Both products typically have a wide range of options across equities, bonds and money market instruments. Question #19 of 48Question ID: 606826 D) 4200. 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. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? An accumulation unit in a variable annuity contract is: A)an accounting measure used to determine the contract owner's interest in the separate account. This recommendation is: Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. IV. have investment risk that is assumed by the investor A) I and II. C)annuity units. Find the per-day expense for one of these travelers who had a z-score of -1.6. c. A Bargain Times Vacation Blog writer claimed to have done this vacation for a cost of$710 per person. Reference: 12.1.4 in the License Exam. D) Joint and last survivor annuity. Reference: 12.3.2.1 in the License Exam. All of the following are characteristics of a variable annuity, except: a. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). The work environment characteristics are normal office conditions. What Are the Risks of Annuities in a Recession? Universal variable life policies Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 D) periodic payment deferred annuity. A) 2800. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract The correct answer was: partially a tax-free return of capital and partially taxable. *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. B) Exchange traded Funds (ETFs) or Exchange traded Notes (ETNs) And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. II) It has an internal capital market wherein each division competes for funds. 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. 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. Question #27 of 48Question ID: 606818 Sample problems from Chapter 9. . III. A) It will be higher. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. B)Life annuity with period certain. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children C)prime rate. Reference: 12.1.1 in the License Exam. A) variable annuities offer the investor protection against capital loss. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. The most suitable option and one considered effective for married couples is a single joint and last survivor contract. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. PGIM Fixed Income has over $900 billion in assets under management across a broad array of fixed . A)III and IV. *BEST Suited for VA-Age 56, available cash to invest, maxes out IRA and 401(k) plan VA will be supplemental income, would not be suitable for cust. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. The figure below illustrates a six-month annuity with monthly payments. Reference: 12.3.4 in the License Exam. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. A)exempt from taxes Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. C)3800. an annuitant dies sooner than expected. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate. C)II and III. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. D) It cannot be determined until the April return is calculated. B)corporate stock. C)The entire $10,000 is taxable as ordinary income. A joint life with last survivor annuity: D)the safety of the principal invested. D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. If the data is normally distributed with standard deviation$198, find the percent of vacationers who spent less than $1,200 per day. Which of the following statements is not true about the characteristics of a trend? How to Rollover a Variable Annuity Into an IRA. Fixed interest rates during the payout period The value of each accumulation unit varies: Daily Variable annuities have Variable interest rates and benefits All of the following statements are true regarding the interest rate guarantees of fixed annuities, EXCEPT: She may choose to receive monthly payments for the rest of her life. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. 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. b. *A variable annuity may only be surrendered during the accumulation period. Therefore, ordinary income taxes will apply to the entire $10,000. C) II and IV. The tax on this is $2,800 ($10,000 x 28%). B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. Reference: 12.1.2.1.2 in the License Exam. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). Distributed along a dermatome. A) The fact that the annuity payment may increase or decrease. C) The ordinary income on the proceeds over the cost basis plus 10% of the net gain (if any) if Sue is younger than 59- years old. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. Question #45 of 48Question ID: 606795 A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. C) insurance guarantee. C) value of underlying securities held in the separate account. You can buy an annuity with either a lump sum or a series of payments, and the accounts value will grow accordingly. If your 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is annuitized, what are the consequences of this action? A)the state banking commission. The fixed payment that the annuitant receives loses purchasing power over time as a result of inflation. A) Dow Jones Industrial Average. C) II and IV a variable annuity guarantees payments for life. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. A guaranteed lifetime annuity promises to pay the owner an income for the rest of their life. D)II and IV. D)II and III. You can learn more about the standards we follow in producing accurate, unbiased content in our. D)I and IV. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Fixed annuities. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: C) the yield is always higher than bond yields. C)the invested money will be professionally managed according to the issuers' investment objectives. B)a majority vote from the shareholders is required to change the investment objectives. C) II and III. These contracts come with high surrender charges. A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement c. The separate account provides for a guaranteed minimum return. Therefore, ordinary income taxes will apply to the entire $10,000. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are Get Started. 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. Each of the remaining statements are true. A) Life-only annuity Question #15 of 48Question ID: 606804 Distribution of dividends occurs during the accumulation period. B) 0. Usually the term "annuity" relates to a contract between an individual and a life insurance company. IBM is a global brand and has its presence in 170 countries and operates . All of the following statements regarding variable annuities are true EXCEPT: All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. A) I and II Question #22 of 48Question ID: 606803 Reference: 12.1.4.1 in the License Exam. must be filed with FINRA. Variable annuities involve underlying equity investments in a separate account. Which of the following is characteristic of variable annuities? D)0. the agent must be licensed in both insurance and securities. A) waiver of premium A) two people are covered and payments continue until the second death. 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. D)the rate of return is determined by the underlying portfolio's value. The wage for applicants for this position is $45,979.00 per year. A)100% tax free. *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. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Reference: 12.3.3 in the License Exam. "Variable Annuities: What You Should Know," Page 10. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. A trend makes considerable influence or impact. The number of annuity units is fixed at the time of annuitization. Explain what is meant by positive and negative D) Age 27, saving for first home. B) I and II. Deal with mathematic Math is all about solving equations and finding the right answer. There are two elements that contribute to the value of a variable annuity: the principal, which is the amount of money you pay into the annuity, and the returns that your annuitys underlying investments deliver on that principal over the course of time. A customer is receiving annuitized payments from a variable annuity. Once a variable annuity has been annuitized: The amount of the purchase payments that go into the account may be less than you paid because fees were taken out of the purchase payments. Distributions from nonqualified variable annuities are: D)variable annuities. 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. Reference: 12.3.4 in the License Exam, Chapter 16: U.S. Government and State Rules a, Chapter 17: Other SEC and SRO Rules and Regul, Chapter 15: Ethics, Recommendations, and Taxa, Chapter 13: Direct Participation Programs, Fundamentals of Financial Management, Concise Edition, Joe B. Hoyle, Thomas F. Schaefer, Timothy S. Doupnik, Carl Warren, James M Reeve, Jonathan E. Duchac. Prudential Retirement Security Annuity VI is a group variable annuity (GVA) issued by Prudential Retirement Insurance and Annuity Company (PRIAC) which utilizes a Separate Account offered The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. A)It will stay the same. If a 42-year-old customer has been depositing money in a variable annuity for 5 years, and he plans to stop investing but has no intention of withdrawing any funds for at least 20 years, he is holding: Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. D)variable annuities offer the investor protection against capital loss. Designed to protect against inflation. Variable annuities are designed to combat inflation risk. B)cost of living. About Us B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. A 3 Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions. . D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. *Distributions from a nonqualified plan represent both a return of the original investment made in the plan with after-tax dollars (a nontaxable return of capital) and the income from that investment. C) IRAs. Immediate life annuity. guarantees payments for a certain period of time. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. Home; About. *The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. externalities. A)II and III B)II and III. Her agent recommended she choose a variable annuity as a safe haven for the funds. It is innate and universal. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. (primary needs). Reference: 12.1.2 in the License Exam. B)Value of each annuity unit each month. Based on the information given in the question, the VA recommendation would not be suitable. 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. *Variable annuity contracts were devised to help investors keep pace with inflation. The following information about the payroll for the week ended December 303030 was obtained from the records of Vienna Co.: Salaries:Deductions:Salessalaries$670,000Incometaxwithheld$198,744Warehousesalaries110,000Socialsecuritytaxwithheld51,714Officesalaries234,000Medicaretaxwithheld15,210$1,014,000U.S. The growth portion is taxed as a capital gain. Options. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. D) I and III. b. A) Only during the payout period. Reference: 12.3.3 in the License Exam. Full-Time. C) III and IV. Future annuity payments will vary according to the separate account's performance. *Only variable annuities have payout plans that provide the client income for life. A variable annuity's separate account is: A separate account will invest in a number of different securities. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. Question #44 of 48Question ID: 606797 If the customer takes a withdrawal of $10,000, what are the tax consequences? Reference: 12.1.2.1.1. in the License Exam. a variable annuity does not guarantee payments for life. B) The policyowner. Reference: 12.1.2 in the License Exam. A 10% penalty applies only if distributions begin before age 59-. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. D)value of accumulation units. C) Universal variable life policy. Many variable annuities invest the separate account in mutual funds. C) There is no tax as the withdrawal is considered return of capital. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. Distribution can take place before or during any solicitation for sale. *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. D) the payout plans provide the client income for life. C)earnings only and taxable c) Construct a contingency table showing all the joint and marginal probabilities. View full document. None of the other investments listed here offer tax-deferred growth. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. Vaccine has decreased the incidence. A) not suitable B) accumulation units. Are There Penalties for Withdrawing Money From Annuities? Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? 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. Life with period certain will produce a smaller check for life because the insurance company will guarantee payments to a beneficiary for a certain period of time designated in the contract should the annuitant die within that period. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. A customer, who has contributed to an IRA and to an employer matching 401(k) plan continuously for many years, wants to purchase an annuity contract to add additional monthly income once retired. 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. 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. C) II and IV. Reference: 12.2.1 in the License Exam. C)III and IV For a retired person, which of the following investments would provide the greatest protection against inflation? Once the contract is annuitized, monthly payments to the customer are: A)Corporate debt securities The separate account is NOT likely to invest in: An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: A)the number of annuity units becomes fixed when the contract is annuitized. Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. Immediate life annuity with 10-year period certain. This customer has no spouse or dependents, which negates the value of the death benefit. Licensed to sell Variable Annuities in the following state(s): FL, TX . A variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic pay- ments to you, beginning either immediately or at some future date. Reference: 12.1.2 in the License Exam, Question #23 of 48Question ID: 901858 D) each annuity unit's value varies with time, but the number of annuity units is fixed. In addition, if the customer is not at least 59-, there will be a tax penalty of an additional 10%.
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