Series 65 – Uniform Investment Adviser Law Exam
Answers with Explanations
1. Which of the following is true with an annuity?
A. Taxes on earned dividends, interest, and capital gains are paid annually until the owner
withdraws money from the contract.
B. Tandom withdrawals are taxed on a LIFO basis.
C. Money invested in a nonqualified annuity represents the investor's cost basis.
D. Upon withdrawal, the amount exceeding the investor's cost basis is taxed as ordinary
income.
Answer: B
Tandom withdrawals are taxed on a LIFO basis, money invested in a nonqualified annuity
represents the investor's cost basis, and upon withdrawal, the amount exceeding the investor's
cost basis is taxed as ordinary income
2. Larry purchased a deferred annuity and, on his 65th birthday, annuitized the product
under a life with 15-year certain option. His spouse, Linda, is the beneficiary. Which of
the following statements is correct?
A. Payments will be made to Larry until his death and then to Linda for another 15 years.
B. Payments will be made to Larry until he is 80 and then cease.
C. Payments will be made to Larry as long as he lives, but should he die prior to reaching age
80, Linda will receive payments until Larry's 80th birthday.
D. Payments will be made to Larry until he is 80 and then to Linda for the remainder of her
life.
Answer: C
Payments will be made to Larry as long as he lives, but should he die prior to reaching age 80,
Linda will receive payments until Larry's 80th birthday
3. Current market interest rates are 6%. Using the discounted cash flow method of
valuation, you would expect to arrive at the highest valuation for which of the following?
A) 7% coupon maturing in 9 years
B) 10% coupon maturing in 10 years
Answers with Explanations
1. Which of the following is true with an annuity?
A. Taxes on earned dividends, interest, and capital gains are paid annually until the owner
withdraws money from the contract.
B. Tandom withdrawals are taxed on a LIFO basis.
C. Money invested in a nonqualified annuity represents the investor's cost basis.
D. Upon withdrawal, the amount exceeding the investor's cost basis is taxed as ordinary
income.
Answer: B
Tandom withdrawals are taxed on a LIFO basis, money invested in a nonqualified annuity
represents the investor's cost basis, and upon withdrawal, the amount exceeding the investor's
cost basis is taxed as ordinary income
2. Larry purchased a deferred annuity and, on his 65th birthday, annuitized the product
under a life with 15-year certain option. His spouse, Linda, is the beneficiary. Which of
the following statements is correct?
A. Payments will be made to Larry until his death and then to Linda for another 15 years.
B. Payments will be made to Larry until he is 80 and then cease.
C. Payments will be made to Larry as long as he lives, but should he die prior to reaching age
80, Linda will receive payments until Larry's 80th birthday.
D. Payments will be made to Larry until he is 80 and then to Linda for the remainder of her
life.
Answer: C
Payments will be made to Larry as long as he lives, but should he die prior to reaching age 80,
Linda will receive payments until Larry's 80th birthday
3. Current market interest rates are 6%. Using the discounted cash flow method of
valuation, you would expect to arrive at the highest valuation for which of the following?
A) 7% coupon maturing in 9 years
B) 10% coupon maturing in 10 years
