AAMS UPDATED QUESTIONS AND ANSWERS GRADED A+
✔✔George Billups recently retired. Prior to his retirement, he and his wife agreed that
she should sign the required waiver to allow the money purchase plan to pay George's
retirement income as a single life annuity with no period certain. Which one of the
following statements best explains why George and his wife would select the single life
annuity distribution option from his retirement plan? - ✔✔to maximize the periodic
payment because George and his wife have no need or desire to have any portion of
the plan benefits left after his death
✔✔Which of these options explains an investment planning consideration during
retirement that is related to the length of the retirement period? - ✔✔Because the
retirement period can be long, clients should consider taking greater risk for greater
return to keep up with inflation.
✔✔Which one of the following provides a means by which a person who has
accumulated a large amount of her company's stock can convert that stock into a cash
flow stream for retirement (without her selling the stock)? - ✔✔a charitable remainder
trust
✔✔Which of these choices generally represents the tax consequences to an employer
and employee under a nonqualified deferred compensation plan? An employer will -
✔✔receive a deduction when the employee recognizes income.
✔✔Which one of the following is a correct statement of a tax consequence of an off-
shore rabbi trust? - ✔✔developing rules and regulations for its members.
✔✔An investment professional is assessing the life insurance needs of the Johnson
family. As it stands, Mr. Johnson has determined that the family's immediate cash flow
requirements in the event of his death are $65,000. The amount needed to meet all
future funding requirements (net of Mrs. Johnson's income and Social Security and
pension benefits) is estimated to be $550,000. The family owns a home in which their
equity interest is $200,000. Based upon these figures, the investment professional
would recommend life insurance with a face amount of - ✔✔$615,000
$65,000 + $550,000 = $650,000; the $200,000 equity in the home does not represent a
truly liquid asset to offset these expenses (though it could possibly be tapped with a
home equity loan).
✔✔A major responsibility of FINRA is - ✔✔insuring customer accounts in the event of
the liquidation of brokerage firms.
✔✔Hi-Tech Solutions Inc. is a small publicly traded corporation. The company wants to
provide an incentive to its vice president, Tom Salazar, to continue with the company;
however, the company needs to avoid any withdrawal from its much-needed cash
, account. Based on these characteristics, Hi-Tech Solutions Inc. should establish - ✔✔a
restricted stock plan.
✔✔Which one of the following is the most appropriate use of life insurance by a
business? - ✔✔Provide money to help continue the business at the death of a partner
or other owner
✔✔As described in this course, many individuals and households overlook the potential
needs for - ✔✔disability income and long-term care insurance.
✔✔Mrs. Jennings purchased a life insurance policy that will pay $100,000 to her
beneficiary should she die anytime during the next year. She is guaranteed the right to
renew this policy every year for the next five years. The policy is not expected to have
any cash value. Mrs. Jennings has purchased a - ✔✔term life insurance policy.
✔✔Which one of the following types of brokerage clients has been identified as a good
prospect for cash value life insurance? - ✔✔clients who prefer the discipline of regular,
periodic investments
✔✔With respect to cash value life policies, what part of the policy value, if any, is
subject to income taxation when the policy is surrendered? - ✔✔the amount of the
surrender value that exceeds basis
✔✔Brenda is the owner of a whole life insurance policy on her husband, Rolf. Their
daughter, Vera, is named as the contingent beneficiary. In issuing the policy, the
insurance company has asked that a settlement option be selected. Which one of the
following individuals is currently empowered to make the selection? - ✔✔Brenda, the
policy owner
✔✔Your client, Ben Parsons, age 45, received a $500,000 legal settlement. Ben does
not currently need additional income. He would like to invest this money in a safe place,
where it will grow in value until he reaches age 65. Based only on these facts, which
one of the following would be the most logical choice for Ben? - ✔✔a single-premium
deferred annuity
✔✔June O'Leary purchased a deferred annuity 15 years ago. Now, at age 65, she
wants to begin receiving annuity payments for the rest of her life, but she is concerned
about taxation of the payments. You explain that she will - ✔✔be taxed on any amount
representing investment gains
✔✔Traditional community property is a form of property ownership that - ✔✔will require
probate upon the death of an owner.
✔✔George Billups recently retired. Prior to his retirement, he and his wife agreed that
she should sign the required waiver to allow the money purchase plan to pay George's
retirement income as a single life annuity with no period certain. Which one of the
following statements best explains why George and his wife would select the single life
annuity distribution option from his retirement plan? - ✔✔to maximize the periodic
payment because George and his wife have no need or desire to have any portion of
the plan benefits left after his death
✔✔Which of these options explains an investment planning consideration during
retirement that is related to the length of the retirement period? - ✔✔Because the
retirement period can be long, clients should consider taking greater risk for greater
return to keep up with inflation.
✔✔Which one of the following provides a means by which a person who has
accumulated a large amount of her company's stock can convert that stock into a cash
flow stream for retirement (without her selling the stock)? - ✔✔a charitable remainder
trust
✔✔Which of these choices generally represents the tax consequences to an employer
and employee under a nonqualified deferred compensation plan? An employer will -
✔✔receive a deduction when the employee recognizes income.
✔✔Which one of the following is a correct statement of a tax consequence of an off-
shore rabbi trust? - ✔✔developing rules and regulations for its members.
✔✔An investment professional is assessing the life insurance needs of the Johnson
family. As it stands, Mr. Johnson has determined that the family's immediate cash flow
requirements in the event of his death are $65,000. The amount needed to meet all
future funding requirements (net of Mrs. Johnson's income and Social Security and
pension benefits) is estimated to be $550,000. The family owns a home in which their
equity interest is $200,000. Based upon these figures, the investment professional
would recommend life insurance with a face amount of - ✔✔$615,000
$65,000 + $550,000 = $650,000; the $200,000 equity in the home does not represent a
truly liquid asset to offset these expenses (though it could possibly be tapped with a
home equity loan).
✔✔A major responsibility of FINRA is - ✔✔insuring customer accounts in the event of
the liquidation of brokerage firms.
✔✔Hi-Tech Solutions Inc. is a small publicly traded corporation. The company wants to
provide an incentive to its vice president, Tom Salazar, to continue with the company;
however, the company needs to avoid any withdrawal from its much-needed cash
, account. Based on these characteristics, Hi-Tech Solutions Inc. should establish - ✔✔a
restricted stock plan.
✔✔Which one of the following is the most appropriate use of life insurance by a
business? - ✔✔Provide money to help continue the business at the death of a partner
or other owner
✔✔As described in this course, many individuals and households overlook the potential
needs for - ✔✔disability income and long-term care insurance.
✔✔Mrs. Jennings purchased a life insurance policy that will pay $100,000 to her
beneficiary should she die anytime during the next year. She is guaranteed the right to
renew this policy every year for the next five years. The policy is not expected to have
any cash value. Mrs. Jennings has purchased a - ✔✔term life insurance policy.
✔✔Which one of the following types of brokerage clients has been identified as a good
prospect for cash value life insurance? - ✔✔clients who prefer the discipline of regular,
periodic investments
✔✔With respect to cash value life policies, what part of the policy value, if any, is
subject to income taxation when the policy is surrendered? - ✔✔the amount of the
surrender value that exceeds basis
✔✔Brenda is the owner of a whole life insurance policy on her husband, Rolf. Their
daughter, Vera, is named as the contingent beneficiary. In issuing the policy, the
insurance company has asked that a settlement option be selected. Which one of the
following individuals is currently empowered to make the selection? - ✔✔Brenda, the
policy owner
✔✔Your client, Ben Parsons, age 45, received a $500,000 legal settlement. Ben does
not currently need additional income. He would like to invest this money in a safe place,
where it will grow in value until he reaches age 65. Based only on these facts, which
one of the following would be the most logical choice for Ben? - ✔✔a single-premium
deferred annuity
✔✔June O'Leary purchased a deferred annuity 15 years ago. Now, at age 65, she
wants to begin receiving annuity payments for the rest of her life, but she is concerned
about taxation of the payments. You explain that she will - ✔✔be taxed on any amount
representing investment gains
✔✔Traditional community property is a form of property ownership that - ✔✔will require
probate upon the death of an owner.
