Questions and Answers
What type of annuity guarantees an income payment for the rest of T's life?
Which of the following are Equity Indexed annuities typically invested in?
Which of the following did P NOT buy?
Which type of annuity did K purchase if she receives payments for as long as she and her spouse live?
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If K dies before receiving payments equal to the contract value, what will happen?
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Income derived from a Tax Sheltered Annuity (TSA) is received tax-free.
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What type of annuity did N purchase if it guarantees $2,000/month at age 70 for life?
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What type of annuity did P purchase if she will fund it with $500/month for 15 years?
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Which of the following is NOT included in an annuity contract?
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What will T's transaction provide when he purchases a Straight Life Annuity?
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What type of annuity has a cash value based on the performance of its underlying investment funds?
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Which type of annuity does a 45-year-old woman purchase if it will pay her $1,500 per month beginning at age 60?
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An immediate annuity consists of a:
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Which annuity represents the largest possible monthly payment to an individual?
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What type of annuity does Q own if the payments are no less than $250 quarterly?
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How does an indexed annuity differ from a fixed annuity?
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Which type of contract liquidates an estate through recurrent payments?
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A buyer of a Life Annuity is protected against which risk?
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What is considered a characteristic of an immediate annuity?
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What is the basic function of an annuity?
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What characteristic does a Variable Annuity have?
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A(n) _____ annuity pays benefits based on units rather than stated dollar amounts.
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Which of these is an element of a Single Premium annuity?
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If T purchased a $100,000 single premium, Straight Life annuity, what will happen if he dies?
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What type of annuity is best suited for S who wants guaranteed income for life?
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What will a contract owner receive if they terminate an annuity before the income payment period begins?
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Variable annuities may invest premiums in all of the following, EXCEPT:
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W is a 39-year-old female who can accept all annuity choices EXCEPT:
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Payments of an Individual Straight Life annuity are made for life.
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What type of annuity can be purchased with one monetary deposit?
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Study Notes
Annuities Overview
- An annuity provides guaranteed income payments, often for an individual's lifetime.
- Life annuity with period certain guarantees payments for a minimum duration, ensuring beneficiaries receive any remaining payments.
Equity Indexed Annuities
- Typically invested in the S&P 500, offering potential gains based on stock market performance.
Types of Annuities
- Immediate annuities provide payments starting right after purchase, not suitable for deferred income needs.
- Deferred annuities delay payouts until a specified future date, ideal for long-term retirement planning.
- Single premium immediate joint with survivor annuities ensure payments continue as long as one annuitant is alive.
Refund Annuities
- Installment refund annuities pay survivors if the annuitant dies before receiving total contractual value.
Tax Sheltered Annuities (TSA)
- Contributions to TSAs are tax-deductible, and interest grows tax-deferred; however, distributions may be taxable.
Characteristics of Annuities
- Variable annuities have cash values linked to underlying equity investments and may provide varied payout amounts.
- A straight life annuity offers the largest monthly payments, providing income that cannot outlive the owner.
Payment Structures
- Immediate annuities are based on single premium payment, ensuring liquidity and fast access to funds.
- Flexible installment deferred annuities allow flexible payment amounts and timing before income starts.
Indexed Annuities
- Indexed annuities may offer returns related to market indices, differentiating them from fixed annuities which provide stable but lower yields.
Estate Planning
- Annuities effectively liquidate estates over time through structured payments rather than one-time lump sums.
Guaranteed Income for Retirement
- Purchasing a single premium annuity ensures immediate funds for retirement, providing financial security.
Specific Annuity Details
- Age and timing significantly influence the type of annuity purchased, with choices adaptively meeting individual retirement goals.
- The cash value of certain annuities may fluctuate based on market performance, unlike fixed annuities which offer consistent returns.
Benefits and Risks
- Life annuities protect against the risk of outliving savings, whereas structured payouts create predictable income streams.
- Variable annuities expose investors to market risks while promising potential for higher returns through equity investment.
Summary Points
- Annuities can be tailored based on individual financial situations, investment preferences, and retirement timelines.
- Understanding the different kinds of annuities and their features is crucial for effective financial planning and risk management.
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Description
This quiz focuses on key concepts and definitions related to annuities, particularly life annuities with period certain. It helps learners understand the different types of annuities and their characteristics through flashcard-style questions and answers. Perfect for students studying finance or insurance topics.
