Case application chapter 14-15|
CHAPTER 14 CASE STUDY:
(a) James should purchase a flexible premium deferred annuity because that would allow him changes in the amount of payments and also the frequency of payments. He has the option of selecting the flexible premium annuity which is either fixed annuity or a variable annuity. (b) Nancy should purchase a fixed annuity and select a life income annuity option that will guarantee her a lifetime income irrespective of how long she lives. Depending on her needs and objectives, the life income option can be selected with a certain number of guaranteed payments. (c) Jennifer should select a life annuity income option with either an installment refund feature or cash refund feature. Under the installment refund option, if the annuitant dies before receiving total income payments equal to the purchase price of the annuity, the payments continue to a designated beneficiary until they equal the purchase price. Under the cash refund option, if the annuitant dies before receiving total payments equal to the purchase price of the annuity, the balance is paid in a lump sum to the beneficiary. (d) Fred should purchase a variable annuity, which is designed to provide an inflation hedge after retirement. (e) Mary should purchase a fixed annuity. She should select the life income annuity option with no refund feature. This option provides a life income to the annuitant only while the annuitant is alive.No additional payments are made after the annuitant dies. A life income option with no refund pays the highest amount of periodic income payments because it has no refund feature. (f) Kathy should purchase an equity-indexed annuity. An equity-indexed annuity is a fixed, deferred annuity that allows the annuity owner to participate in the growth of the stock market and also provides downside protection against the loss of principal and prior interest if the annuity is held to term.
CHAPTER 15 CASE STUDY:
(a) Since Lorri...