RMI 3011 FINAL EXAM FSU ZAVADA
Questions with complete solution
Annuity - correct answer ✔A periodic payment that continues for a fixed
period or for the duration of a designated life or lives. It provides protection
against the risk of excessive longevity. The fundamental purpose is to provide
a lifetime income that cannot be outlived
Types of Annuity - correct answer ✔Fixed annuity
Variable annuity
Equity-indexed annuity
Fixed Annuity - correct answer ✔Pays periodic income payments that are
guaranteed and fixed in amount
- income payments can be paid immediately, or at a future date
guaranteed rate - correct answer ✔the minimum interest rate that will be
credited to the fixed annuity
current rate - correct answer ✔based on current market conditions, and is
guaranteed only for a limited period
liquidation period - correct answer ✔the period in which funds are paid out,
or annuitized
immediate annuity - correct answer ✔one where the first payment is due one
payment interval from the date of purchase
,deferred annuity - correct answer ✔provides income payments at some
future date
A flexible-premium annuity - correct answer ✔allows the owner to vary the
premium payments
life annuity (no refund) option - correct answer ✔provides a life income to the
annuitant only while the annuitant remains alive
life annuity with guaranteed payments - correct answer ✔pays a life income
to the annuitant with a certain number of guaranteed payments
installment refund option - correct answer ✔pays a life income to the
annuitant; after the annuitant's death, payments continue to a beneficiary until
they equal the purchase price
inflation-indexed annuity option - correct answer ✔provides periodic
payments that are adjusted for inflation
joint-and-survivor annuity - correct answer ✔pays benefits based on the lives
of two or more annuitants. The annuity income is paid until the last annuitant
dies
Variable annuities contain the following fees and expenses - correct answer
✔-Investment management charge
-Administrative charge
-Mortality and expense risk charge
-Surrender charge
, Longevity Insurance - correct answer ✔-a generic name for a single-
premium deferred annuity that begins paying benefits only at an advanced
age, typically age 85
-They are low-cost annuities because there are no cash values or death
benefits in the policy
-Once purchased, the funds cannot be accessed
Annuity surrender Charge - correct answer ✔Most insurance companies limit
the amount of withdrawals one can take during the initial years of a contract,
and place a surrender charge on any withdrawals above that preset limit
(typically, to help cover the commissions the company paid). Be careful, as
surrender charges can be significant and can be imposed for an extended
time period.
individual retirement account (IRA) - correct answer ✔-Allows workers with
taxable compensation to make annual contributions to a retirement plan up to
certain limits and receive favorable income-tax treatment
traditional IRA - correct answer ✔-Allows workers to take a tax deduction for
part or all of their IRA contributions
-The investment income accumulates income-tax free on a tax-deferred basis
-Distributions are taxed as ordinary income
-The participant must have earned income during the year, and must be under
age 70½
-A full deduction for IRA contributions is allowed under certain circumstances
-Distributions from a traditional IRA before age 59½ are considered an early
withdrawal, and subject to a 10% tax penalty unless certain conditions apply,
e.g., death or disability
IRA rollover - correct answer ✔tax-free distribution of cash or other property
from one retirement plan, which is deposited into another retirement plan
Questions with complete solution
Annuity - correct answer ✔A periodic payment that continues for a fixed
period or for the duration of a designated life or lives. It provides protection
against the risk of excessive longevity. The fundamental purpose is to provide
a lifetime income that cannot be outlived
Types of Annuity - correct answer ✔Fixed annuity
Variable annuity
Equity-indexed annuity
Fixed Annuity - correct answer ✔Pays periodic income payments that are
guaranteed and fixed in amount
- income payments can be paid immediately, or at a future date
guaranteed rate - correct answer ✔the minimum interest rate that will be
credited to the fixed annuity
current rate - correct answer ✔based on current market conditions, and is
guaranteed only for a limited period
liquidation period - correct answer ✔the period in which funds are paid out,
or annuitized
immediate annuity - correct answer ✔one where the first payment is due one
payment interval from the date of purchase
,deferred annuity - correct answer ✔provides income payments at some
future date
A flexible-premium annuity - correct answer ✔allows the owner to vary the
premium payments
life annuity (no refund) option - correct answer ✔provides a life income to the
annuitant only while the annuitant remains alive
life annuity with guaranteed payments - correct answer ✔pays a life income
to the annuitant with a certain number of guaranteed payments
installment refund option - correct answer ✔pays a life income to the
annuitant; after the annuitant's death, payments continue to a beneficiary until
they equal the purchase price
inflation-indexed annuity option - correct answer ✔provides periodic
payments that are adjusted for inflation
joint-and-survivor annuity - correct answer ✔pays benefits based on the lives
of two or more annuitants. The annuity income is paid until the last annuitant
dies
Variable annuities contain the following fees and expenses - correct answer
✔-Investment management charge
-Administrative charge
-Mortality and expense risk charge
-Surrender charge
, Longevity Insurance - correct answer ✔-a generic name for a single-
premium deferred annuity that begins paying benefits only at an advanced
age, typically age 85
-They are low-cost annuities because there are no cash values or death
benefits in the policy
-Once purchased, the funds cannot be accessed
Annuity surrender Charge - correct answer ✔Most insurance companies limit
the amount of withdrawals one can take during the initial years of a contract,
and place a surrender charge on any withdrawals above that preset limit
(typically, to help cover the commissions the company paid). Be careful, as
surrender charges can be significant and can be imposed for an extended
time period.
individual retirement account (IRA) - correct answer ✔-Allows workers with
taxable compensation to make annual contributions to a retirement plan up to
certain limits and receive favorable income-tax treatment
traditional IRA - correct answer ✔-Allows workers to take a tax deduction for
part or all of their IRA contributions
-The investment income accumulates income-tax free on a tax-deferred basis
-Distributions are taxed as ordinary income
-The participant must have earned income during the year, and must be under
age 70½
-A full deduction for IRA contributions is allowed under certain circumstances
-Distributions from a traditional IRA before age 59½ are considered an early
withdrawal, and subject to a 10% tax penalty unless certain conditions apply,
e.g., death or disability
IRA rollover - correct answer ✔tax-free distribution of cash or other property
from one retirement plan, which is deposited into another retirement plan
