1. Explain, in a sentence or two, how life annuities can protect a person against the risk “of living too long.”
2. Briefly explain what the word “term” in term certainty annuity refers to.
3. Briefly explain why term annuities do not require a guarantee clause but life annuities do.
4. Briefly explain the difference between an installment refund annuity and a cash refund annuity.
5. Briefly explain the difference between a prescribed annuity and an impaired annuity.
6. Why are annuities considered to be creditor-protected?
7. A client wants to fund part of his retirement with an annuity that he will eventually purchase for $300,000. If his accumulation phase is 5 years long, with an 8% growth rate per year and $5000 in annual payments, how much money should the client have at the beginning of this process?
8. A $350,000 non-registered annuity provides a monthly payment of $1,500 over 20 years.
Calculate the capital element of each payment.
9. Where a $350,000 registered annuity was determined to provide a monthly payment of $1,500 monthly over 20 years, calculate the taxable element of each payment.
10. Prescribed annuities generally offer annuitants all of the following except:
a. Tax deferral
b. Paying lower amounts of tax in the early years of an annuity term and higher amounts of tax in the later years of an annuity term than would otherwise occur
c. Level after-tax income
d. Lower after tax income amounts when compared to GICs and short term bonds
11. Where an annuitant bought an annuity with a 15 year guarantee period but died in year 7,
how much longer would a beneficiary normally receive a payment?
a. 15 years
b. 7 years
c. 8 years
d. 0 years
12. An impaired annuity offers an enhanced payout schedule to an annuitant because the
underwriter assumes the annuitant has a shorter life expectancy. All of the following are
considered eligible impairments for this type of annuity except:
13. Segregated Funds offer 6 important advantages over other money products. List all of them.
14. Ivan invested $100,000 into a segregated fund. He died when the fund was valued at
$80,000. Calculate how much his estate received when the fund was sold.15, Assume Ivan lived a little longer than in the above question and he used his guarantee reset to “lock-in” the value at $145,000 before he died. At death, how much money does his estate receive?
16. Assume that after Ivan reset his guarantee at $145,000, there was a market crash and the segregated fund value dropped to $130,000 before Ivan died. Recalculate how much money his estate receives?
17. Sam owns an annuity with a life insurance company that is invested in units of a segregated fund. Sam financed the annuity with a single deposit of $15,000 and invested the funds in a newly issued segregated fund with a unit value of $10. This annuity offers a
75% guarantee on segregated fund deposits at death of the annuitant or maturity of the plan. Sam has experienced a personal financial crisis and needs to withdraw $3,000 from his annuity. What will the death benefit guarantee of the annuity become if Sam withdraws the $3,000 when the fund unit value is $17, if the annuity uses the linear withdrawal method to adjust the guarantees?
18. Sam, from the above question, withdraws $4,000 after the fund unit value drops to $9.Calculate the post-withdrawal guarantee level assuming the annuity uses the proportional reduction method to adjust its guarantee?
19. Segregated Funds operate in ways similar to mutual funds in that they have MERs, sales loads and similar fund objectives and asset allocation. Since the segregated fund is an insurance product, does the KYC rule apply to a segregated fund purchase?
20. One of the key differences between a segregated Fund and a mutual fund involves the documents the client must receive at the time of purchase. Identify the two key documents a client must receive at the point he purchases a segregated fund.