The value of accumulation and annuity units varies with the investment performance of the separate account. 222. D) II and IV. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. A) a minimum rate of return is guaranteed. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? The anti-money laundering rules for insurance companies highlight that each insurance company - like other financial institutions subject to anti-money laundering program requirements - must develop a risk-based anti-money laundering program that identifies, assesses, and mitigates any risks of money laundering, terrorist financing, and other Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, asset management, and real estate services. Reference: 12.1.1 in the License Exam. Upon John's death during the accumulation period, Sue takes a lump-sum payment. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Which of the following is NOT an accurate statement concerning a variable life insurance contract? C)Mortality risk. A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. A) variable annuities offer the investor protection against capital loss. *When money is deposited into the annuity, it is purchasing accumulation units. To comply with Regulation SP, a brokerage firm is required to do all of the following EXCEPT: A) deliver an annual notice of its information collecting and sharing policies to all customers. can be sold by someone with only an insurance license D)suitable due to the relative safety of the investment. B)fixed in value until the holder retires. Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. C)such an annuity is designed to combat inflation risk. Fixed annuities typically earn at a lower, stable rate. An investor who has purchased a nonqualified variable annuity has the right to: C)not suitable because a lifetime income rider is only for someone who is already retired If the data is normally distributed with standard deviation$198, find the percent of vacationers who spent less than $1,200 per day. Reference: 12.3.1 in the License Exam. Given that all of the current retirement investments are subject to market risk, the customer wants these new funds to have no market risk exposure. A)II and III. A) be paid to a designated beneficiary. Therefore, ordinary income taxes will apply to the entire $10,000. While there is no guarantee on how investments in the separate account will perform, depending on its investment performance, the separate account could provide for a larger death benefit than the minimum guaranteed amount. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. B) accumulation units. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan B)I and IV. An annuity is a continuous stream of equal periodic payments from one party to another for a specified period of time to fulfill a financial obligation. A)Fixed annuities. B) II and IV. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Of the four client profiles below which might be the best suited for a variable annuity recommendation? The funds in an annuity are off-limits to creditors and other debt collectors. "Variable Annuities: What You Should Know," Pages 67. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities #. D) I and II. An investor owning which of the following variable annuity contracts would hold accumulation units? B) The entire $10,000 is taxable as ordinary income. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. A passion for serving customers and a personal commitment to following through in a dynamic, fast-paced environment. D) be paid to the issuing company to complete the plan. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: are purchased primarily for their insurance features A client has purchased a nonqualified variable annuity from a commercial insurance company. Qualified Longevity Annuity Contract (QLAC): Definition, Taxes, and Example, Present Value of an Annuity: Meaning, Formula, and Example, Future Value of an Annuity: What Is It, Formula, and Calculation, Calculating Present and Future Value of Annuities, Present Value Interest Factor of Annuity (PVIFA) Formula, Tables. A) mutual fund units. Immediate life annuity with 10-year period certain. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. In March, the actual net return to the separate account was 8%. *Once a variable annuity is annuitized, the accumulation units are converted into a fixed number of annuity units. The number of annuity units is fixed. D) a lifetime withdrawal benefit (LWB) or lifetime income benefit is generally in the form of a rider attached to the contract which will come at a cost to the annuitant. However, the web version (cat. D) A 50 year old individual with $50,000 cash to invest who has already made the maximum contributions to an IRA and the 401(k) plan at his place of employment and would like to minimize some of the tax consequences of his currently high tax bracket. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. Reference: 12.3.2.4 in the License Exam. B)a majority vote from the shareholders is required to change the investment objectives. Distributions from such an annuity are computed on a LIFO basis with the income taxed first. EEO IS THE LAW . B. C) II and IV. Once the contract is annuitized, monthly payments to the customer are: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Eric W. Noreen, Peter C. Brewer, Ray H Garrison. *Accumulation units represent units of ownership in a life insurance company's separate account when the contract is in the accumulation stage. C) 3800. *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. D) II and III. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. The payout compared to last month's payout. An individual who purchases a Life annuity is given protection against: the risk of living longer than expected The type of annuity that can be purchased with one monetary deposit is called a (n) Immediate annuity N purchases an annuity by making payments in an amount no less than $100 quarterly. can be sold by someone with only an insurance license (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). *VAs are less suitable for individuals who have not yet made maximum contributions to other retirement accounts such as IRAs and 401ks. C) Life annuity with period certain. Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? A)each annuity unit's value and the number of annuity units vary with time. C)II and III. None of the other investments listed here offer tax-deferred growth. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. D) II and III. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. B) the number of annuity units is fixed, and their value remains fixed. B)suitable regardless of funding sources The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. *The customer, in the accumulation stage of the annuity, is holding accumulation units. D)each annuity unit's value is fixed, but the number of annuity units varies with time. Distributed along a dermatome. D)I and III. approve changes in the plan portfolio. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. the agent must be licensed in both insurance and securities. B) prime rate. must be filed with FINRA. The number of accumulation units can rise during the accumulation period. When the second party dies, all payments cease. These contracts come with high surrender charges. covers more than one person. the state banking commission. Complete a blank sample electronically to save yourself time and money. A) Joint tenants annuity. If in the following year, the S&P 500 declined by 5%, the annuities value would remain at $107,000 because gains are locked in each year. Round to the nearest hundredth of a percent. A)defined contribution plans. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. C) The insurance company. At the end of the year, your account has a value of $10,750 ($5,500 in the stock fund and $5,250 in the bond fund), minus fees and charges. The annuitized payments are viewed for tax purposes as A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). B) fixed payments for 10 years, followed by variable payments for life. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. A joint life with last survivor annuity: He makes the following four statements, all of which are true EXCEPT I. However, it does guarantee payments for life (mortality). D)accumulation units. The separate account performance compared to an assumed interest rate. is required by the Securities Act of 1933. C)III and IV. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. B) II and III. A) periodic payment immediate annuity. B) II and III. Reference: 12.1.2.1.1 in the License Exam. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. D) Variable annuity. B) I and III. If the customer takes a withdrawal of $10,000, what are the tax consequences? Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. Based on this information the RR should: Question #47 of 48Question ID: 606813 Because they have a separate account in which the investor assumes the investment risk, they can only be sold by individuals with both insurance and securities licenses. A variable annuity is a type of annuity contract, the value of which can vary based on the performance of an underlying portfolio of sub accounts. Reference: 12.3.1 in the License Exam. B) payments continue until the death of the primary owner. *When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. Your client has a large sum of money to invest from the proceeds of the sale of his home. P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. Question #27 of 48Question ID: 606818 B) It will be lower. C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. Her intent was to use the funds for the down payment on a house after graduation. The growth portion is taxed as ordinary income. Once the contract is annuitized, monthly payments to the customer are: When the annuitization option is selected, each payment represents both capital and earnings. *Waiver of premium is a benefit available on qualified life insurance contracts, usually in the form of a rider, which provides for the waiver of premium payments that fall due while the policyholder is totally disabled. C) value of underlying securities held in the separate account. D) I and III 8 annuities provide a guaranteed rate of return, whereas annuities provide conservative to aggressive investments whose rates of return are not guaranteed. $63,000 b.$51,000 c. $18,000 d.$6,000. He makes the following four statements, all of which are true EXCEPT A)exempt from taxes D) a minimum of 10 years of variable payments, followed by additional variable payments for life Your customer, still working, informs you that she will be funding a variable annuity you have recommended from 2 sources: a refinancing of her primary home where she will be able to draw out equity that has built up since it was purchased 15 years ago, and cashing out another variable annuity that she recently purchased within the past 2 years without a lifetime income rider like the one you have recommended. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. A)Fixed annuity contract with a discussion regarding purchasing power risk Reference: 12.1.4.1 in the License Exam. C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. All of the following statements about variable annuities are true EXCEPT: B) During the accumulation period. Question: The following are characteristics of a public conglomerate: I) It is designed to operate various divisions for the long run. B) Life annuity with period certain Reference: 12.2.1 in the License Exam. Question #18 of 48Question ID: 606827 D) II and IV. *Annuity death benefits are generally paid in a lump sum. Reference: 12.1.2.1.2 in the License Exam. *Of the four customer profiles the individual already making the maximum retirement account contributions available to him and wanting to minimize the tax consequences of being in a high income tax bracket would be most suitable for a VA recommendation. C) II and III. C)100% tax deferred. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. \text{Salaries:} && \text{Deductions:}\\ Question #37 of 48Question ID: 606817 The annuitant may not contribute and withdraw simultaneously. A) partially a tax-free return of capital and partially taxable. As with most retirement account options, withdrawals before the age of 59 will result in a 10% tax penalty. III. When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. The growth portion is taxed as a capital gain. B) fixed in value until the holder retires. II. A variable annuity is both an insurance and a securities product. A 3 D) Any time before the accumulation period. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. Carefully look at your options when choosing an annuity. A) Money market fund. Cashing out life insurance policies or VAs where steep surrender charges are likely to exist, particularly in the earlier years of those contracts, is also considered abusive. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 A)Joint tenants annuity. If one purchases an annuity for a set price, the issuing company would invest the funds and hold them until they are supposed to be disbursed, generally based on the owner's age. Reference: 12.3.2.1 in the License Exam. used for the investment of funds paid by contract holders. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings This would not align with the couple's criteria for coverage as long as they both live. However, if you take a withdrawal during the contractssurrender period, which can be as long as 15 years, youll generally have to pay a surrender fee. a. it performs a single task b. it is self-contained and independent of other modules c. it is relatively short d. all of the above are chamcleristics of a program module 7. The figure below illustrates a six-month annuity with monthly payments. If the customer takes a withdrawal of $10,000, what are the tax consequences? A) I and II. A trend is formed from non-repetitive actions of people. B) II and III B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. D) Variable annuities. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. B)corporate stock. A) I and II. Anthony Battle is a CERTIFIED FINANCIAL PLANNER professional. Transcribed image text: 6. D) variable annuities may only be sold by registered representatives. Needs - are goal-directed forces that people experience. A)equity funds. On any device & OS. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. D)an accounting measure used to determine payments to the owner of the variable annuity. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. Life Insurance vs. Annuity: What's the Difference? This annuity is nonqualified, which means the client has paid for it with after-tax dollars and has a basis equal to the original $29,000 investment. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Annuities due are a type of annuity where payments are made at the beginning of each payment period. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: \hspace{10pt} \text{Office salaries} & \underline{234,000} & \hspace{10pt} \text{Medicare tax withheld} & 15,210\\ A)It will stay the same. An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. The largest monthly check an annuitant can receive for the rest of his life is generated by a straight life (life income or life only) payout option. In this case, the investor is taking a lump-sum distribution before reaching age 59- and must pay an additional 10% penalty on the taxable amount. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. a life insurance holder dies sooner than expected. *If the separate account of a variable annuity with an AIR of 4% had actual net earnings of 8% in March, the April payment will be higher than the March payment. DR:BASSANT ADEL 9 QUIZ CH 6 Choose the correct answer: 1-Insurance policy benefits are classified on an insurance company's balance sheet as A. liabilities, because the insurance company may have to pay out the benefits B. assets, because policy benefits are valuable to the company C. liabilities, because customers may fall behind on their premium payments D. assets, because policy benefits . C)the invested money will be professionally managed according to the issuers' investment objectives. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. A) The policy provides a minimum guaranteed death benefit. He originally invested $29,000 4 years ago; it now has a value of $39,000. B) Life annuity. Practice all cards. John is the annuitant in a variable plan, and Sue is the beneficiary. A demonstrated ability to quickly learn and continuously develop functional knowledge and an understanding of company products as well as administrative, claims, underwriting and marketing functions. C)Corporate bonds. C)I and IV. Based on the clients profile which of the following would be the best recommendation? C) Unit refund life option None of the other investments listed here offer tax-deferred growth. Once a variable annuity has been annuitized: Because this is not guaranteed, the policyowner bears the investment risk. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: A variable annuity is a type of annuity contract, the value of which can vary based on the performance of an underlying portfolio of sub accounts. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. A)II and IV. continues payments as long as one annuitant is alive. A variable annuity is a type of annuity contract the value of which can vary based on the performance of an underlying portfolio of sub accounts.

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