NWM Chapter 9 Test Study Guide
A teacher recently retired at age 63 and has a tax sheltered annuity (TSA). Periodic
deposits total $120,000 and the value of the contract is now worth $200,000. How much
is taxed if the current value is surrendered today? -Answer $200,000
When compared to a fixed annuity, a variable annuity has what distinguishing feature?
-Answer Investment risk is assumed by the purchaser
What is the effect of the market value adjustment in a market value adjustment annuity?
-Answer Transfers some of the investment risk to the policyowner
When determining the accumulation value of a deferred annuity, the total is calculated
by taking the premiums paid plus interest earned minus -Answer expenses and
withdrawals
A life annuity feature which provides benefit payments for a minimum number of years,
no matter when the annuitant dies, is called -Answer period certain
When does the owner's contractual rights begin under an individual annuity contract?
-Answer Time of purchase
When an annuity contract has been fully surrendered, how will the surrender charges
affect the final contract settlement? -Answer Final contract settlement will be reduced
An annuity's accumulation period may -Answer continue after the purchase payments
stop
Which of these annuity contract features is meant to discourage withdrawals and
exchanges? -Answer Surrender charges
Which of the following is NOT an intended use of an annuity? -Answer Create new funds
upon the death of a wage-earner
Which of these pays an income to two or more annuitants until the death of the last
annuitant? -Answer Joint and survivor annuity
Sarah, age 88, is a life annuitant who has lived beyond her life expectancy. The funds for
additional benefit payments will be derived primarily from funds that were -Answer not
distributed to life annuitants who died before life expectancy
A large corporation pension plan purchased an accumulation annuity contract where all
of the participating employees received certificates of participation. What is this
contract called? -Answer Group deferred annuity
Who typically makes the purchase payments in an individual annuity? -Answer Owner
A life annuity with period certain is characterized as -Answer guaranteeing benefit
payments for a stated minimum number of years
, An individual, age 45, would like to help pay for his daughter's college expenses in 10
years. Which annuity would be appropriate for this individual? -Answer Deferred annuity
During an annuity's liquidation phase, the annuitant normally -Answer receives benefit
payments at regular intervals
When a deferred annuity is surrendered, who must sign the authorization to do so?
-Answer Owner
Which of the following would NOT be appropriate for an immediate annuity? -Answer A
parent saving for a child's college
Which annuity allows contributions to an IRA? -Answer Deferred
An insurer will typically assess a back-end load on a deferred annuity that is cancelled
during the early contract years. What is this back-end load referred to as? -Answer
Surrender charge
Which of the following would most likely purchase an immediate annuity? -Answer
Retiree having a lump sum to invest
The exclusion ratio determines -Answer the amount of an annuity payment subject to
income tax
When does interest income for a flexible premium deferred annuity get reported for
federal income taxes? -Answer Upon receiving distributions from the contract
A business may purchase an annuity for all of the following reasons EXCEPT -Answer
informally funding a non-qualified deferred compensation plan
Under which circumstance is the interest rate guaranteed within a market value
adjusted annuity? -Answer When the contract has been held for the period specified in
the policy
The owner's cost basis for a non-qualified deferred annuity is typically the same as the
-Answer total premiums paid
Which benefit can be found in an equity indexed annuity, but not in a fixed annuity?
-Answer Protection against long-term inflation
The surrender charge on many deferred annuity contracts are waived when the -Answer
annuitant dies or becomes disabled
An annuitant is paid $495 per month until the contract value is exhausted at some
undetermined date in the future. Which type of annuity payout option is this? -Answer
Fixed amount
What happens to the purchasing power of benefit payments from a fixed life annuity
when the cost of living goes up? -Answer Decreases
A teacher recently retired at age 63 and has a tax sheltered annuity (TSA). Periodic
deposits total $120,000 and the value of the contract is now worth $200,000. How much
is taxed if the current value is surrendered today? -Answer $200,000
When compared to a fixed annuity, a variable annuity has what distinguishing feature?
-Answer Investment risk is assumed by the purchaser
What is the effect of the market value adjustment in a market value adjustment annuity?
-Answer Transfers some of the investment risk to the policyowner
When determining the accumulation value of a deferred annuity, the total is calculated
by taking the premiums paid plus interest earned minus -Answer expenses and
withdrawals
A life annuity feature which provides benefit payments for a minimum number of years,
no matter when the annuitant dies, is called -Answer period certain
When does the owner's contractual rights begin under an individual annuity contract?
-Answer Time of purchase
When an annuity contract has been fully surrendered, how will the surrender charges
affect the final contract settlement? -Answer Final contract settlement will be reduced
An annuity's accumulation period may -Answer continue after the purchase payments
stop
Which of these annuity contract features is meant to discourage withdrawals and
exchanges? -Answer Surrender charges
Which of the following is NOT an intended use of an annuity? -Answer Create new funds
upon the death of a wage-earner
Which of these pays an income to two or more annuitants until the death of the last
annuitant? -Answer Joint and survivor annuity
Sarah, age 88, is a life annuitant who has lived beyond her life expectancy. The funds for
additional benefit payments will be derived primarily from funds that were -Answer not
distributed to life annuitants who died before life expectancy
A large corporation pension plan purchased an accumulation annuity contract where all
of the participating employees received certificates of participation. What is this
contract called? -Answer Group deferred annuity
Who typically makes the purchase payments in an individual annuity? -Answer Owner
A life annuity with period certain is characterized as -Answer guaranteeing benefit
payments for a stated minimum number of years
, An individual, age 45, would like to help pay for his daughter's college expenses in 10
years. Which annuity would be appropriate for this individual? -Answer Deferred annuity
During an annuity's liquidation phase, the annuitant normally -Answer receives benefit
payments at regular intervals
When a deferred annuity is surrendered, who must sign the authorization to do so?
-Answer Owner
Which of the following would NOT be appropriate for an immediate annuity? -Answer A
parent saving for a child's college
Which annuity allows contributions to an IRA? -Answer Deferred
An insurer will typically assess a back-end load on a deferred annuity that is cancelled
during the early contract years. What is this back-end load referred to as? -Answer
Surrender charge
Which of the following would most likely purchase an immediate annuity? -Answer
Retiree having a lump sum to invest
The exclusion ratio determines -Answer the amount of an annuity payment subject to
income tax
When does interest income for a flexible premium deferred annuity get reported for
federal income taxes? -Answer Upon receiving distributions from the contract
A business may purchase an annuity for all of the following reasons EXCEPT -Answer
informally funding a non-qualified deferred compensation plan
Under which circumstance is the interest rate guaranteed within a market value
adjusted annuity? -Answer When the contract has been held for the period specified in
the policy
The owner's cost basis for a non-qualified deferred annuity is typically the same as the
-Answer total premiums paid
Which benefit can be found in an equity indexed annuity, but not in a fixed annuity?
-Answer Protection against long-term inflation
The surrender charge on many deferred annuity contracts are waived when the -Answer
annuitant dies or becomes disabled
An annuitant is paid $495 per month until the contract value is exhausted at some
undetermined date in the future. Which type of annuity payout option is this? -Answer
Fixed amount
What happens to the purchasing power of benefit payments from a fixed life annuity
when the cost of living goes up? -Answer Decreases
