Lucky the Banker mascotLTB
← Series 7: Investment Information & Recommendations
Series 7 practice questionhardPackaged Products — Variable Annuities

A client who purchased a variable annuity 3 years ago wants to surrender the contract. The surrender charge schedule is: Year 1 = 7%, Year 2 = 6%, Year 3 = 5%, Year 4 = 4%. If the contract value is $150,000, what is the surrender charge?

  1. A$6,000
  2. B$10,500
  3. C$9,000
  4. D$7,500✓ Correct answer
Explanation

Why D — $7,500

Since the client is in the third year of the contract, the applicable surrender charge is 5%. The surrender charge is $150,000 x 5% = $7,500. The client would receive $150,000 - $7,500 = $142,500 (before any applicable taxes and penalties). Surrender charges are designed to discourage early withdrawals and compensate the insurer for upfront sales costs.

Turn it into reps

Reading one answer is not the same as being ready

Lucky the Banker is a free practice app with 758+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.

Practice Series 7 freeSeries 7 exam guide

Spot an error in this question or explanation? Tell us — we fix these fast.

Related Investment Information & Recommendations questions