Lila invested $10,000 in one of Long Life Insurance Company's annuity contracts When issued, the contract was paying a 5 percent rate of return Two years later, Long Life increased this rate to 7 percent Underlying Lila's contract is a 3 percent rate of return, guaranteed for the life of the contract What kind of annuity does Lila own (Search Chapter 2) a a fixed immediate annuity b a variable immediate annuity c a fixed deferred annuity d a variable deferred annuity 12 Two years ago, 62 year old Felicity purchased an annuity that credited an interest rate of 6 5 percent to the contract's values Today, Felicity received a notice from the issuing insurer that the interest rate that will be paid on the contract for the next 12 months will be 5 5 percent Underlying the contract for as long as it is held is a minimum guaranteed rate of 3 percent What kind of annuity does Felicity own (Search Chapter 2) a immediate fixed annuity b traditional fixed deferred annuity c deferred variable annuity d indexed deferred annuity 13 Mack purchased a variable annuity with a $50,000 premium deposit, which he split equally between two subaccounts At the time of purchase, the value of a unit in Subaccount 1 was $25, and the value of a unit in Subaccount 2 was $10 Six months later, the unit value of Subaccount 1 had risen to $30, and the unit value of Subaccount 2 had declined to $8 What was the value of Mack's contract at that point (Search Chapter 2) a $48,000 b $50,000 c $52,000 d $55,000 14 Ozzie owns a deferred fixed annuity Under what circumstance would he be restricted as to the amount of premium he could contribute to his contract (Search Chapter 2) a if any portion of the premiums is invested in the insurer's general account b if the contract is the funding vehicle for his IRA c if Ozzie is also the contract annuitant d Deferred fixed annuities never impose limits on contributions 15 Which of the following refers to the difference between what an insurer earns on the funds in its general account and the interest rate it declares for crediting to its annuity contracts (Search Chapter 2) a the insurer's reserve b the insurer's earnings c the insurer's spread d the insurer's liability 16 Gracie owns a deferred annuity The contract is tied to a market index, which was at 1000 when Gracie purchased the product and reached 1250 five years later at the end of the contract's crediting term The 25 percent index gain is the basis for the amount of interest credited to the contract What kind of annuity does Gracie own (Search Chapter 2) a an annual ratchet indexed annuity b a high water mark indexed annuity c a point to point indexed annuity d a variable annuity 17 At the age of 42, Steve purchased a fixed deferred annuity from Mega Mutual Life with a single premium deposit of $10,000 The declared interest rate on Steve's contract when it was issued was 5 percent, and the contract guarantees a minimum rate of 3 percent The initial declared rate is payable for two years the renewal rate for year three and later is subject to change How much interest will be credited to Steve's contract at the end of year one (Search Chapter 2) a $300 b $500 c $800 d $1,000 18 With regard to the investment of a fixed annuity's assets, which of the following statements is true (Search Chapter 2) a Premiums are invested into the insurer's separate account b Premiums are directed into the insurer's general account c Premiums are invested at the owner's option into either secure bond or fixed interest accounts d Premiums are directed at the owner's option into either government issued Treasury bills or money market accounts 19 All of the following are common modal annuitization payout options EXCEPT (Search Chapter 3) a lump sum b monthly c quarterly d annually 20 Ten years ago, John purchased a deferred annuity and named his daughter, Suzanne, as beneficiary Over the years, John invested $50,000 in the contract upon his death, the contract was valued at $118,000 Assuming that John died without annuitizing and the contract contained the standard death benefit provision, how much will Suzanne receive (Search Chapter 3) a $50,000 b $68,000 c $118,000 d $57,000

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Lila invested $10,000 in one of Long Life Insurance Company's annuity contracts. When issued, the contract was paying a 5 percent rate of return. Two

Lila invested $10,000 in one of Long Life Insurance Company's annuity contracts. When issued, the contract was paying a 5 percent rate of return. Two years later, Long Life increased this rate to 7 percent. Underlying Lila's contract is a 3 percent rate of return, guaranteed for the life of the contract. What kind of annuity does Lila own? (Search Chapter 2)
- a. a fixed immediate annuity
- b. a variable immediate annuity
- c. a fixed deferred annuity
- d. a variable deferred annuity
12. Two years ago, 62-year-old Felicity purchased an annuity that credited an interest rate of 6.5 percent to the contract's values. Today, Felicity received a notice from the issuing insurer that the interest rate that will be paid on the contract for the next 12 months will be 5.5 percent. Underlying the contract for as long as it is held is a minimum guaranteed rate of 3 percent. What kind of annuity does Felicity own? (Search Chapter 2)
- a. immediate fixed annuity
- b. traditional fixed deferred annuity
- c. deferred variable annuity
- d. indexed deferred annuity
13. Mack purchased a variable annuity with a $50,000 premium deposit, which he split equally between two subaccounts. At the time of purchase, the value of a unit in Subaccount #1 was $25, and the value of a unit in Subaccount #2 was $10. Six months later, the unit value of Subaccount #1 had risen to $30, and the unit value of Subaccount #2 had declined to $8. What was the value of Mack's contract at that point? (Search Chapter 2)
- a. $48,000
- b. $50,000
- c. $52,000
- d. $55,000
14. Ozzie owns a deferred fixed annuity. Under what circumstance would he be restricted as to the amount of premium he could contribute to his contract? (Search Chapter 2)
- a. if any portion of the premiums is invested in the insurer's general account
- b. if the contract is the funding vehicle for his IRA
- c. if Ozzie is also the contract annuitant
- d. Deferred fixed annuities never impose limits on contributions.
15. Which of the following refers to the difference between what an insurer earns on the funds in its general account and the interest rate it declares for crediting to its annuity contracts? (Search Chapter 2)
- a. the insurer's reserve
- b. the insurer's earnings
- c. the insurer's spread
- d. the insurer's liability
16. Gracie owns a deferred annuity. The contract is tied to a market index, which was at 1000 when Gracie purchased the product and reached 1250 five years later at the end of the contract's crediting term. The 25 percent index gain is the basis for the amount of interest credited to the contract. What kind of annuity does Gracie own? (Search Chapter 2)
- a. an annual ratchet indexed annuity
- b. a high water mark indexed annuity
- c. a point-to-point indexed annuity
- d. a variable annuity
17. At the age of 42, Steve purchased a fixed deferred annuity from Mega Mutual Life with a single premium deposit of $10,000. The declared interest rate on Steve's contract when it was issued was 5 percent, and the contract guarantees a minimum rate of 3 percent. The initial declared rate is payable for two years; the renewal rate for year three and later is subject to change. How much interest will be credited to Steve's contract at the end of year one? (Search Chapter 2)
- a. $300
- b. $500
- c. $800
- d. $1,000
18. With regard to the investment of a fixed annuity's assets, which of the following statements is true? (Search Chapter 2)
- a. Premiums are invested into the insurer's separate account.
- b. Premiums are directed into the insurer's general account.
- c. Premiums are invested at the owner's option into either secure bond or fixed interest accounts.
- d. Premiums are directed at the owner's option into either government-issued Treasury bills or money market accounts.
19. All of the following are common modal annuitization payout options EXCEPT: (Search Chapter 3)
- a. lump-sum
- b. monthly
- c. quarterly
- d. annually
20. Ten years ago, John purchased a deferred annuity and named his daughter, Suzanne, as beneficiary. Over the years, John invested $50,000 in the contract; upon his death, the contract was valued at $118,000. Assuming that John died without annuitizing and the contract contained the standard death benefit provision, how much will Suzanne receive? (Search Chapter 3)
- a. $50,000
- b. $68,000
- c. $118,000
- d. $57,000