Annuities CE Exam Questions With Correct
Answers.
Which of the following is a purpose of the annuity?
A. The replacement of earnings upon the disability of an individual
B. The distribution of a lifetime income
C. The discounting of a principal sum back to its present value
D. The creation of...
Which of the following is a purpose of the annuity?
A. The replacement of earnings upon the disability of an individual
B. The distribution of a lifetime income
C. The discounting of a principal sum back to its present value
D. The creation of a fund at the earth of an individual - answer✔B
Why: the purpose of an annuity is the distribution of a lifetime income
Annuity purchasers transfer to an insurance company their risk of
A. Outliving their financial resources
B. Becoming uninsurable
C. Dying prematurely
D. Having to pay unexpectedly high estate taxes - answer✔A
Why: when people purchase annuities, they transfer the risk of outliving their financial resources
to an insurance company
Under which of the following payout options are payments made regardless of how long the
annuitant lives?
B. Interest only payments
C. Life annuity payments
D. Fixed amount payments - answer✔C
Why: life annuity payments are made regardless of how long the annuitant lives
An annuity is sometimes called the flip side of
A. Qualified retirement plans
B. Social security
C. Life insurance
D. Compounding - answer✔C
Why: the flip side of an annuity is life insurance
Who receives lifetime payments from an annuity?
A. A beneficiary
B. A trustee
C. An executor
D. An annuitant - answer✔D
Why: an annuity contract owner names the annuitant, who receives lifetime payments from the
annuity. Usually, the contract owner and the annuitant are the same person. The contract owner
also names a beneficiary, who receives any survivor benefits payable under the annuity upon the
annuitant's death.
An annuity purchased with a single premium to begin providing income one payment interval in
the future is called
A. A fixed annuity
B. An immediate annuity
C. A variable annuity
D. A deferred annuity - answer✔B
Why: an immediate annuity is purchased with a single premium and begins providing income
one payment interval in the future
The type of annuity that guarantees a minimum rate of return is
A. The variable annuity
B. The fixed annuity
C. The immediate annuity
D. The deferred annuity - answer✔B
Why: the fixed annuity guarantees a minimum rate of return
The rate of return on a variable annuity is
A. Tied to the performance of securities in the insurer's separate account
B. Variable within a specified number of percentage points
C. Flexible but guaranteed to be no less than the minimum rate specified in the contract
D. Guaranteed to reflect activity on the New York Stock Exchange - answer✔A
Why: a variable annuity's rate of return is tied to the performance of securities in the insurer's
separate account
An individual who wants the potential for hedging against inflation with money invested in an
annuity should choose
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