OSU Autumn BUSFIN 3300 Exam 3 (Ch 14, 15, 16, 22, 23, 24) Questions And Correct Answers
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RN- Nursing
Institution
RN- Nursing
Annuitant - Correct Answer Person who receives payment of annuities
Annuity - Correct Answer a periodic payment that continues for a fixed period or for the duration of a designated life or lives
Immediate Annuity - Correct Answer Pays periodic income payments that are guaranteed and fi...
OSU Autumn BUSFIN 3300 Exam 3 (Ch 14,
15, 16, 22, 23, 24) Questions And Correct
Answers
Annuitant - Correct Answer Person who receives payment of annuities
Annuity - Correct Answer a periodic payment that continues for a fixed period or for the
duration of a designated life or lives
Immediate Annuity - Correct Answer Pays periodic income payments that are
guaranteed and fixed in amount
Deferred Annuity - Correct Answer provides periodic income payments at some future
date
Bonus Annuities - Correct Answer Pays higher interest rates initially
Liquidation Period - Correct Answer The period in which funds are paid out, or
annuitized
Joint Life Annuity - Correct Answer The income payments terminate when the death of
the first covered person dies
Joint and Survivor Annuity - Correct Answer Pays benefits based on the lives of two or
more annuitants (paid till last annuitant dies)
Variable Annuity - Correct Answer pays a lifetime income, but the income payments
vary depending on common stock prices
Fixed - Indexed Annuity - Correct Answer A deferred annuity that allows the owner to
participate in the growth of the stock market and provides downside protection against
the loss of principal and prior interest earnings
Longevity Annuity - Correct Answer Provides protection against the risk of depleting
your financial assets at an advanced age (low cost annuities because there is no cash
value or death benefits, inflation protection, or the option of starting payments sooner)
Qualified Longevity Annuity Contract (QLAC) - Correct Answer A deferred income
annuity contract in which a lump sum premium is paid today to provide lifetime income
at some future date, typically 2-40 years in the future (qualified still pay taxes, non-
qualified Do Not)
Multi-Year Guaranteed Annuity (MYGA) - Correct Answer A deferred annuity that
allows you to invest in a lump sum for a specific period at a fixed rate of interest,
typically 3 to 10 years
, Annuity Payments Consist of 3 Sources: - Correct Answer -Premium Payments
-Interest Earnings
-Unliquidated principal of annuitants who die early
Annuities can be attractive to investors who have made maximum contributions to other
tax-advantage plans - Correct Answer Annuities can be attractive to investors who
have made maximum contributions to other tax-advantage plans
Exclusive Ratio - Correct Answer Used to determine the taxable and nontaxable
portions of the payment
=Investment in the contract/Expected Return
Example of Exclusive Ratio:
Ben 65 purchase immediate annuity for $108,000 that pays a lifetime monthly income of
$1,000.
-Based on IRS table life expectance of 20 Years - Correct Answer Expected Return of
$1,000(monthly income) x 12 (months) x 20 (years) = $240,000
$108,000/$240,000= 0.45
Each year he receives $5,400 Tax Free (0.45 x $12,000 Amount he makes a year) and
$6,600 is taxable
Traditional IRA - Correct Answer Must have earned income during the year and must
be under 70 1/2. Maximum annual contribution is $6,000 or 100% of taxable
contribution
IRA Distributions - Correct Answer Distributions before age 59 1/2 are subject to 10%
tax penalty . An IRA rollover is a tax-free distribution of cash or property from one
retirement plan to another
A Roth IRA - Correct Answer Another type of IRA:
-Annual Contributions are not tax deductible
-Contributions can be made after age 70 1/2
-A traditional can be converted to a Roth
Annuity vs. Life Insurance: Life Insurance - Correct Answer -Creates an immediate
estate
-Protects against dying too soon
Annuity vs. Life Insurance :Annuity - Correct Answer -Creates a fund
-Provides a lifetime income that cannot be outlived
-Protects against living to long
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