A)variable annuities will protect an investor against capital loss. B)II and III. D) Two-thirds of the withdrawal is taxable as ordinary income. D) III and IV. C)III and IV. All of the following statements concerning a variable annuity are correct EXCEPT: *Variable annuity contracts must be sold by prospectus due to the characterization of the separate accounts as securities, which must be registered under the Securities Act of 1933 and the Investment Company Act of 1940. Question #33 of 48Question ID: 606832 What Are the Biggest Disadvantages of Annuities? A) I and IV. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract B) I and III. B) II and III. The time period depends on how often the income is to be paid. B)a minimum rate of return is guaranteed. A)I and IV. Variable annuities are riskier than fixed annuities because the underlying investments may lose value. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). D) Variable Annuity. The distribution of questions by topic is not intended to represent the 39) A variable annuity has the following guarantees: [PDF] Understanding your variable annuity UBS Variable annuities are long-term investment vehicles that with these securities as well insurance company and do not apply to the investment Question #42 of 48Question ID: 606830 How to Rollover a Variable Annuity Into an IRA. B)I and IV. Reference: 12.1.2 in the License Exam. *The accumulation period of a variable annuity may continue for many years. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. *A variable annuity is a security and must be registered with the SEC, not FINRA. III. are purchased primarily for their insurance features B) The death benefit cannot ever be more than the guaranteed benefit. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Question #40 of 48Question ID: 606800 A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. D) I and II. A)not suitable This makes a total of $4,000 tax and penalty paid on the random withdrawal. b. "Variable Annuities: What You Should Know," Page 6. Your client owns a variable annuity contract with an AIR of 4%. D) periodic payment deferred annuity. C) taxed as ordinary income only to the extent of earnings. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. B)a majority vote from the shareholders is required to change the investment objectives. Premiums made into the annuity purchase accumulation units. This chapter was updated on 15 December, 2005. The nature of the securities invested in-bonds and growth stocks-makes it necessary that sales representatives and their principals be licensed in securities as well as insurance. This describes which of the following annuities? must be filed with FINRA. During the accumulation phase, the number of accumulation units will increase as additional money is invested. Question #35 of 48Question ID: 606810 Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. *Variable annuities offer tax-deferred growth and are suitable for achieving supplemental retirement income. This recommendation is: D) II and IV. When the contract is annuitized, the annuitant is credited with a fixed number of annuity units. VAs, blue chip mutual fund portfolios, ETFs and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client. U.S. Securities and Exchange Commission. A customer has a nonqualified variable annuity. D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. Your customer in his early 30s has received a modest inheritance from a relative. Variable annuities are designed to combat inflation risk. a variable annuity does not guarantee an earnings rate of return. IBM is a global brand and has its presence in 170 countries and operates . an annuitant lives longer than expected. C)none of these. The investor purchased accumulation units. No paper. I. C) III and IV. To comply with Regulation SP, a brokerage firm is required to do all of the following EXCEPT: A) deliver an annual notice of its information collecting and sharing policies to all customers. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). 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. Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. This includes transportation, food, lodging, and entertainment. The growth portion is taxed as ordinary income. 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 . The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. . Once annuitized, the number of annuity units does not vary. C) value of underlying securities held in the separate account. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. Variable annuity salespeople must be registered with FINRA and the state insurance department. This customer has no spouse or dependents, which negates the value of the death benefit. You have 4 clients each expressing interest in a variable annuity contract. Your client owns a variable annuity contract with an AIR of 4%. For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. Investopedia requires writers to use primary sources to support their work. A) I and II. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. A) two people are covered and payments continue until the second death. That can adversely affect your returns over the long term, compared with other types of investments. Which of the following recommendations would best meet the customer profile? B)suitable regardless of funding sources An annuity is a continuous stream of equal periodic payments from one party to another for a specified period of time to fulfill a financial obligation. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. They can be classified by: Nature of the underlying investment - fixed or variable Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. covers more than one person. The features of variable deferred annuities are many. A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. Variable annuity salespeople must register with all of the following EXCEPT: A) FINRA. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Question #27 of 48Question ID: 606818 Classifying annuities There are many categories of annuities. Annuities are complicated products, so that may be easier said than done. Licensed to sell Variable Annuities in the following state(s): FL, TX . Clusters of vesicles in various stages. vote on proposed changes in investment policy. B)Tax-free municipal bonds Reference: 12.2.1 in the License Exam. Full-Time. What Are the Risks of Annuities in a Recession? C) Tax-free municipal bonds Variable annuities must be registered with: Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. B) The entire $10,000 is taxable as ordinary income. D)I and IV. The separate account is NOT likely to invest in: A 3 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. C)none of these. D) the payout plans provide the client income for life. When the annuitization option is selected, each payment represents both capital and earnings. B) Life annuity. *This annuity is nonqualified, which means the client has paid for it with after-tax dollars and has a basis equal to the original $29,000 investment. Only variable annuities have payout plans that provide the client income for life. C) II and IV. A)a lifetime withdrawal benefit (LWB) or lifetime income benefit is generally in the form of a rider attached to the contract which will come at a cost to the annuitant All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. Question #45 of 48Question ID: 606795 Question #18 of 48Question ID: 606827 regulated under both securities and insurance laws. Reference: 12.1.4.2 in the License Exam. The value of an annuity unit varies from month to month according to the performance of the separate account in comparison to the assumed interest rate. Reference: 12.1.4.1 in the License Exam. D) Age 27, saving for first home. *BEST Suited for VA-Age 56, available cash to invest, maxes out IRA and 401(k) plan VA will be supplemental income, would not be suitable for cust. An annuitant assumes the investment risk of a variable annuity and is not protected byt he insurance company from capital losses. D)partially a tax-free return of capital and partially taxable. C) 10 years of variable payments. D)suitable due to the relative safety of the investment. The growth portion is taxed as ordinary income. Over the past five years, 's dividend yield has averaged % per year. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. B) fixed in value until the holder retires. Indexed annuity owners receive credited interest tied to the fluctuations of the linked index An immediate annuity consists of a single premium An immediate annuity has a single premium. What Are Ordinary Annuities, and How Do They Work (With Example)? *Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. C)II and IV. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. He originally invested $29,000 4 years ago; it now has a value of $39,000. Question #24 of 48Question ID: 606806 If this client is in the payout phase, how would his April payment compare to his March payment? B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children *Mortality risk- If an annuitant lives longer than expected, the insurance company will have to continue payments longer than expected. C)III and IV In March, the actual net return to the separate account was 8%. Reference: 12.3.1 in the License Exam. Question #28 of 48Question ID: 606821 savingsbondsGroupinsurance$198,74451,71415,21030,42045,630$341,718, Tax rates assumed: The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. C) II and III. \hspace{10pt} \text{Warehouse salaries} & 110,000 & \hspace{10pt} \text{Social security tax withheld} & 51,714\\ Variable annuity salespeople must register with all of the following EXCEPT: D)an accounting measure used to determine payments to the owner of the variable annuity. *An immediate annuity has no accumulation period. In a variable life annuity with 10-year period certain, a contract holder receives: Reference: 12.1.2.1.1. in the License Exam. He makes several statements regarding the contract. How does an indexed annuity differ from a fixed annuity? It was a lump-sum purchase. The customer, in the accumulation stage of the annuity, is holding accumulation units. As part of his profile he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance and would opt for principal protection instead. The tax on this is $2,800 ($10,000 x 28%). B)IRAs. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. How is the distribution taxed? How Are Nonqualified Variable Annuities Taxed? Your client has a large sum of money to invest from the proceeds of the sale of his home. A demonstrated ability to quickly learn and continuously develop functional knowledge and an understanding of company products as well as administrative, claims, underwriting and marketing functions. Sample problems from Chapter 9. . The earnings are taxable but the cost basis is returned tax free. D)Municipal bonds. Following the transition to T+1 in the U.S. markets, Commission staff will continue to work with industry leaders, public interest advocates, investors and other regulators to assess the future feasibility of a T+0 settlement standard cycle, and seek to identify ways to overcome the challenges associated with such a move, as articulated in the . a variable annuity does not guarantee payments for life. a. Reference: 12.3.4 in the License Exam. B)Variable annuities. D) II and IV. A) The fact that the annuity payment may increase or decrease. D) Life annuity with 10-year period certain. Distributions from nonqualified variable annuities are: The tax on this is $2,800 ($10,000 x 28%). A registered person recommends the purchase of a variable annuity to one of his clients. D) It cannot be determined until the April return is calculated. At the end of the year your account has a value of 10750. withdraw funds without any tax consequences. D) Variable annuities. A) The entire amount is taxed as ordinary income, because it is not life insurance. D) an accounting measure used to determine the contract owner's interest in the separate account. D)the rate of return is determined by the underlying portfolio's value. This role is also eligible for annual short-term incentive compensation. A)each annuity unit's value and the number of annuity units vary with time. A deferred annuity is an insurance contract that promises to pay the buyer a regular stream of income, or a lump sum, at some date in the future. Withdrawals from a nonqualified variable annuity are made on a LIFO basis, so the taxable earnings are considered taken out before principal. The growth portion is subject to a 10% penalty. D)the state insurance department. Universal variable life policies As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. B)Life annuity with period certain. On any device & OS. Once a variable annuity has been annuitized: Fixed Annuity: A fixed annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. D) tax free. A registered representative recommends a variable annuity with an income rider to a client. Question #17 of 48Question ID: 606802 Question #47 of 48Question ID: 606813 B)corporate stock. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. III. The value of the customer's account is converted into annuity units if and when the customer decides to annuitize the contract. Reference: 12.1.2 in the License Exam. B) Life annuity with period certain The upside was the possibility of higher returns during the accumulation phase and a larger income during the payout phase. Distribution can take place before or during any solicitation for sale. Variable annuities offer the possibility of higher returns and greater income than fixed annuities, but theres also a risk that the account will fall in value. Changes in payments on a variable annuity correspond most closely to fluctuations in the: C)3800. B) payment guarantee. D) I and III. Reference: 12.3.1 in the License Exam. D) I and IV. C)Variable annuity contract with a discussion regarding interest rate risk Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). None of the other investments listed here offer tax-deferred growth. \hspace{10pt} Social security, 6%6\%6% on first $100,000\$100,000$100,000 of employee annual earnings C) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. Reference: 12.2.1 in the License Exam. An annuity is an insurance product that promises to pay out income at a future date based on invested funds. C. The original investment has grown to a value of $60,000. A) Joint tenants annuity. Immediate annuities purchase annuity units directly. A) waiver of premium Science Health Science Nursing. 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. used to escrow late or otherwise delinquent premium payments. B) the number of annuity units is fixed, and their value remains fixed. Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 Variable annuities are designed to combat inflation risk. C)municipal bonds. A registered representative recommends a variable annuity with an income rider to a client. Because they have a separate account in which the investor assumes the investment risk, they can only be sold by individuals with both insurance and securities licenses. A variable annuity is both an insurance and a securities product. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. *When money is deposited into the annuity, it is purchasing accumulation units. 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. Any withdrawals you make prior to the age of 59 may also be subject to a 10% tax penalty. 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 dissolutions of the trust for distributing income and capital gains. She may choose to receive monthly payments for the rest of her life. B) the state insurance department. Deal with mathematic Math is all about solving equations and finding the right answer.
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