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Final Exam -- Safeguarding Seniors

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Indicate whether the following statement is true or false.
 

 1. 

AGENT CERTIFICATION

I certify that I am the agent enrolled in this course, and that I will complete this final examination by myself without any assistance from anyone else. I understand that failure to comply with this requirement may result in the loss of continuing education credits and possible administrative sanctions by the Florida Department of Financial Services.
 

Multiple Choice

Identify the choice that best completes the statement or answers the question.
 

 1. 

In a variable annuity:
I.    the investor assumes investment risk
II.   the investor assumes purchasing power risk
III.  the insurance company assumes investment risk
IV.  the insurance company assumes purchasing power risk
-
a.
I and II
b.
I and IV
c.
II and III
d.
III and IV
 

 2. 

A contract holder of a deferred annuity must choose a payout option:
a.
at age 59 1/2
b.
when initially establishing the contract
c.
when the account is annuitized
d.
when the account is surrendered
 

 3. 

The period of time from a variable annuity contract's issue date until the start of payments is known as the:
a.
premium period
b.
accumulation period
c.
annuity period
d.
funding period
 

 4. 

The “current” rate of interest paid on a traditional fixed annuity is:
a.
tied to current market rates
b.
whatever rate the annuity company chooses to pay
c.
guaranteed at the time the contract is established
d.
whatever rate of interest the company can earn on the investments in the general account
 

 5. 

Which interest crediting method is based on when premiums are paid into the contract?
a.
pocket of money method
b.
tiered rate method
c.
sliding scale method
d.
portfolio method
 

 6. 

Contracts with a “bailout” rate will:
a.
automatically terminate the contract if interest rates fall below the initial rate
b.
allow contractholder to surrender the contract without surrender charges if the current rate falls below the bailout rate
c.
tie current interest rates tied to market rates
d.
guarantee the principal in the event of the annuity company’s insolvency
 

 7. 

The assumed interest rate (AIR) in a variable annuity:
a.
serves the same function as the minimum guaranteed rate in a fixed annuity
b.
is the minimum amount the investments in the separate account must earn before the contract will pay income payments to the annuitant
c.
is compared to the investment returns in the separate account to determine if this month’s income payment will be higher or lower than last month’s
d.
is the rate of interest state regulators apply to determine a variable annuity’s reserve requirement
 

 8. 

An equity indexed annuity that is simply based on the value of the index at maturity relative to the value of the index at inception uses the
a.
point-to-point indexing method
b.
high-water indexing method
c.
ratchet  indexing method
d.
annual reset indexing method
 

 9. 

An investor is comparing the purchase of an equity indexed annuity (EIA) based on the S&P 500 with purchase Spiders®,  an exchange traded fund (ETF) that holds a stock portfolio that mirrors the S&P 500 index.  Which of the following is true?
a.
the total return to the investor will be higher in the EIA than the ETF
b.
the EIA’s return includes dividend income, the ETF does not
c.
the investor can avoid market downturns in the ETF, but not the EIA
d.
none of the above are true
 

 10. 

Which of the following market measurements is most commonly used in equity indexed annutiies?
a.
Dow Jones Industrial Average
b.
NASDAQ
c.
S&P 500
d.
Wilshire 5000
 

 11. 

The S&P 500 increased by 12% this year.  Which of the following annual reset contracts will credit the investor with the greatest increase in a EIA based on that index?
a.
Contract A with a 90% participation rate and 8% interest rate cap
b.
Contract B with a 80% participation rate and 10% index cap
c.
Contract C with a 3% yield spread and 15% index cap
d.
Contract D with a 2% yield spread and 10% interest rate cap
 

 12. 

Which of the following are offered to variable annuity contractholders at no additional cost?
a.
guaranteed minimum death benefit
b.
guaranteed minimum income benefit
c.
guaranteed minimum accumulation benefit
d.
guaranteed minimum withdrawal benefit
 

 13. 

Which of the following investment factors prompted tightening of state laws on annuity disclosures and suitablity analysis?
a.
tax deferral
b.
liquidity
c.
creditor protection
d.
estate planning
 

 14. 

Which of the following affect the liquidity of an investment in annuities
a.
surrender charges
b.
up front sales charges
c.
contract charges
d.
all of the above
 

 15. 

To determine whether the tax deferral offered by annuity contracts provides a greater benefit to an investor than a comparable taxable investment depends on:
a.
the investor’s current tax rate
b.
the investor’s tax rate at the time of withdrawal
c.
the length of the investment period
d.
all of the above
 

 16. 

Which of the following factors has an impact on an investor’s investment horizon?
a.
tax penalties for premature withdrawals
b.
financial needs
c.
surrender charges
d.
all of the above
 

 17. 

The basic net worth equation is:
a.
assets minus debts
b.
income minus expenses
c.
assets minus expenses
d.
income minus debts
 

 18. 

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
 

 19. 

In a practical sense, which of the following are subject to the disclosures required under Florida’s Annuity Suitability law?
a.
sale of fixed annuities to all consumers
b.
sale of variable annuities to senior consumers
c.
sales of indexed annuities to senior consumers
d.
all of the above
 

 20. 

Florida’s Senior Suitability law requires agents to make recommendations based on:
a.
what the agent believes is in the best interests of the client
b.
an objective standard
c.
reasonable efforts to ascertain the client’s investment objectives, financial situation and needs
d.
the prudent man rule
 

 21. 

If a client refuses to give the agent the information required by Florida’s Senior Suitability law, the agent:
a.
may not make any recommendations to that client
b.
must have the client sign a form noting that fact before making any recommendation to that client
c.
will totally absolved from any duty to make suitable recommendations to that client
d.
must notify the Department of Financial Services prior to making any recommendations to that client
 

 22. 

If a senior customer holds other annuities, a Florida life agent must ascertain which of the following?
a.
the type of contracts
b.
applicable surrender charges
c.
the asset allocation within variable contracts
d.
all of the above
 

 23. 

Florida law requires that completed copies of the suitability questionnaire be retained by:
a.
the agent
b.
the issuing company
c.
third party marketers
d.
all of the above
 

 24. 

In Florida, Contract Summaries and Buyer’s Guides must be given to purchasers of
a.
fixed annuities
b.
indexed annuities
c.
variable annuities
d.
all of the above
 

 25. 

Regarding Florida’s Free Look law, purchasers have the right to a refund of their premiums within:
a.
10 days for the purchase of fixed and indexed annuities
b.
10 days for the purchase of fixed, indexed and variable annuities
c.
14 days for the purchase of fixed and indexed annuities
d.
14 days for the purchase of fixed, indexed and variable annuities
 

 26. 

Which of the following violations of Florida’s Insurance Code are punishable as a felony?
a.
twisting
b.
churning (direct or indirect)
c.
fraudulent signatures on insurance applications
d.
all of the above
 

 27. 

Which of the following disclosures by an agent to a senior consumer would most likely be prohibited under Florida law?
a.
I am a Certified Senior Financial Advisor
b.
I hold a designation as a Certified Financial Planner.
c.
I hold a Series 6 license by FINRA to sell variable annuities and mutual funds
d.
all of the above
 

 28. 

Under Florida law, when recommending an annuity transaction to a senior consumer, a copy of the completed questionnaire must be: 
a.
submitted to the issuing company with the application
b.
submitted to the issuing company within 7 days
c.
submitted to the issuing company within 10 days
d.
none of the above
 

 29. 

Which of the following are responsible to assure an agent’s compliance with Florida’s Senior Suitability law?
a.
the agent
b.
the agency the agent works for
c.
the company the agent submits applications to
d.
all of the above
 

 30. 

Under state law, documents related to annuity recommendations for senior consumers must be retained for:
a.
1 year
b.
2 years
c.
3 years
d.
5 years
 



 
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