CAS Annuity Fundamentals and Types

Question 1

What is the primary purpose of an annuity?

Accepted Answer

To generate lifetime income through periodic payments

Answer

To provide a lump sum payout

Answer

To accumulate wealth with no withdrawals

Answer

To function as a short-term investment

Question 2

Which type of annuity provides a guaranteed, fixed payment amount?

Accepted Answer

Fixed annuity

Answer

Variable annuity

Answer

Indexed annuity

Answer

Deferred annuity

Question 3

What is the main characteristic of a variable annuity?

Accepted Answer

Payments vary with investment performance

Answer

Fixed payments

Answer

Guaranteed minimum interest

Answer

No investment options

Question 4

How does an indexed annuity differ from a variable annuity?

Accepted Answer

Indexed annuities offer market participation with downside protection

Answer

Indexed annuities have fixed interest rates

Answer

Variable annuities provide guaranteed returns

Answer

Variable annuities have no investment risk

Question 5

Which of the following best describes an immediate annuity?

Accepted Answer

Payments begin shortly after purchase

Answer

Payments begin after a deferral period

Answer

It requires investment in the stock market

Answer

It is only available through employers

Question 6

Which annuity type allows tax-deferred growth until withdrawals begin?

Accepted Answer

Deferred annuity

Answer

Immediate annuity

Answer

Fixed annuity

Answer

Variable annuity with annual distributions