Multiple Choice
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1.
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When analyzing a client’s assets prior to recommending an annuity, which
of the following should NOT be considered?
a. | family residence | b. | life insurance cash value | c. | liquid
assets | d. | death benefits of life insurance |
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2.
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Before recommending an annuity to a client, an advisor should consider the
client’s existing:
a. | annuity holdings | b. | financial needs | c. | income and
expenses | d. | all of the above |
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3.
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An advisor should consider all of the following when proposing an exchange of
annuity contracts EXCEPT:
a. | the new surrender period | b. | fees and charges on the old and new
contracts | c. | commission payout on the new contract | d. | investment options, if a variable annuity is
proposed |
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4.
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All of the following could negatively affect a client who exchanges an annuity
contract for another EXCEPT:
a. | loss of grandfathered rights | b. | income taxes owed on the
exchange | c. | extended surrender period | d. | higher fees and
charges |
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5.
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When compared with an investment in a corporate bond of comparable quality,
which of the following is true of a fixed deferred annuity?
a. | the fixed annuity will offer a higher rate of return than the
bond | b. | the fixed annuity offers the investor a possibility of gain if interest rates
fall | c. | the investor will be guaranteed return of total investment if interest rates
rise | d. | the fixed annuity may be subject to penalties due to premature
withdrawal |
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6.
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An elderly client is concerned with his Social Security benefits being taxed.
Which of the following sources of income are included in determining the taxability of those
benefits?
a. | interest earned on corporate bonds | b. | deferred income earned on fixed
annuities | c. | both a and b | d. | neither a nor b |
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7.
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When compared with an investment in a similar mutual fund, variable annuities
offer which of the following advantages?
a. | lower upfront sales charges | b. | step up in value for estate planning
purposes | c. | guaranteed death benefit | d. | all of the
above |
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8.
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Generally speaking, the capital gains tax treatment of mutual fund investments
is:
a. | more advantageous to an investor than tax deferred growth in a variable
annuity’s comparable subaccount | b. | less advantageous to an investor than tax
deferred growth in a variable annuity’s comparable subaccount | c. | roughly similar to
an investor than tax deferred growth in a variable annuity’s comparable
subaccount | d. | cannot not be generally compared to tax deferred growth in a variable annuity’s
comparable subaccount |
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9.
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Variable annuities provide a minimum guaranteed death benefit, and the
contractholder pays a mortality charge for this benefit. In most contracts, the mortality
charge for variable annuities increases as the amount of protection for beneficiaries
a. | increases | b. | decreases | c. | remains the
same | d. | there is no relationship between the mortality cost and the level of
protection |
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10.
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Which of the following investments will NOT benefit from dividend payments paid
on S&P 500 stocks?
a. | a variable annuity invested in an indexed subaccount based on the S&P 500
index | b. | an indexed mutual fund based on the S&P 500 index | c. | SPDR® shares,
an exchange traded fund based on the S&P 500 index | d. | an equity indexed annuity based on the S&P
500 index |
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