1. The accounting method used in developing the annual statement that is filed with the state insurance department is
a. Generally Accepted Accounting Principles GAAO
b. Statutory
c. International Accounting Standards (IFRS)
d. None of the above
2. Which of the following is not a factor used in underwriting
a. Age
b. Occupation
c. Religion
3. When should a planner not consider term insurance for a client?
a. Cash flow is limited
b. The insurance need is short term
c. The client wants the ability to access borrowed funds in the future
d. None
4. Which of the following should not appear on a Universal Life policy illustration
a. Surrender charges
b. Minimum interest crediting rate
c. Maximum mortality charges
d. Guaranteed dividends
5. What does the phrase "puffed" dividends mean with regard to policy illustrations?
a. They are overly optimistic
b. They are consistent with what has been historically paid
c. They are guaranteed
d. They are lower than what has been historically paid
6. Calculate the annual 10year Net Cost per thousand using the Traditional Method given the following information for a $1000 policy
Total Premiums: $222.40
Total Dividends: $55.10
Cash value year 10: $160.00
Term Dividend: $5.25
7. Taxation of annuities are governed under:
a. IRC sec 7702
b. IRC sec 7702a
c. IRC sec 7
d. IRC sec 72
8. Which of the following are types of annuities:
i. Immediate annuities
ii. Deferred annuities
iii. Life annuities
iv. Fixed period annuities
a. I and ii only
b. I, ii and iii
c. I, iii and iv
d. All
9. A variable annuity allows the annuitant to manage the assets supporting the account during the accumulation phase of the contract.
a. True
b. False
10. Which of the following is not a feature of fixed annuities?
a. Safety of principal
b. Guaranteed level o interest
c. Payment to the annuitant may vary depending upon investment results
d. To provide a conservative complement to other investments
11. Which of the following rating agencies is usually considered the most lenient?
a. A.M. Best
b. Moody's
c. Fitch
d. Standard & Poor's
12. Which of the following is (are) true?
i. A mutual company has no shareholders
ii. A stock company has no shareholders
iii. A mutual company, in theory, is owned by its policyholders
iv. A stock company, in theory, is owned by its shareholders
a. I only
b. I and iii only
c. I, iii and iv only
d. All
13. Average policy and company size are related
a. True
b. False
14. Calculate the exclusion ratio for a 70 yr old female who buys a life only annuity paying $3,840 per year for $24,000. Her life expectancy is 16yrs
15. Given that the exclusion ratio for a $100 per month payout annuity is 62.50% which of the following is true:
A. $37.50 is considered interest and taxed at normal income rates
B. $37.50 is considered interest and taxed at capital gains rates
C. $62.50 is considered interest and taxed at normal income rates
D. $62.50 is considered interest and taxed at capital gains rates
16. When should a fixed annuity not be considered as part of the financial planning process?
a. When a person wants an income that cannot be outlived
b. When the ability to manage the supporting assets is desired
c. When a person wants a minimum guaranteed interest rate
d. When tax deferred growth is desired
17. Which of the following are factors to consider when determining an appropriate type of coverage for a client?
i. Client's preferences, prejudices, and priorities
ii. Holding period probabilities
iii. Client's ability to pay a premium
iv. Amount of insurance method
a. Ii only
b. Iii and iv only
c. I, ii and iii only
d. All
18. What problem weakens the value of the traditional net cost method?
a. It adds premiums over a stated period of time
b. It divides the total net cost by the policy face amount
c. It ignores the time value of money
d. It subtracts total dividends from total premiums
19. Which of the following is the key factor to remember when considering whether to replace an existing policy? (This is from the perspective of a prospective client)
a. Will the policy pay new commission
b. Match the product to the problem
c. All whole life policies sold prior to 1986 should be replaced
d. If the price is two time less than the Belth benchmark, the policy should be replaced
20. Which of the following are correct when comparing an FPDA and a SPDA?
(1) A SPDA annuity phase begins immediately
(2) A FPDA annuity phase is deferred
(3) An FPDA has a flexible premium
(4) A SPDA has a single premium
a. (1) and (4) only
b. (2) and (3) only
c. (1), (2) and (3) only
d. (2), (3) and (4) only
PART B.
1. Given the following information, what us the monthly mortgage payment?
Term: 30years, interest raeww:6% payable monthly, mortgage amount: $100,000
2. What would be the outstanding loan balance at the end of 10years?