Determine the revenue equation given the profit and expense equations. A registered person recommends the purchase of a variable annuity to one of his clients. If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. C)prime rate. Which 2 of the 4 client profiles would a VA be LEAST suitable for? Variable annuities gave buyers a chance to benefit from rising markets by investing in a menu of mutual funds offered by the insurer. At the end of the year your account has a value of 10750. A) I and III. While a variable annuity has the benefit of tax-deferred growth, its annual expenses are likely to be much higher than the expenses of a typical mutual fund. Which of the following is not a characteristic of a program module? If this client is in the payout phase, how would his April payment compare to his March payment? *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) Mutual fund portfolio consisting of blue chip stocks C) II and IV. B)100% taxable. Based on this information the RR should: B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero C) suitable regardless of funding sources A) partially a tax-free return of capital and partially taxable. Do whatever you want with a Learn About Annuities and Their Myths - F&G: fill, sign, print and send online instantly. A registered representative's (RR) customer is speaking of a variable life insurance contract he owns. Distributed along a dermatome. A) Life-only annuity The paper publication will not be rereleased. B)FINRA. The number of accumulation units can rise during the accumulation period. On an annual basis, the machine will produce 20,000 units with an expected selling price of $10, prime costs of$6 per unit, and a fixed cost allocation of $3 per unit. The features of variable deferred annuities are many. A) The policy provides a minimum guaranteed death benefit. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. The most popular type of variable annuity is a deferred annuity. Reference: 12.1.4.2 in the License Exam. What is the taxable consequence of this withdrawal to your client? D) accumulation shares. The holder of a variable annuity receives the largest monthly payments under which of the following payout options? A) two people are covered and payments continue until the second death. However, the web version (cat. The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. These contracts cover both lives and will continue to make payments until the last spouse dies. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? Salaries:SalessalariesWarehousesalariesOfficesalaries$670,000110,000234,000$1,014,000Deductions:IncometaxwithheldSocialsecuritytaxwithheldMedicaretaxwithheldU.S. For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. the state banking commission. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. Immediate life annuity. C)100% tax deferred. C) III and IV. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: An example would be if a life annuity with 10-year period certain contract holder died after 5 years, payments would continue for 5 more years to the beneficiary and then stop. C)II and IV. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. regulated under both securities and insurance laws. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. Her agent recommended she choose a variable annuity as a safe haven for the funds. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: I. Immediate annuities purchase annuity units directly. B) I and II. An annuity may be purchased under all of the following methods EXCEPT: Your client has $50,000 to invest. 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 . Question #47 of 48Question ID: 606813 Life annuity has the largest payout because less risk is assumed by the insurance company; there is no beneficiary in the event the annuitant dies. Reference: 12.1.1 in the License Exam. A variable annuity's separate account is: A) used for the investment of monies paid by variable annuity contract holders B) separate from the insurance company's general investments C) operated in a manner similar to an investment company D) as much a security as it is an insurance product All of the above B) Municipal bonds. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. The earnings are taxable but the cost basis is returned tax free. The owner of a variable annuity has all of the following rights EXCEPT the right to vote: a. for the Board of Trustees b. to change the separate account's investment objective c. for distributing income and capital gains d. for dissolutions of the trust for distributing income and capital gains. The investor purchased accumulation units. D)Municipal bonds. C)annuity units. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. III. This recommendation is: An annuitant assumes the investment risk of a variable annuity and is not protected by the insurance company from capital losses. The separate account performance compared to an assumed interest rate. C)the SEC. D) The investment risk is shared between the insurance company and the policyowner. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. Supplemental income stream for retirement, not preservation of capital should be the catalyst to consider a VA and for anyone who may need access to the sum invested for any reason a VA would not be considered a suitable recommendation. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Reference: 12.1.2 in the License Exam. Reference: 12.1.2 in the License Exam, Question #21 of 48Question ID: 606812 The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? B)Fixed annuity contract with a discussion regarding timing risk B) variable annuities. C) Age 40, currently unemployed B)mutual fund units. The beneficiary is taxed at ordinary income rates during the year the lump sum is received. Question #14 of 48Question ID: 606823 What will this transaction provide? Her intent was to use the funds for the down payment on a house after graduation. a variable annuity does not guarantee payments for life. A joint life with last survivor annuity: B) the state insurance department. 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 offers that appear in this table are from partnerships from which Investopedia receives compensation. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. D) Variable Annuity. A security is any investment for profit with management performed by a third party. C)the number of annuity units is fixed, and their value remains fixed. *When money is deposited into the annuity, it is purchasing accumulation units. A variable annuity is both an insurance and a securities product. \hspace{10pt} \text{Office salaries} & \underline{234,000} & \hspace{10pt} \text{Medicare tax withheld} & 15,210\\ For example, when paying rent, the rent payment (PMT) . 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: These include white papers, government data, original reporting, and interviews with industry experts. A)equity funds. Dividing the funds available so as to fund 2 separate contracts, whether they be joint with last survivor or life income, would not be cost efficient for spouses. The value of the annuity units is fixed. Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 A)accumulation shares. B) payment guarantee. C)Life annuity. Question #32 of 48Question ID: 606815 How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. D) Keogh plans. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. D) II and III. The figure below illustrates a six-month annuity with monthly payments. A) Dow Jones Industrial Average. C)Variable annuity contract with a discussion regarding interest rate risk Reference: 12.3.3 in the License Exam. In the case of deferred annuities, this is often referred to as the accumulation phase. During the . VAs, blue chip mutual fund portfolios, ETFs and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client. Question #19 of 48Question ID: 606826 \hspace{10pt} State unemployment (employer only), 3.8%3.8\%3.8% The investor has already paid tax on the contributions but the earnings have grown tax-deferred. You have 4 clients each expressing interest in a variable annuity contract. The number of annuity units is fixed at the time of annuitization. FINRA. A customer has a nonqualified variable annuity. However, a discussion should occur regarding the risks that are associated with a fixed annuity; purchasing power risk. The growth portion is subject to a 10% penalty. 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 a. Question #31 of 48Question ID: 606836 B) During the accumulation period. A) II and IV. If this client is in the payout phase, how would his April payment compare to his March payment? B. A) mortality guarantee. B)Two-thirds of the withdrawal is taxable as ordinary income. With variable annuities policyholders can choose from a number of investment opportunities. A) Money market fund. *Variable annuity contracts must be sold by prospectus due to the characterization of the separate accounts as securities, which must be registered under the Securities Act of 1933 and the Investment Company Act of 1940. C)III and IV. 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. However, it does guarantee payments for life (mortality). Options. B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. Expert Answer. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. For a retired person, which of the following investments would provide the greatest protection against inflation? The remainder of the premium is invested in the separate account. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. The accumulation period of a variable annuity may continue for many years. Question #18 of 48Question ID: 606827 The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. She will receive the annuity's entire value in a lump-sum payment. Ted's Bio; Fact Sheet; Hoja Informativa Del Ted Fund; Ted Fund Board 2021-22; 2021 Ted Fund Donors; Ted Fund Donors Over the Years. The earnings on dollars invested into a variable annuity accumulate tax deferred, which is why variable annuities are popular products for retirement accumulation. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. D)partially a tax-free return of capital and partially taxable. Question #11 of 48Question ID: 606816 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. B) The entire $10,000 is taxable as ordinary income. Who assumes the investment risk in a variable annuity contract? A) defined contribution plans. A) 2800. D) The fact that periodic payments into the contract may increase or decrease. Annuity death benefits are generally paid in a lump sum. *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. B) payments continue until the death of the primary owner. B) I and III. B) I and II. A) periodic payment immediate annuity. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract A deferred annuity is an insurance contract that promises to pay the buyer a regular stream of income, or a lump sum, at some date in the future. A) I and IV. In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. 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. B) The policyowner. A) a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero The annuity unit's value represents a guaranteed return. MetLife offers a comprehensive benefits program, including healthcare benefits, life insurance, retirement benefits, parental leave, legal plan services and paid time off. \hspace{10pt} Federal unemployment (employer only), 0.8%0.8\%0.8%. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. Bear in mind that between the numerous feessuch as investment management fees,mortality fees, and administrative feesand charges for any additional riders, a variable annuitysexpenses can quickly add up. used to escrow late or otherwise delinquent premium payments. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. What Are the Risks of Annuities in a Recession? 's dividend yield was % last year. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: C) During the annuity period. order now. No software installation. With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. D) the payout plans provide the client income for life. Which of the following is characteristic of variable annuities? continues payments only as long as all annuitants are still alive. No, annuities are not FDIC-insured as they are not bank products. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. *During the accumulation phase, the number of accumulation units will increase as additional money is invested. A)II and IV. B) It will be lower. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. A) Fixed Annuity Determine whether the following events are independent or dependent. During the accumulation phase, you make purchase payments. Fixed annuities typically earn at a lower, stable rate. *Contributions to a nonqualified annuity are made with the owner's after-tax dollars. All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. C) the yield is always higher than bond yields. A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. If the client, who is in a 30% tax bracket, makes a random withdrawal of $15,000, what will the tax liability to the IRS be? IV. Variable annuity salespeople must register with all of the following EXCEPT: national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. B) II and III. Deal with mathematic Math is all about solving equations and finding the right answer. A Variable Annuity has which of the following characteristics? B)Value of each annuity unit each month. You can learn more about the standards we follow in producing accurate, unbiased content in our. C)municipal bonds. B)each annuity unit's value varies with time, but the number of annuity units is fixed. B)cost of living. C)I and III. Income that cannot be outlived by the owner B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. The number of annuity units rises once annuitization begins. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. D)I and III. He makes several statements regarding the contract. The original investment has grown to a value of $60,000. Reference: 12.3.2.1 in the License Exam. This guideline has been prepared for use by Federal agencies. Distribution can take place before or during any solicitation for sale. B)Universal variable life policy. The work environment characteristics are normal office conditions. On any device & OS. This compensation may impact how and where listings appear. D) tax free. Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. When the first party dies, the annuity payment is made to the survivor. A)not suitable *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. A) A variable annuity A) I and III. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. & \underline{\underline{\$1,014,000}} & \hspace{10pt} \text{U.S. savings bonds} & 30,420\\ Contributions to a nonqualified variable annuity are not tax deductible. a. Therefore only a fixed annuity could be considered as suitable. D)money market funds. D) I and II. Universal variable life policies $63,000 b.$51,000 c. $18,000 d.$6,000. I. A variable annuity's separate account is: PGIM Fixed Income, a division of PGIM Inc., an SEC-registered investment adviser and a business unit of Prudential Financial, Inc. is seeking a Portfolio Risk Surveillance Analyst. Generally, a life-only contract pays the most per month because payments cease at the annuitant's death. We also reference original research from other reputable publishers where appropriate. Practice all cards. C) Unit refund life option D)accumulation units. B)a minimum rate of return is guaranteed. is required by the Securities Act of 1933. Once a variable annuity has been annuitized: Distribution can take place before or during any solicitation for sale. A)the state banking commission. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. How is the distribution taxed? View full document. A variable annuity is a long term investment issued by an insurance company that can help you grow your money, take income in retirement and pass on your wealth. All of the following statements about variable annuities are true EXCEPT: This role is also eligible for annual short-term incentive compensation. Which of the following is NOT an accurate statement concerning a variable life insurance contract? Annuity units are units of ownership when the contract is in the payout stage. Annuities: How to Find the Right One for You, How a Fixed Annuity Works After Retirement, Pros and Cons of Indexed Universal Life Insurance. C) 10 years of variable payments. The downside was that the buyer was exposed to market risk, which could result in losses. The separate account performance compared to last month's performance. A) two people are covered and payments continue until the second death. Reference: 12.3.4 in the License Exam. 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 value of the separate account is now $30,000. A)Joint tenants annuity. D) variable annuities may only be sold by registered representatives. During the accumulation phase, the number of accumulation units will increase as additional money is invested. *A variable annuity is a security and must be registered with the SEC, not FINRA. The second phase is triggered when the annuity owner asks the insurer to start the flow of income, often referred to as the payout phase. Variable annuities involve underlying equity investments in a separate account. C. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. A guaranteed death benefit guarantees that the beneficiary will receive a death benefit if the annuitant dies before the annuity begins paying benefits.
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