Quiz #08 - Results

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Old Dominion University *

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Finance

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Apr 3, 2024

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Results Nathaniel Williams — 2nd Attempt 14 Out of 14 points Time for this attempt Your Answers: 1 / 1 point When determining the percentage of an annuity income that is not taxable, the investment in the annuity is divided by the total of the expected payments to be received. What is this quotient is called? 1 / 1 point Which of the following risks can an annuity mitigate? Attempt History Results Points Score (Highest score is kept) The current ratio The inclusion ratio The exclusion ratio The working capital ratio Superannuation and purchasing power 100% 1 2
1 / 1 point Kareem is a drug rep and planning on retiring next month. He is using his accumulated $200,000 to purchase an annuity. Which of the following options will give him the largest monthly annuity payment assuming his life expectancy is 20 years and his spouse’s life expectancy is 22 years? 1 / 1 point Patrick is age 67 and receives Social Security retirement income that covers 60 percent of his monthly expenses. He has no dependents. He would like to invest $200,000 in an annuity that will mitigate in±ation and provide him with the highest monthly income. Although he has a 20-year table life expectancy, he thinks he has a much longer life expectancy. Which annuity is most suitable for Patrick? 1 / 1 point Perry, who is 50 years old, was building a new home for his family. However, he was running out of money and could not afford the pool they fell in love with. Since his family was upset, he decided to take a withdrawal from his annuity. He had contributed $100,000 to the annuity, and the value of the annuity today is $300,000. He decided to take a withdrawal of $60,000 from the annuity. Which of the following is correct? 1 / 1 point Mortality Superannuation Mortality and purchasing power 100% joint life annuity over Kareem and his spouse’s lives 75% joint life annuity over Kareem and his spouse’s lives Single life annuity over Kareem’s life 10 year term certain A single-premium annuity A deferred, ²xed annuity A single-premium, variable annuity A single-premium, variable annuity with a guaranteed term equal to his table life expectancy $40,000 is taxable as ordinary income $40,000 is taxable as ordinary income and subject to the early withdrawal penalty $60,000 is taxable as ordinary income $60,000 is taxable as ordinary income and subject to the early withdrawal penalty 3 4 5 6
Arline is a 70-year-old widow with no dependents. She wants to invest in an annuity that will produce income now. She has $100,000 to invest and wants to receive the most she can in monthly income. Which of the following is the most suitable annuity for Arline based on her objectives? 1 / 1 point Which of the following is true? 1 / 1 point Kim, a single 40-year-old, would like to invest in the stock market but wants her principal guaranteed against losses. What type of annuity is most suitable for Kim? 1 / 1 point Which of the following parties to an annuity contract serves as the measuring life for the payment stream? 1. Owner. 2. Annuitant. 3. Bene²ciary. A longevity annuity A 20-year term certain, ²xed annuity A deferred, ²xed annuity An immediate, single-premium life annuity A ²xed annuity mitigates the risk of superannuation. A ²xed annuity mitigates the risk of superannuation and in±ation. A ²xed annuity is always a deferred annuity A ²xed annuity is always for a single life expectancy A deferred, ²xed annuity A single-premium, variable annuity A ±exible variable annuity An equity-indexed annuity 1 only. 2 only. 7 8 9
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1 / 1 point Colson wants to participate in the stock market by purchasing a deferred annuity but wants protection against the loss of his principal. What annuity is best suited for Colson? 1 / 1 point Harry, age 63 purchased an immediate annuity. The annuity will provide monthly payments to Harry for as long as he lives. If he dies before receiving payments for 20 years, the remaining payments will go to his bene²ciary. What type of annuity did Harry purchase? 1 / 1 point Quincy, age 33, plans to retire at age 67. Quincy is a consultant and his income varies widely on a monthly basis. Quincy wants to invest in an annuity over his work life expectancy. Which of the following annuities is most suitable for Quincy? 1 / 1 point Which of the following are correct regarding quali²ed annuities? Both 1 and 3 Both 2 and 3 A ²xed annuity A single-premium, variable annuity. A variable annuity An equity-indexed annuity A joint and survivor annuity A straight-life annuity An installment refund annuity A life annuity with a term-certain guarantee Fixed premium, immediate annuity Single premium, immediate annuity Fixed premium, deferred annuity Flexible premium, deferred annuity 10 11 12 13
1 / 1 point Ross owns an annuity. He decided that he no longer has a need for it and wants to exchange it for a life insurance policy. To get the policy he wants, he will have to exchange the annuity and add additional money. Which of the following is correct? They can be purchased with funds from life insurance proceeds or IRA assets The payments generally have a 50% exclusion ratio The payments avoid the 10% early withdrawal penalty They must comply with the minimum distribution rules He can make the exchange, but it will be taxable to the extent of the value of the annuity. He can make the exchange, but it will be taxable to the extent of the annuity less the additional money he puts into the life insurance policy He can make the exchange under Section 1035, which will not be taxable He can make the exchange, which will not be taxable, but his basis will not re±ect any of the investment into the life insurance policy 14