Multiple Choice
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1.
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The difference between accumulating capital using an equity indexed annuity
versus a variable annuity invested in an indexed subaccount is:
a. | the indexed subaccount may go down in value, the equity indexed annuity will
not | b. | the investor in the indexed subaccount is credited with full market movements, the
equity indexed annuity is not | c. | the indexed subaccount will receive dividend
income from its passively managed portfolio, the equity indexed annuity will not | d. | all of the above are
true |
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2.
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Which of the following risks is a possible reason that fixed deferred annuities
will not fulfill a client’s objective of conservation of principal?
a. | interest rate risk | b. | legislative risk | c. | credit
risk | d. | market risk |
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3.
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What is the greatest risk facing investors who seek conservation of
principal?
a. | tax risk | b. | purchasing power risk | c. | interest rate
risk | d. | opportunity risk |
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4.
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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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5.
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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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6.
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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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7.
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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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8.
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In Florida, which of the following are protected from claims of the
client’s creditors?
a. | investments held by the client’s IRA | b. | death benefits paid
by the client’s annuity or life insurance to the client’s
beneficiaries | c. | the principal balance in the client’s deferred variable
annuity | d. | all of the above |
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9.
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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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10.
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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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11.
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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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12.
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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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13.
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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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14.
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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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15.
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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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