Chapter 8 - Variable Contract and Municipal Fund Securities

Question 1

A customer may contribute each year to a 529 college savings plan without incurring any taxes:

Answer 1

an amount equal to the annual gift tax exclusion.

Question 2

(True or False) Regarding 529 Prepaid Tuition Plans, the beneficiary may use the tuition credits purchased at virtually any college or university in the United States.

Answer 2

False

Question 3

For variable annuities, which of the following payout options provide the highest payout?
A) Joint and Last Survivor
B) Life Annuity with Period Certain
C) Life Annuity
D) Unit Refund Annuity

Answer 3

C) Life Annuity

Question 4

Which of the following is NOT a characteristic of a 529 plan?
A) There are no income limits placed on contributors
B) Withdrawals from 529 plans used for additional purposes are not subject to federal tax
C) Earnings in accounts are tax-deferred
D) Contributions are unlimited

Answer 4

D) Contributions are unlimited

Question 5

Entity that typically sponsors a 529 plan is a:

Answer 5

state

Question 6

When purchasing mutual fund shares, the ability to receive cumulative quantity discounts is referred to as:

Answer 6

Rights of accumulation

Question 7

The money invested in variable annuity is used to buy:

Answer 7

accumulation units

Question 8

The owner invests on an after-tax basis with earnings accumulating on a tax-deferred basis.

Answer 8

Non-qualified annuity

Question 9

At annuitization, what will determine the annuitant’s payment?

Answer 9

A fixed number of annuity units with a fluctuating value per unit

Question 10

What percentage of the benefit received from a qualified annuity is subject to taxation?

Answer 10

100%

Question 11

Principals have ___ business days from receiving an application to approve an annuity sale for suitability standards.

Answer 11

seven

Question 12

How is a non-qualified annuity payout taxed?

Answer 12

Only the earnings portion is subject to tax as ordinary income.

Question 13

Allows for pre-tax contributions and the annuity value grows on a tax-deferred basis.

Answer 13

Qualified annuity

Question 14

Who assumes the investment risk in a variable annuity contract?

Answer 14

The client or contract owner

Question 15

A tax-advantage college savings plan sponsored by a state or educational institution.

Answer 15

529 account

Question 16

Who can contribute to a qualified annuity?

Answer 16

Individuals who work for non-profit organizations and public schools

Question 17

A tax-free exchange of one annuity for another.

Answer 17

1035 Exchange

Question 18

Annuity sales must be approved by a _____ to determine whether they are suitable.

Answer 18

principal

Question 19

A variable annuity is most suitable for a client seeking _____ over a long period.

Answer 19

capital appreciation

Question 20

Pays an issuer if expenses for administering the annuity are more than estimated.

Answer 20

Expense risk charge

Question 21

Guarantees an amount equal to the value of the annuity is paid to a designated beneficiary.

Answer 21

Unit Refund Annuity