Question
1. Which of the following is correct regarding the federal income taxation of annuities that are purchased with after tax dollars? A) Tax must be
1. Which of the following is correct regarding the federal income taxation of annuities that are purchased withafter taxdollars?
A) Tax must be paid annually on the investment income that accrues during the accumulation period.
B) If funds are withdrawn during the accumulation period, they are taxed as ordinary income.
C) Payments received during the liquidation phase are partially exempt from taxation.
D) There is no tax since each payment is considered compensation for a loss (ie., retirement).
C
D
A
B
2. The variable annuity:
A) pays a fixed dollar amount for a variable length of time
B) pays an annuity to a variable number of people
C) overcomes the problem of inflation and the loss of purchasing power
D) accepts variable amounts of deposits on a periodic basis during the accumulation period
C
A
D
B
3. Oprah has $250,000 and wishes to purchase a single-premium annuity. All other things being equal, which of the following annuities will provide her with thesmallestmonthly liquidation payment?
A) 20-year period certain, joint and 2/3 survivor, single premium
B) 20-year period certain, single premium
C) 20-year period certain, joint and survivor, single premium
D) Straight life annuity, single premium.
A
B
C
D
4. Granny Clampett's health insurance policy has a $500 annual aggregate deductible, and 80/20 cost sharing deductible, and a $5,000 maximum annual out-of-pocket cap of $5,000. She wrecks her Harley and breaks her hip, and her total medical bills for the injury are $122,721. How much will her insurer pay for this claim?
A) $5,500
B) $97,777
C) $98,177
D) $117,721
B
A
D
C
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