Which of the following statements is not true about the characteristics of a trend? A) partially a tax-free return of capital and partially taxable. II) It has an internal capital market wherein each division competes for funds. A registered person recommends the purchase of a variable annuity to one of his clients. Do homework Doing homework can help you learn and understand the material covered in class. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. Question #12 of 48Question ID: 606814 For this potential advantage, the investor, rather than the insurance company, assumes the investment risk. Funding a VA contract by cashing out either life insurance policies or existing VA contracts, especially those held for a short period of time is not suitable. C) II and III. A) be paid to a designated beneficiary. A security is any investment for profit with management performed by a third party. A) I and II. \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. No, annuities are not FDIC-insured as they are not bank products. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. B) During the accumulation period. For a retired person, which of the following investments would provide the greatest protection against inflation? The accumulation unit's value is used to calculate the total value of the account. Because this is not guaranteed, the policyowner bears the investment risk. A the safety of the principal invested B the yield is always higher than bond yields. A) Capital gains taxation on the earnings withdrawn in excess of the owner's basis. Variable Annuities. Changes in payments on a variable annuity correspond most closely to fluctuations in the: *Under the mortality guarantee, the insurance company assumes mortality risk by guaranteeing payments for life, though the amount of each payment is not guaranteed. Many variable annuities invest the separate account in mutual funds. D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. B) It will be lower. These contracts come with high surrender charges. The number of annuity units is fixed. A variable annuity is a type of annuity contract, the value of which can vary based on the performance of an underlying portfolio of sub accounts. A variable annuity is a type of annuity contract in which the value can vary based on the performance of an u . B) During the accumulation period. Which of the following is not a characteristic of a program module? She may choose to receive monthly payments for the rest of her life. 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. The value of the annuity units varies. All of the following statements about variable annuities are true EXCEPT: D)accumulation units. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. When may a variable annuity account be surrendered? must provide full and fair disclosure. A) mutual fund units. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. II. A) Any tax due is deferred. The growth portion is taxed as ordinary income. B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. C) a variable annuity contract does not guarantee any type of return What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? While there is no guarantee on how investments in the separate account will perform, depending on its investment performance, the separate account could provide for a larger death benefit than the minimum guaranteed amount. These contracts cover both lives and will continue to make payments until the last spouse dies. D) III and IV. C. How to Rollover a Variable Annuity Into an IRA. A) Ordinary income tax on earnings exceeding basis. B) II and III All of the following are characteristics of Variable Annuity contracts EXCEPT The possibility of higher returns and greater income than fixed annuities, but there's also a risk that the account will fall in value A There are no surrender fees B Guaranteed death benefit C Tax deferred growth D Training Explanations Which of the following statements regarding variable annuities are TRUE? With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. 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. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Immediate life annuity. A) II and III. An accumulation unit in a variable annuity contract is: D)an accounting measure used to determine payments to the owner of the variable annuity. Nicks Enterprises has purchased a new machine tool that will allow the company to improve the efficiency of its operations. Your client has a large sum of money to invest from the proceeds of the sale of his home. *When money is deposited into the annuity, it is purchasing accumulation units. Annuities due are a type of annuity where payments are made at the beginning of each payment period. D) value of accumulation units. A) variable payments for 10 years, followed by fixed payments for life. A) I and II B) Municipal bonds. a variable annuity does not guarantee an earnings rate of return. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. A)the number of annuity units becomes fixed when the contract is annuitized. Determine the revenue equation given the profit and expense equations. Early withdrawal is either removal of funds from a fixed-term investment before the maturity date, or the removal of funds from a tax-deferred investment account or retirement savings account before a prescribed time. B)II and III. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: What Are the Risks of Annuities in a Recession? A)III and IV. Question #43 of 48Question ID: 606809 The funds in an annuity are off-limits to creditors and other debt collectors. *The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. A client has purchased a nonqualified variable annuity from a commercial insurance company. C) taxed as ordinary income only to the extent of earnings. An annuity payment is the dollar amount of the equal periodic payment in an annuity environment. Distribution can take place before or during any solicitation for sale. D) Two-thirds of the withdrawal is taxable as ordinary income. C)the yield is always higher than bond yields. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. An annuity factor is taken from the annuity table, which considers, for example, the investor's sex and age. D) a variable annuity contract is subject to fluctuating values due to market fluctuations of the underlying separate accounts. Skylar Clarine is a fact-checker and expert in personal finance with a range of experience including veterinary technology and film studies. We also reference original research from other reputable publishers where appropriate. 5 Q All of the following are characteristics of variable whole life EXCEPT the premium is level there is no guaranteed cash value there is no guaranteed minimum death benefit. IV. 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? Distribution of dividends occurs during the accumulation period. B) variable annuities. C)prime rate. This compensation may impact how and where listings appear. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. 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 growth portion is taxed as a capital gain. U.S. Securities and Exchange Commission. Herpes Zoster has all of the following characteristics except: Group of answer choices. Cashing out life insurance policies or VAs where steep surrender charges are likely to exist, particularly in the earlier years of those contracts, is also considered abusive. This cloud model is composed of five essential characteristics, three service models, and four deployment models. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. A)Joint tenants annuity. With variable annuities policyholders can choose from a number of investment opportunities. Once annuitized, the number of annuity units does not vary. Life with period certain will produce a smaller check for life because the insurance company will guarantee payments to a beneficiary for a certain period of time designated in the contract should the annuitant die within that period. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. C)I and IV. Prudential Retirement Security Annuity VI is a group variable annuity (GVA) issued by Prudential Retirement Insurance and Annuity Company (PRIAC) which utilizes a Separate Account offered Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. C) Universal variable life policy. Sample problems from Chapter 9 . must be filed with 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. Universal variable life policies C) IRAs. is required by the Securities Act of 1933. Question #20 of 48Question ID: 606808 The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. Once annuitized, the number of annuity units does not vary. If an investor has a fixed-annuity contract with an insurance company, which of the following risks is assumed by the investor? Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed A) A variable annuity Her agent recommended she choose a variable annuity as a safe haven for the funds. B) single payment deferred annuity. C) taxed as ordinary income only to the extent of earnings. A) It will be higher. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. Variable annuities operate in similar ways to . This customer has no spouse or dependents, which negates the value of the death benefit. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. C)with guaranteed minimum withdrawal benefits (GMWBs) the periodic payments can be monthly, quarterly or annually D) I and II. When the second party dies, all payments cease. A trend is formed from non-repetitive actions of people. Reference: 12.3.1 in the License Exam. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. The minimum guaranteed death benefit is provided by that portion of the payment invested in the insurance company's general account. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. If this client is in the payout phase, how would his April payment compare to his March payment? A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. During the accumulation phase, you make purchase payments. If a customer is about to buy a variable annuity contract and wants to select an annuity with a payout option providing the largest possible monthly payment, which of the following payout options would be most suitable? *A variable annuity may only be surrendered during the accumulation period. A variable annuity is both an insurance and a securities product. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero This makes a total of $4,000 tax and penalty paid on the random withdrawal. C) suitable regardless of funding sources B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. D) I and III. Question #19 of 48Question ID: 606826 Based only on these facts, the variable annuity recommendation is Reference: 12.1.4.1 in the License Exam. 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 . "Variable Annuities: What You Should Know," Page 6. A) A 75 year old women, who is a former executive retired for over ten years who wants to preserve as much capital as she can to leave to her two grandchildren. order now. B) I and IV. Try The annuitized payments are viewed for tax purposes as Question #46 of 48Question ID: 606796 *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Question #38 of 48Question ID: 606798 B) II and III. Once a variable annuity has been annuitized: Question #22 of 48Question ID: 606803 All of the following statements concerning a variable annuity are correct EXCEPT: C) It will stay the same. Owners of variable annuities, like owners of mutual fund shares, may vote on changes in investment policy and for an investment adviser. C)municipal bonds. \hspace{7pt} a. December 303030, to record the payroll. Variable annuities grow tax-deferred, so you dont have to pay taxes on any investment gains until you begin receiving income or make a withdrawal. The number of accumulation units can rise during the accumulation period. When the annuitization option is selected, each payment represents both capital and earnings. a variable annuity guarantees an earnings rate of return. IBM Noida, Uttar Pradesh, India4 weeks agoBe among the first 25 applicantsSee who IBM has hired for this roleNo longer accepting applications. A) III and IV. 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. A)defined contribution plans. The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. B) The entire $10,000 is taxable as ordinary income. Reference: 12.2.1 in the License Exam. Designed to protect against inflation. *During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. guarantees payments for a certain period of time. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. IBM is a global brand and has its presence in 170 countries and operates . This recommendation is: . C) There is no tax as the withdrawal is considered return of capital. Deferred Annuity Definition, Types, How They Work, What Is a Fixed Annuity? What is her total tax liability? This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. If the customer takes a withdrawal of $10,000, what are the tax consequences? Both products typically have a wide range of options across equities, bonds and money market instruments. B) fixed payments for 10 years, followed by variable payments for life. Upon John's death during the accumulation period, Sue takes a lump-sum payment. B)reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. B)a majority vote from the shareholders is required to change the investment objectives. CDs insured by the FDIC. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. b) What probability is the 20%20 \%20% mentioned above? A universal variable life policy should be purchased primarily for its insurance features, not its investment features. C) the yield is always higher than bond yields. The time period depends on how often the income is to be paid. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. A variable annuity is a tax-deferred retirement vehicle that allows you to choose from a selection of investments and then pays you a level of income in retirement that is determined by the performance of the investments you choose. D) It cannot be determined until the April return is calculated. D) minimum guaranteed death benefit. B)mutual fund units. Fixed annuities pay a fixed monthly benefit which loses purchasing power if there is inflation. regulated under both securities and insurance laws. She will receive the annuity's entire value in a lump-sum payment. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. A variable annuity is a combination of 2 products: an insurance contract and a mutual fund. *With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. B) I and III. Needs - are goal-directed forces that people experience. *The customer, in the accumulation stage of the annuity, is holding accumulation units. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. C)such an annuity is designed to combat inflation risk. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. Question #17 of 48Question ID: 606802 D) each annuity unit's value varies with time, but the number of annuity units is fixed. B) be paid to any legal heirs as recognized by the annuitant's state of domicile. C)III and IV Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. A) periodic payment immediate annuity. III. 2019 Ted Fund Donors A registered representative recommends a variable annuity with an income rider to a client. 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 dissolution of the trust c. for distributing income and capital gains. An annuity is an agreement for one person or organization to pay another a series of payments. C) each annuity unit's value and the number of annuity units vary with time. Her agent recommended she choose a variable annuity as a safe haven for the funds. No paper. Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. If the account is annuitized, the investor has chosen a payout option. D) A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. Your client owns a variable annuity contract with an AIR of 4%. C) early annuity phase-in The fixed annuities, indexed annuities, and variable annuities are some of the major types of annuities, of which one may find immediate annuities and deferred annuities. Therefore, variable annuities must be registered with the state insurance commission and the Securities and Exchange Commission. A)the yield is always higher than mortgage yields. A 60-year-old individual, nearing retirement who has both IRAs and a 401k in place, is comfortable with market risk associated with the stock market, and has a lump sum in cash available to fund the annuity B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. C) II and IV 111. None of the other investments listed here offer tax-deferred growth. D)an accounting measure used to determine payments to the owner of the variable annuity. All of the following statements about variable annuities are true EXCEPT: The downside was that the buyer was exposed to market risk, which could result in losses. Future annuity payments will vary according to the separate account's performance. C) insurance guarantee. The largest monthly check an annuitant can receive for the rest of his life is generated by a straight life (life income or life only) payout option. A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. Which of the following are defined as securities? the SEC. The work environment characteristics are normal office conditions. A customer has a nonqualified variable annuity. The annuity unit's value represents a guaranteed return. In this case, the investor is taking a lump-sum distribution before reaching age 59- and must pay an additional 10% penalty on the taxable amount. A. a variable annuity does not guarantee payments for life. A) I and III. a. it performs a single task b. it is self-contained and independent of other modules c. it is relatively short d. all of the above are chamcleristics of a program module 7. In addition, an element of risk must be present. While there is no guarantee on how investments in the separate account will perform, depending on its investment performance, the separate account could provide for a larger death benefit than the minimum guaranteed amount. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). In deciding whether to put money into a variable annuity versus some other type of investment, its worth weighing these pros and cons. C) value of underlying securities held in the separate account. A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. *Insurance companies introduced the variable annuity as an opportunity to keep pace with inflation. A customer, who has contributed to an IRA and to an employer matching 401(k) plan continuously for many years, wants to purchase an annuity contract to add additional monthly income once retired. A) Ordinary income tax on earnings exceeding basis. C)Life annuity. B)II and III. A) defined contribution plans. A registered representative recommends a variable annuity with an income rider to a client. must provide full and fair disclosure. A)It will stay the same. A universal variable life policy should be purchased primarily for its insurance features, not its investment features. &&& \underline{\underline{\$341,718}} A) a minimum rate of return is guaranteed. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. View full document. D) periodic payment deferred annuity. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Spartan Technology Services and Solutions Private Limited is a subsidiary of IBM (International Business Machines) Corporation. Reference: 12.1.2.1.1 in the License Exam. The tax on this amount is $3,000. An individual retirement annuity is an investment vehiclesimilar to an individual retirement accountthat is offered by insurance companies. Your client has $50,000 to invest. They can be classified by: Nature of the underlying investment - fixed or variable In a variable life annuity with 10-year period certain, a contract holder receives: A variable annuity's separate account is: FINRA. Question #18 of 48Question ID: 606827 D) cost of living. A) waiver of premium C) I and IV. A) an accounting measure used to determine payments to the owner of the variable annuity.

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