OSU Autumn BUSFIN 3300 Exam 3 Questions with
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
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
