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

An annuity is designed to provide a steady stream of income, typically during retirement, by distributing payments over time.

Question 2

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

Accepted Answer

Fixed annuity

Answer

A fixed annuity provides predictable payments by offering a guaranteed interest rate and set payouts.

Question 3

What is the main characteristic of a variable annuity?

Accepted Answer

Payments vary with investment performance

Answer

A variable annuity’s payments fluctuate based on the performance of underlying investment options, exposing the annuitant to market risk.

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 provide returns based on a market index with some protection from market losses, while variable annuities have direct exposure to market risks.

Question 5

Which of the following best describes an immediate annuity?

Accepted Answer

Payments begin shortly after purchase

Answer

An immediate annuity begins making payments soon after the contract is purchased, typically within a year, and is used for retirement income.

(CAS) Certified Annuity Specialist Practice Test

(CAS) Certified Annuity Specialist Practice Test

CAS Annuity Fundamentals and Types