Question 1

The accumulation phase is a period of time in which an annuity is being:&#10;A) Calculated.&#10;B) Funded.&#10;C) Paid out.&#10;D) Underwritten.

Accepted Answer

During the accumulation phase, an annuity is being funded or contributions are being made to it. This is the period when the value of the annuity is growing due to interest or investment returns, and no distributions or payouts are being made.

Question 2

Which of the following annuities does not provide a survivor benefit?&#10;A) Installment Refund Annuity.&#10;B) Joint and Survivor Annuity.&#10;C) Life Only Annuity.&#10;D) Period Certain Annuity.

Accepted Answer

A Life Only Annuity does not provide a survivor benefit, it only pays out during the annuitant's lifetime. The other options all provide some form of survivor benefit.

Question 3

Which of the following methods assumes that the accumulated savings will be depleted at the end of an individual's lifetime?&#10;A) Capital preservation.&#10;B) Pure annuity.&#10;C) Monte Carlo simulation.&#10;D) Stress tested.

Accepted Answer

A pure annuity assumes that the individual will receive regular payments until their death, at which point the accumulated savings will be depleted. Therefore, this is the method that assumes the accumulated savings will be depleted at the end of an individual's lifetime.

Question 4

Whom of the following established a state funded pension plan for retired workers over the age of 65?&#10;A) Otto von Bismarck.&#10;B) Winston Churchill.&#10;C) Vladimir Lenin.&#10;D) Franklin&#10;E) Roosevelt.

Accepted Answer

Otto von Bismarck, the Chancellor of Germany, established the world's first state-funded pension scheme in 1889, providing for workers over the age of 65.

Question 5

Which of the following models typically involves placing the worst two years (from a portfolio return perspective) at the beginning of the historic model.&#10;A) Historic Return.&#10;B) Probability Analysis.&#10;C) Straight-line Return.&#10;D) Stress-tested Historic Return.

Accepted Answer

The stress-tested historic return model typically involves simulating the worst-case scenario by placing the worst two years at the beginning of the historic model. This helps to test the portfolio's resilience in the face of extreme market conditions.

Question 6

Which of the following is a type of home loan which requires no monthly payments from the borrower?&#10;A) Credit line mortgage.&#10;B) Lump sum mortgage.&#10;C) Reverse mortgage.&#10;D) Term certain mortgage.

Accepted Answer

A reverse mortgage is a type of home loan where the borrower receives payments from the lender instead of making monthly payments. These payments are typically made until the borrower moves out of the home or passes away. Therefore, no monthly payments are required from the borrower.

Question 7

Which Section of the Internal Revenue Code codifies the tax treatment of the Net Unrealized Appreciation of an in-kind distribution of employer stock from a qualified retirement plan?&#10;A) Section 72.&#10;B) Section 83.&#10;C) Section 401.&#10;D) Section 402.

Accepted Answer

Section 402 of the Internal Revenue Code deals with the tax treatment of the Net Unrealized Appreciation of an in-kind distribution of employer stock from a qualified retirement plan.

Question 8

The Pension Benefit Guaranty Corporation (PBFC) is funded by which of the following methods?
I. Assets of pension plans that the SIPC takes over as trustee.
II. Insurance premiums paid by defined benefit plans.
III. Investments of the FDIC.
IV. Recoveries from companies formerly responsible for the defined benefit plans.

A) I, II.
B) II, III.
C) II, IV.
D) III, IV.

Accepted Answer

The Pension Benefit Guaranty Corporation (PBGC) is funded through insurance premiums paid by defined benefit plans and recoveries from companies formerly responsible for the defined benefit plans.

Deck 12: Planning for Retirement and Financial Independence