EXAMFX Annuity Concepts and Uses 2

Question 1

Which annuity payout option guarantees income for as long as the annuitant lives, with no payments to beneficiaries after death?

Accepted Answer

Life only

Answer

Joint and survivor

Answer

Period certain

Answer

Life with period certain

Question 2

An indexed annuity credits interest based on the performance of:

Accepted Answer

An external market index such as the S&P 500

Answer

A fixed rate set at issue

Answer

The insurer's general account portfolio

Answer

U.S. Treasury bill yields

Question 3

What is the primary purpose of a surrender charge on a deferred annuity?

Accepted Answer

To recover the insurer's acquisition costs if the contract is surrendered early

Answer

To penalize the owner for changing beneficiaries

Answer

To fund the state guaranty association

Answer

To increase the death benefit

Question 4

During the accumulation phase of a deferred annuity, the owner's funds grow on a:

Accepted Answer

Tax-deferred basis

Answer

Tax-free basis

Answer

Taxable basis each year

Answer

Pre-tax deductible basis always

Question 5

A variable annuity's subaccounts are most similar to which investment vehicle?

Accepted Answer

Mutual funds

Answer

Certificates of deposit

Answer

Fixed-rate savings bonds

Answer

Money market deposit accounts

Question 6

Which of the following best describes an immediate annuity?

Accepted Answer

A contract funded with a single premium that begins income payments within one year

Answer

A contract that begins payouts at least five years after purchase

Answer

A tax-qualified plan that allows pre-tax contributions

Answer

A contract requiring monthly premium payments for ten years

Question 7

A 10-year period certain annuity payout ensures that:

Accepted Answer

If the annuitant dies before 10 years, a beneficiary receives payments for the remainder of that period

Answer

The annuitant receives income for exactly 10 years only

Answer

The insurer guarantees a 10% annual return

Answer

Payments stop after 10 years regardless of whether the annuitant is alive