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Finra Series-6 Exam - Topic 1 Question 16 Discussion

Your client is trying to choose between a variable annuity and a fixed annuity. You can tell him that:i. the fixed annuity will make guaranteed monthly payments, but has more purchasing power risk than a variable annuity.ii. he can expect higher monthly payments from his fixed annuity during a bear market than he would get from a variable annuity.iii. the earnings on both variable and fixed annuities grow tax-deferred.
C) I and III only
A) I only
B) I and II only
D) I, II, and III

Finra Series-6 Exam - Topic 1 Question 16 Discussion

Actual exam question for Finra's Series-6 exam
Question #: 16
Topic #: 1
[All Series-6 Questions]

Your client is trying to choose between a variable annuity and a fixed annuity. You can tell him that:

i. the fixed annuity will make guaranteed monthly payments, but has more purchasing power risk than a variable annuity.

ii. he can expect higher monthly payments from his fixed annuity during a bear market than he would get from a variable annuity.

iii. the earnings on both variable and fixed annuities grow tax-deferred.

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Suggested Answer: C

Only Statements I and III are accurate. When your client is trying to choose between a variable annuity and a fixed annuity, you can tell him that the fixed annuity will make guaranteed monthly payments, but has more purchasing power risk than a variable annuity, and that the earnings on both variable and fixed annuities grow tax-deferred. You cannot tell him that he can expect higher monthly payments from his fixed annuity during a bear market than he would get from a variable annuity. This will depend on various factors, such as the amount of the fixed annuity payment, the assumed interest rate, and the actual returns earned on the variable annuity investment portfolio.


by Selma at May 06, 2022, 06:22 PM

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Elly
10 months ago
Tax-deferred growth is a win for both types!
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Heidy
10 months ago
Not sure about that; variable annuities can be pretty flexible.
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Chantell
11 months ago
Surprised to hear fixed annuities can outperform in bear markets!
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Gregoria
11 months ago
I agree, but the purchasing power risk is a big deal.
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Nida
11 months ago
Fixed annuities do have guaranteed payments!
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Leatha
11 months ago
I feel like I might have mixed up the benefits of fixed versus variable annuities in my studies. I need to double-check that fixed annuities really do offer higher payments during a bear market.
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Aracelis
11 months ago
I think I practiced a question similar to this, and I recall that variable annuities can be riskier in a bear market, but I can't remember the specifics.
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Solange
11 months ago
I remember that fixed annuities provide guaranteed payments, but I'm not sure about the purchasing power risk part.
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Keith
11 months ago
I’m pretty confident that both types of annuities grow tax-deferred, so I think that part is definitely true.
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Paulina
11 months ago
Hmm, I'm a bit unsure about this one. Descriptive analytics can be tricky to spot sometimes. I'll need to carefully review the options and think it through.
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Blythe
11 months ago
I'm a little confused by this question. Is it asking about the person or entity responsible for the initial asset allocation? I'll need to re-read the question and think it through step-by-step.
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