Multiple Choice
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1.
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Which of the following annuity contracts impose the fewest costs on
contractholders?
a. | immediate fixed annuities | b. | deferred fixed annuities | c. | immediate variable
annuities | d. | deferred variable annuities |
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2.
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Florida’s Senior Suitability law defines a senior consumer as one
a. | age 60 or older | b. | age 65 or older | c. | age 70 or
older | d. | age 75 or older |
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3.
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Under Florida’s Senior Suitability law, a recommendation is defined
as:
a. | any advice the agent provides on annuities to senior consumers | b. | any annuity
transaction that follows the advice of an agent | c. | any sale, exchange, replacement or transfer of
an annuity | d. | none of the above |
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4.
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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 |
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5.
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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 |
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6.
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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 |
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7.
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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 |
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8.
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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 |
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9.
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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 |
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10.
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A market value adjustment applies to holders of deferred fixed annuities
who:
a. | annuitize their accounts | b. | take penalty-free
withdrawals | c. | surrender their contracts | d. | none of the
above |
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11.
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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 |
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12.
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Which of the following costs in a deferred fixed annuity is the least
transparent (not clearly disclosed) to contract holders?
a. | interest rate spread | b. | surrender charges | c. | market value
adjustments | d. | contract charges |
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13.
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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 |
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14.
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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 |
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15.
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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 |
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16.
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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 |
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17.
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The basic net worth equation is:
a. | assets minus debts | b. | income minus expenses | c. | assets minus
expenses | d. | income minus debts |
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18.
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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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19.
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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 |
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20.
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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 |
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21.
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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 |
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22.
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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 |
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23.
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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 |
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24.
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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 |
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25.
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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 |
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26.
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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 |
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27.
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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
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28.
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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 |
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29.
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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 |
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30.
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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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31.
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Which of the following are properly analyzed as a
cost of investing in an equity indexed annuity?
a. | participation rates | b. | ratchets | c. | floors | d. | all of the
above |
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32.
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Which of the following is costs in a deferred fixed
annuity is the least transparent (not clearly disclosed) to contractholders?
a. | surrender charges | b. | interst rate spread | c. | contract
charges | d. | market value adjustments |
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33.
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A market value adjustment affects fixed deferred
annuity holders who:
a. | annuitize their contracts | b. | surrender their contracts | c. | take penalty-free
withdrawls | d. | all of the above |
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34.
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Compared with traditional life insurance policies,
the death benefits of an annuity contract provide:
a. | greater benefits for
beneficiaries | b. | the same level of
benefits for beneficiaries | c. | less benefits for
beneficiaries | d. | there is no fixed
relationship between the two |
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35.
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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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36.
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An agent’s license may remain valid without
an appropriate appointment for:
a. | 12 months | b. | 24 months | c. | 36
months | d. | 48 months |
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