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                                FINAL EXAM – Annuity 2004 California CE
1.   How do immediate and deferred annuities           8.   The Rule of 72 is useful to quickly tell how
     differ?                                                long it will take invested money to double
                                                            with _________.
     A.   In the timing of benefit payments
     B.   Only deferred contracts are guaranteed            A.   Taxes already removed
     C.   Immediate plans offer long-term growth            B.   No tax or deferred tax
     D.   Deferred plans create current income              C.   Capital gains applied
                                                            D.   Double digit interest rates
2.   Concerning the risk of variable annuities,
     which of the following are important to keep      9.   Advertising to seniors is defined as the use of
     in mind                                                envelopes, stationary, business cards or
                                                            other materials designed to
     A.   The insurance company                             ____________________.
     B.   The fluctuating nature of investments
     C.   The guaranteed death benefit                      A.   Attract attention
     D.   A&B                                               B.   Mislead consumers
                                                            C.   Describe or encourage the purchase of
3.   In owner-driven annuity contracts, benefits                 an annuity
     are based on something happening to the                D.   Tell a story
                                                       10. Disadvantages of owning annuities for people
     A.   Annuitant                                        over 60 years include:
     B.   Owner
     C.   Beneficiary                                       A.   They have less time for tax-deferred
     D.   Insurance Company                                      growth to work
                                                            B.   They are closer to the age when they
4.   The downside of buying annuities in                         may need to withdraw funds
     retirement is ____________.                            C.   They are not subject to the IRS 10%
     A.   Too many could negatively effect                  D.   A&B
     B.   Scams may convince seniors they              11. Which of the following are symptoms that a
          are safer than bank CDs                          senior's judgment and mental capacity is
     C.   Solicitors often pose as experts to sell         reduced or impaired:
          what a senior doesn't need
     D.   All of the above                                  A.   Problems remember recent events
                                                            B.   Difficulty following simple directions
                                                            C.   Disorientation of time and place
5.   Knowing the difference between two products            D.   All
     you sell is a legal responsibility as proved in
                                                       12. A refund option provides that the company
     A.   Acme v. Bolter                                   will pay out an amount equal to
     B.   Benton V. Paul Revere                            _____________.
     C.   Sargent v. Rollins
     D.   Jason v. Conner                                   A.   $10,000
                                                            B.   Total dollars paid as premiums
6.   In a fixed annuity, investment authority and           C.   One-half the death benefit
     risk are the responsibility of                         D.   Double the death benefit

     A.   The agent                                    13. Agents advertising a seminar or class about
     B.   The annuitant                                    annuities must also add the words
     C.   The insurance company                            ____________.
     D.   The owner
                                                            A.   Free lunch
7.   When the owner of a non-qualified annuity              B.   Free advice
     dies, his entire death benefit must be                 C.   And insurance sales presentation
     distributed within _______ years.                      D.   No investment required

     A.   3   Years
     B.   5   Years
     C.   7   Years
     D.   9   Years
                                FINAL EXAM – Annuity 2004 California CE
14. Gain from variable annuities, like mutual         21. The Rule of 108 calculates the amount of time
    funds, is kept by the owner. If investments           it takes for _________________.
    plummet then _________.
                                                         A.    A   non-taxable account to double
   A.    No one makes up the difference                  B.    A   taxable account to double
   B.    The state guaranty fund kicks in                C.    A   taxable account to triple
   C.    The insurance company chips in                  D.    A   non-taxable account to triple
   D.    The annuitant must resign
                                                      22. To justify the replacement of a contract,
15. Portfolio annuity renewal rates are based on          experts believe there should be
    _______________.                                      _____________ because of the associated
   A.    Earnings of the portfolio
   B.    A pre-determined rate                           A.    No commissions involved
   C.    The prevailing prime rate                       B.    No tax
   D.    Whatever is agreed between the parties          C.    Multiple reasons and benefits
                                                         D.    An escrow
16. The exclusion ratio computes the amount of
    each annuity payment that ____________.           23. Post-retirement planning doesn't end when a
                                                          client retirees, because he must
   A.    Must be taxed                                    _____________.
   B.    Won't be taxed
   C.    Receives capital gains                          A.    Maximize income
   D.    Is distributed at death                         B.    Refine goals
                                                         C.    Minimize taxes and withdrawal penalties
17. The concept behind dollar cost averaging is          D.    All of the above
    that spreading purchases over time will
    average out __________________.                   24. Needs analysis helps the agent sell the right
                                                          amount of insurance or product
   A.    The payout                                       _______________.
   B.    Potential highs and lows
   C.    Tax deductions                                  A.    For the right amount of commission
   D.    The mix                                         B.    In the least amount of time
                                                         C.    For the right reasons
18. A crisis waiver allows the waiver of                 D.    With little resistance
    ______________ should an owner illness
    develop.                                          25. Variable annuity free look provisions require
                                                          that premiums during the first 30 days should
   A.   Taxes owed                                        be _________________.
   B.   All surrender charges
   C.   Certain fees                                     A.    Placed in a trust
   D.   Nonforfeiture                                    B.    Held by the owner
                                                         C.    Invested in fixed-income investments
19. Reasonable expectation theory states that if         D.    Invested for maximum return
    coverage or benefits are implied to a
    reasonable person, but not in the language of     26. An annuitant-driven contract bases benefits
    the policy, then ______________.                      on something happening to the death,
                                                          disability or age of the _______________.
   A.    Coverage / benefits extend to the
         policyholder                                    A.    Annuitant
   B.    Only the attorneys get paid                     B.    Owner
   C.    A lawsuit can commence                          C.    Beneficiary
   D.    The insurance company wins                      D.    Insurer

20. The distribution of an annuity contract owned     27. The NAIC recommends that annuities sold
    inside a qualified plan __________________.           into a qualified retirement plan include a
                                                          disclosure that ___________________.
   A.    Is the same as other qualified plan
         distributions                                   A.    The tax-deferred feature is unnecessary
   B.    Allows for special tax breaks                   B.    All proceeds could be lost
   C.    Is not allowed                                  C.    Annuities are high-risk investments
   D.    Must occur over five years                      D.    Double taxation could result
                                 FINAL EXAM – Annuity 2004 California CE
28. A misleading advertisement might include           34. One investor consideration of variable
    which of the following:                                annuities is the fact that they have the
                                                           potential to be ____________________ than
   A.    Coverage is somehow associated with a             conventional savings or fixed annuities.
         government agency
   B.    Wording that implies the reader might            A.   Safer
         lose a right unless he acts                      B.   More liquid
   C.    Use of an address that disguise the true         C.   More responsive to economic trends
         identity of the agent                            D.   Easier to buy
   D.    All of the above
                                                       35. A typical living benefit guarantee from an
29. Direct mailers designed to produce leads               insurer might promise to _______________
    from seniors must now disclose that                    regardless of how the investment account
    __________________ if it is the case.                  performs.

   A.    An agent may contact the applicant               A.   Pay a reduced death benefit
   B.    All annuities are purchased on a buyer           B.   Pay a guaranteed retirement income
         beware basis                                     C.   Pay all associated taxes
   C.    Annuities are risky investments                  D.   Refund any surrender charges
   D.    Annuities are not liquid

30. A period certain annuity option refers to a                         --END EXAM--
    guarantee of payments for _______________,
    even if the annuitant dies before the end of
    this period.

   A.    Long period of time
   B.    Undetermined time frame
   C.    Specified number of years
   D.    Less than five years

31. New, in-home solicitation rules require agents
    to ______________________.

   A.    Give written notice 24 hours before
   B.    Notify the senior that a sales
         presentation will be given
   C.    End a meeting when requested
   D.    All of the above

32. A death waiver passes on the full account
    value if an owner dies _______________.

   A.    Without warning
   B.    Before annuitizing
   C.    Without a will
   D.    During the first year

33. A banded or new money annuity company is
    described by which of the following:

   A.    Segregates different bands of contracts
         assigning different rates to each
   B.    Old contracts earn one rate, new
         contracts another
   C.    More advantageous in a rising rate
   D.    All of the above
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