You are explaining how a variable annuity functions to one of your clients. Which of the following statements is true? OA) Withdrawals are always federal income tax-free. B) Growth inside the annuity is taxed annually. C) The growth in the variable annuity is guaranteed. D) The rates of return may fluctuate depending on how the account value is invested.
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- Select all the statements on perpetuities that are correct. a. The present value of a perpetuity increases if the interest rate increases. b. If I multiply the present value of a perpetuity with the interest rate then I get the value of a single payment of the cashflow stream. c. The present value value of a perpetuity is independent of the interest rate. d. The present value of a perpetuity is infinite as all the payments add up to infinity. e. A perpetuity describes a constant cashflow at the end of each year that continues infinitely long.All the following are advantages of a single premium deferred variable annuity, EXCEPT: A.lt provides income tax deferral during the accumulation period B.lt provides for the cost savings of dollar- cost averaging C.It will provide the owner with some hedge against inflation D.It provides for diversification of investments for the ownerIf you're calculating the present value of future payments, you're using an annuity. Is this statement accurate or incorrect?
- Which one of these statements related to growing annuities and perpetuities is correct? In computing the present value of a growing annuity, you discount the cash flows using the growth rate as the discount rate. You can compute the present value of a growing annuity but not a growing perpetuity. The future value of an annuity will decrease if the growth rate is increased. An increase in the rate of growth will decrease the present value of an annuity. The present value of a growing perpetuity will decrease if the discount rate is increased.Using an annuity, you may calculate the present value of a single payment or a series of payments you will receive. Is this statement correct or incorrect?Suppose that you have the capacity to pay, would you rather borrow a loan that is amortized monthly or one that is amotized quarterly? what are your considerations when availing a loan (qualitative or quantitative) discuss.
- 1) What type of annuity is a Sinking fund? 2) Maturity value is equal to principle plus interest when considering a Promissory Note? a. True b. False 3) Depreciation expense results in an indirect tax savings a. True b. False 4) The monthly payment is calculated by totaling the finance charge and the amount financed divided by the number of payments of the loan. a. True b. FalseWhich of the following statements is CORRECT? If some cash flows occur at the beginning of the periods while others occur at the ends, then we have what the textbook defines as a variable annuity. The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods. If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity. The cash flows for an annuity due must all occur at the ends of the periods. The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month.In comparing an ordinary annuity and an annuity due, which of the following is true? a. The future value of an annuity due is always less than the future value of an otherwise identical ordinary annuity, since one less payment is received with an annuity due. b. The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity. c. The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due.
- Perpetuity is a type of annuity which has infinite period of payments. The present value of a perpetuity equals to the annual payment divided by the required rate of return. True or FalseWhich of the following statements is CORRECT? 1. If some cash flows occur at the beginning of the periods while others occur at the ends, then we have what the textbook defines as a variable annuity. 2. The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month. 3. If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity. 4. The cash flows for an annuity due must all occur at the ends of the periods. 5. The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.How would an increase in the interest rate effect the present value of an annuity problem (all other variables remain the same)