life and Health Insurance - FIN-3660fe and Health Insurance - FIN-3660

Assignment Chapter 10 NAME

FIN 3660

Please be sure to include a citation and a copy of any informational source you use. Copy and paste your cited information at the end of this assignment.

1. The following question concerns annuities. Please answer each questions with sufficient detail to fully explain your answer.

a. Define an annuity and distinguish between an immediate and deferred annuity.

b. What is the purpose of purchasing an annuity? Be as specific as possible.

c. What risk is addressed by the use of annuities?

d. Distinguish between the liquidation and the accumulation periods of an annuity.

2. Two hybrid types of annuity products that insurers issue are equity-indexed annuities (EIAs) and market value adjusted (MVA) annuities. Please explain the answer that you select. With regard to these hybrid annuities, it is correct to say that an

a. EIA typically is classified as a variable annuity

b. EIA does not offer any guarantees

c. MVA annuity allows contract owners to move or withdraw premium deposits at certain times stipulated in the contract to take advantage of prevailing market interest rates

d. MVA annuity requires contract owners to be “locked in” with fixed earnings for the life of the contract

3. A variable annuity is an annuity under which the amount of the accumulated value and the amount of the periodic income payments fluctuate in accordance with the performance of one or more specified investment funds. The following statements are about variable annuities. Select the answer choice containing the correct statement and EXPLAIN why the other answers are incorrect .

a. An insurer that issues a variable annuity must guarantee that the contract’s accumulated value will experience no loss of principal and will earn at least a minimum guaranteed interest rate.

b. Federal laws in the United States treat variable annuities as securities that must comply with federal securities laws.

c. Once the contract owner of a variable annuity allocates premium amounts among a number of subaccounts, she cannot change the subaccounts in which future premiums are invested.

d. If the contract owner of a variable annuity allocates premiums among a number of subaccounts, she generally cannot change the percentage of money allocated to specific subaccounts.

4. Tasha Baker was the contract owner, the annuitant, and the payee of a life with refund annuity for which she paid a single premium of $75,000. The annuity will provide an income payment of $5,000 per year during Tasha’s lifetime. Tasha died five years after income payments began, and at the time of her death, she had received periodic income payments totaling $25,000. In this situation, the contingent payee named in Tasha’s annuity contract is entitled to receive $______________________________. Please show your work for full credit.

5. For all types of life annuities, the number and timing of periodic income payments depends on mortality experience as well as on the frequency of payments and the total length of the payout period. Please explain the following correct answer . All other factors being equal, it generally is correct to say that the shorter the time period that an annuitant is expected to live, the

a. larger the periodic income payments will be

b. smaller the periodic income payments will be

c. greater the number of periodic income payments that will be made

d. lower the annuity contract’s stated interest rate will be