity 
C)  exclusion ratio 
D)  none of the above 
A)  FICA deduction ratio 
B)  rate of return on the annuity 
C)  exclusion ratio 
D)  none of the above C

Question 2

An annuity 5 years certain pays for 5 years or the death of the annuitant, whichever comes first.

Accepted Answer

A) True 
 B)False  False

Question 3

A variable annuity is usually paid for on a deferred basis.

Accepted Answer

A) True 
 B)False  True

Question 4

Assume you are analyzing two separate annuity pools. Pool A has significantly higher mortality (deaths/thousand) than Pool B. Holding other factors constant, which pool will make higher payments per month to each annuitant?

Accepted Answer

A)  A 
B)  B 
C)  The monthly liquidation payments will be equal. 
D)  We cannot say because mortality is not an important factor in calculating annuity payments. 
A)  A 
B)  B 
C)  The monthly liquidation payments will be equal. 
D)  We cannot say because mortality is not an important factor in calculating annuity payments.

Question 5

Life annuities may be classified according to all but which one of the following criteria?

Accepted Answer

A)  When liquidation payments begin 
B)  Method of paying premiums 
C)  Number of lives insured 
D)  Maximum number of payments guaranteed 
A)  When liquidation payments begin 
B)  Method of paying premiums 
C)  Number of lives insured 
D)  Maximum number of payments guaranteed

Question 6

What is the difference between a SPDA and a FPDA?

Accepted Answer

A SPDA is designed to accept o

Question 7

Explain how an annuity 10 years certain would work.

Accepted Answer

An annuity 10 years certain would pay re

Question 8

The period during which the insured is making annuity payments to the insurer is the:

Accepted Answer

A)  retirement period 
B)  deferral period 
C)  accumulation period 
D)  liquidation period 
A)  retirement period 
B)  deferral period 
C)  accumulation period 
D)  liquidation period

Question 9

Oprah has $250,000 and wishes to purchase a single-premium annuity. All other things being equal, which of the following annuities will provide her with the smallest monthly liquidation payment?

Accepted Answer

A)  20-year period certain, joint and 2/3 survivor, single premium 
B)  20-year period certain, single premium 
C)  20-year period certain, joint and survivor, single premium 
D)  Straight life annuity, single premium. 
A)  20-year period certain, joint and 2/3 survivor, single premium 
B)  20-year period certain, single premium 
C)  20-year period certain, joint and survivor, single premium 
D)  Straight life annuity, single premium.

Question 10

No medical exam is required for the purchase of an annuity, no matter how old the applicant.

Accepted Answer

A) True 
 B)False

Question 11

Explain the purpose of the annuity contract in a financial plan.

Accepted Answer

The annuity contract allows th

Question 12

An annuity, five years certain, makes payments to the annuitant:

Accepted Answer

A)  for 5 years or until the annuitant's death, whichever event happens last 
B)  for only the first 5 years of the liquidation period 
C)  only if the insured dies within the first five years 
D)  for 5 years or until the annuitant's death, whichever event happens first 
A)  for 5 years or until the annuitant's death, whichever event happens last 
B)  for only the first 5 years of the liquidation period 
C)  only if the insured dies within the first five years 
D)  for 5 years or until the annuitant's death, whichever event happens first

Question 13

A joint-and-one-half survivor annuity covers two people, but the annuity payments are cut in half at the death of the first annuitant.

Accepted Answer

A) True 
 B)False

Question 14

An installment-refund annuity:

Accepted Answer

A)  guarantees that annuity payments will continue to a successor beneficiary until the insurer pays out a total amount equal to the premium 
B)  guarantees that annuity payments will continue to a successor beneficiary until the insurer pays out a total amount equal to the excess interest 
C)  guarantees that annuity payments will continue to a successor beneficiary until the insurer pays out a total amount equal to the liquidation value 
D)  guarantees that annuity payments will continue to a successor beneficiary until the insurer pays out a total amount equal to the structured settlement premium 
A)  guarantees that annuity payments will continue to a successor beneficiary until the insurer pays out a total amount equal to the premium 
B)  guarantees that annuity payments will continue to a successor beneficiary until the insurer pays out a total amount equal to the excess interest 
C)  guarantees that annuity payments will continue to a successor beneficiary until the insurer pays out a total amount equal to the liquidation value 
D)  guarantees that annuity payments will continue to a successor beneficiary until the insurer pays out a total amount equal to the structured settlement premium

Question 15

A cash refund annuity would have lower monthly benefits per $1,000 of premium than an installment refund annuity.

Accepted Answer

A) True 
 B)False

Question 16

A life annuity that pays nothing after the annuitant's death is a ________ annuity.

Accepted Answer

A)  period certain 
B)  straight life 
C)  refund 
D)  single premium deferred 
A)  period certain 
B)  straight life 
C)  refund 
D)  single premium deferred

Question 17

Which of the following statements is false?

Accepted Answer

A)  Annuities can be used to fund structured settlements in negligence cases. 
B)  Annuities are useful for generating an income that cannot be outlived. 
C)  Annuities are good retirement funding vehicles for persons in poor health. 
D)  Annuities maximize cash flow for people who are willing to liquidate their assets. 
A)  Annuities can be used to fund structured settlements in negligence cases. 
B)  Annuities are useful for generating an income that cannot be outlived. 
C)  Annuities are good retirement funding vehicles for persons in poor health. 
D)  Annuities maximize cash flow for people who are willing to liquidate their assets.

Question 18

The main purpose of an annuity is to protect against:

Accepted Answer

A)  premature death 
B)  outliving one's income 
C)  growing old 
D)  none of the above 
A)  premature death 
B)  outliving one's income 
C)  growing old 
D)  none of the above

Question 19

Choose the recipient of the largest dollar amount of annual annuity receipts for a $100,000 single-premium immediate annuity:

Accepted Answer

A)  male age 65 
B)  female age 65 
C)  male age 25 
D)  female age 20 
A)  male age 65 
B)  female age 65 
C)  male age 25 
D)  female age 20

Question 20

Which of the following does not influence how an insurer calculates monthly annuity benefits?

Accepted Answer

A)  Age 
B)  Health status of insured annuitant 
C)  Sex 
D)  Amount of the premium the annuitant has paid 
A)  Age 
B)  Health status of insured annuitant 
C)  Sex 
D)  Amount of the premium the annuitant has paid

Exam 17: Annuities

The amount paid for an annuity divided by the expected return from the annuity is the:

An annuity 5 years certain pays for 5 years or the death of the annuitant, whichever comes first.

A variable annuity is usually paid for on a deferred basis.

Assume you are analyzing two separate annuity pools. Pool A has significantly higher mortality (deaths/thousand) than Pool B. Holding other factors constant, which pool will make higher payments per month to each annuitant?

Life annuities may be classified according to all but which one of the following criteria?

What is the difference between a SPDA and a FPDA?

Explain how an annuity 10 years certain would work.

The period during which the insured is making annuity payments to the insurer is the:

Oprah has $250,000 and wishes to purchase a single-premium annuity. All other things being equal, which of the following annuities will provide her with the smallest monthly liquidation payment?

No medical exam is required for the purchase of an annuity, no matter how old the applicant.

Explain the purpose of the annuity contract in a financial plan.

An annuity, five years certain, makes payments to the annuitant:

A joint-and-one-half survivor annuity covers two people, but the annuity payments are cut in half at the death of the first annuitant.

An installment-refund annuity:

A cash refund annuity would have lower monthly benefits per $1,000 of premium than an installment refund annuity.

A life annuity that pays nothing after the annuitant's death is a ________ annuity.

Which of the following statements is false?

The main purpose of an annuity is to protect against:

Choose the recipient of the largest dollar amount of annual annuity receipts for a $100,000 single-premium immediate annuity:

Which of the following does not influence how an insurer calculates monthly annuity benefits?

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

Filters