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Chapter 4: Annuities Flashcards | Chegg.com C) value of underlying securities held in the separate account. D) There is no guarantee regarding the investment results of the separate account. B) the number of annuity units is fixed, and their value remains fixed. A registered representative recommends a variable annuity with an income rider to a client. The annuity unit's value represents a guaranteed return. Income that cannot be outlived by the owner B)corporate stock. However, because the client is not yet age 59- when making the withdrawal, he also pays a 10% penalty, or $1,000. Of the four client profiles below which might be the best suited for a variable annuity recommendation? A 45-year-old investor takes a lump-sum distribution from a nonqualified variable annuity. Explain what is meant by positive and negative The number of annuity units is fixed. When may a variable annuity account be surrendered? For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. B) allow customers to opt out of sharing of financial information with certain nonaffiliated firms. B) a variable annuity contract is not required to be sold by prospectus because it is an insurance contract You can tailor the income stream to suit your needs. A) Joint tenants annuity. John is the annuitant in a variable plan, and Sue is the beneficiary. C) 3000. Distribution can take place before or during any solicitation for sale. A client has purchased a nonqualified variable annuity from a commercial insurance company. A)each annuity unit's value and the number of annuity units vary with time. A life with period certain contract guarantees payments for a specified number of years to a named beneficiary if the annuitant dies during that time. A) a minimum rate of return is guaranteed. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Of the 4 client profiles below, which might be the best suited for a variable annuity recommendation? C)Growth mutual funds B) During the accumulation period. No software installation. B)Variable annuities. Who assumes the investment risk in a variable annuity contract? C) payments continue for a pre-determined period of time. A variable annuity's separate account is: A separate account will invest in a number of different securities. The growth portion is taxed as ordinary income. Single payment deferred annuity. All of the following are characteristics of a variable annuity, except: a. C)II and III. Flashcards - Securities and Tax - FreezingBlue C) Mutual fund portfolio consisting of blue chip stocks D) II and IV. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. C) the client assumes the investment risk. C) II and IV A) partially a tax-free return of capital and partially taxable. (primary needs). D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. No Hibernation for Issuers of Index-Linked Variable Annuities and Index Reference: 12.1.2.1.1. in the License Exam. A) the investment portfolio is managed professionally. Reference: 12.3.3 in the License Exam. The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. Changes in payments on a variable annuity correspond most closely to fluctuations in the: Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. B)Life annuity with period certain. Annuities due are a type of annuity where payments are made at the beginning of each payment period. All of the following statements regarding variable annuities are true EXCEPT: A) variable annuities offer the investor protection against capital loss. A variable annuity is both an insurance and a securities product. \hspace{10pt} Medicare, 1.5%1.5\%1.5% Question #11 of 48Question ID: 606816 Reference: 12.2.1 in the License Exam, Question #48 of 48Question ID: 606835 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 variable annuity does not guarantee an earnings rate of return. D) variable annuities may only be sold by registered representatives. The money paid in will be returned tax free, but the earnings portion will be taxed as ordinary income. An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. The value of a variable annuity is based on the performance of an underlying portfolio of sub accounts selected by the annuity owner. It's somewhat similar to a variable life insurance policy in that: You can choose how the product's value is invested. Question #35 of 48Question ID: 606810 A) The fact that the annuity payment may increase or decrease. This includes transportation, food, lodging, and entertainment. CH 7 Annuities Flashcards | Quizlet C)100% tax deferred. Reference: 12.1.2 in the License Exam. B) single payment deferred annuity. No paper. Variable Annuities Flashcards | Quizlet *The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. B) accumulation units. D) Age 27, saving for first home. Only variable annuities have payout plans that provide the client income for life. B) accumulation units. Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. If a 42-year-old customer has been depositing money in a variable annuity for 5 years, and he plans to stop investing but has no intention of withdrawing any funds for at least 20 years, he is holding: Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. If this client is in the payout phase, how would his April payment compare to his March payment? variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. B) suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract During payout, distributions will fluctuate due to performance in the separate account. A) The entire amount is taxed as ordinary income, because it is not life insurance. C)the yield is always higher than bond yields. The noble relatives of the Count d'Horn absolutely blocked up the ante-chambers of the regent, praying for mercy on the misguided youth, and alleging that he was insane . A) Life-only annuity Which Earns More: Variable or Fixed Annuities? B) Corporate debt securities B)each annuity unit's value varies with time, but 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. Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. a variable annuity does not guarantee an earnings rate of return. \hspace{10pt} \text{Office salaries} & \underline{234,000} & \hspace{10pt} \text{Medicare tax withheld} & 15,210\\ A Variable Annuity has which of the following characteristics? U.S. Securities and Exchange Commission. C)complete all paper work to purchase the annuity contract and obtain the clients signature immediately. D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. C)III and IV. used for the investment of funds paid by contract holders. Classifying annuities There are many categories of annuities. A) A variable annuity D) each annuity unit's value varies with time, but the number of annuity units is fixed. Periodic payments are not a consideration because normally the payments into an annuity are level or in a lump sum. Francisco R. - Financial Professional - Prudential Financial | LinkedIn 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. U.S. Securities and Exchange Commission. A) mutual fund units. 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? Because the client is older than age 59-, he does not pay 10% premature distribution penalty tax. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. Immediate annuities purchase annuity units directly. A) I and IV. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. 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. are purchased primarily for their insurance features C) There is no tax as the withdrawal is considered return of capital. Guaranteed Lifetime Annuity: How They Work, When They Pay You, This is also generally true of retirement plans. Instructions\textsf{\textcolor{#4257b2}{Instructions}}Instructions An accumulation unit in a variable annuity contract is: A)an accounting measure used to determine the contract owner's interest in the separate account. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. Upon John's death during the accumulation period, Sue takes a lump-sum payment. Question #45 of 48Question ID: 606795 B) II and IV. D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. There is a guaranteed minimum interest rate, normally amounting to between 1 and 3 percent. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. B)part earnings and part cost basis Practice all cards. 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. Here is how guaranteed lifetime annuities work. Question #19 of 48Question ID: 606826 The value of accumulation and annuity units varies with the investment performance of the separate account. In the case of deferred annuities, this is often referred to as the accumulation phase. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? \hspace{7pt} b. January 444, to record the employers payroll taxes on the payroll to be paid on January 444. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. B) 100% taxable. B)I and IV. D) II and III. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. Assuming that the payroll for the last week of the year is to be paid on January 444 of the following fiscal year, journalize the following entries: D) 100% tax deferred. Simple and general annuities problems with solutions A)There is no tax as the withdrawal is considered return of capital. Determine the revenue equation given the profit and expense equations. Reference: 12.3.2.1 in the License Exam. Reference: 12.1.2.1.1 in the License Exam. Reference: 12.1.4.1 in the License Exam. Contributions to an IRA may be tax deductible, depending on the individual's earnings and participation in a company-sponsored qualified retirement plan. withdraw funds without any tax consequences. D) 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. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. PDF Variable Annuities: What You Should Know - SEC C)annuity units. The accumulation period of a variable annuity may continue for many years. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. D) tax free. Once a customer annuitizes a variable annuity, which of the following statements are TRUE? *The most important consideration in purchasing a variable annuity is to be aware that benefit payments will fluctuate with the investment performance of the separate account. What Are Ordinary Annuities, and How Do They Work (With Example)? C)none of these. C)I and III. B)Universal variable life policy. A)variable annuities will protect an investor against capital loss. D) a minimum of 10 years of variable payments, followed by additional variable payments for life. Which of the following is NOT an accurate statement concerning a variable life insurance contract? B) prime rate. Universal variable life policies The customer, in the accumulation stage of the annuity, is holding accumulation units. This would not align with the couple's criteria for coverage as long as they both live. How Variable Life Insurance Works: Pros and Cons - ValuePenguin (Check all that apply.) *A variable annuity does not guarantee an earnings rate because earnings will depend on the performance of the separate account. Her agent recommended she choose a variable annuity as a safe haven for the funds. D)II and IV. A) be paid to a designated beneficiary. D) Capital gains tax on earnings exceeding basis. B) Life annuity. Round to the nearest hundredth of a percentile. Reference: 12.3.1 in the License Exam. $63,000 b.$51,000 c. $18,000 d.$6,000. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. However, it does guarantee payments for life (mortality). B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children B) The investor's marital status. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. Every annuity has some characteristics in common. What percentile is represented by $710? Question #37 of 48Question ID: 606817 The Three Main Types of Annuity Insurance - Fixed, Variable, and Equity Chapter 6-Classification Annuities Flashcards | Quizlet D)It cannot be determined until the April return is calculated. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. Reference: 12.1.2 in the License Exam. MetLife, Inc. Senior Customer Care Advocate Annuities ($22 per hour Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Eric W. Noreen, Peter C. Brewer, Ray H Garrison. If the account is annuitized, the investor has chosen a payout option. 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 . Once the contract is annuitized, monthly payments to the customer are: B) 10% penalty plus payment of ordinary income tax on all funds withdrawn. The remainder of the premium is invested in the separate account. B) The death benefit cannot ever be more than the guaranteed benefit. Variable annuity salespeople must be registered with FINRA and the state insurance department. D)accumulation units. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. A)Corporate debt securities A) A variable annuity Table1. Since the client is older than 59 at the time of distribution, the additional 10% penalty tax is not incurred. The tax on this is $2,800 ($10,000 x 28%). He makes the following four statements, all of which are true EXCEPT It was a lump-sum purchase. B)suitable regardless of funding sources *A variable annuity is a security and must be registered with the SEC, not FINRA. D) the payout plans provide the client income for life. But again, the need to designate beneficiaries is not an issue for this annuitant. A) Money market fund. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. Investopedia requires writers to use primary sources to support their work. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. B) Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. C) Universal variable life policy. B)II and III. the state banking commission. The trial of the assassins commenced on the following day; and the evidence being so clear, they were both found guilty, and condemned, to be broken alive on the wheel.