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SIE > Options And Variable Products Quiz > Flashcards

Options And Variable Products Quiz Flashcards

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SIE Exam flashcards
1
Q

Unless instructed to the contrary the options clearing corporation OCC will automatically exercise all option that are

A

At least $0.01 in the money

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2
Q

What is the total premium for the following index option OEX OCT 750 call @ $9.50

A

$950

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3
Q

Your client has a portfolio of treasury bonds. You are connected about a ride in interest rates. Which of the following would you recommend?

A

Buy T -Bond puts

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4
Q

Which of the following statements regarding the impact of market performance on variable life insurance policy is True?

A

If performance in the separate account is negative the policy may have no cash value

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5
Q

A financial institution has a large portfolio of Us treasury notes and is concerned that interest rates are about to increase. Rather than selling off the notes thereby creating portfolio volatility the institution could attempt to offset the portfolios unrealized losses by

A

Buying T-Note puts

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6
Q

Bill Scott took a loan against his variable life policy several years ago. Because of poor investment performance. Bills policy cash value has dropped to a negative value of $500. What are Bills options?

A

Bill has 31 days to pay back enough of the loan to bring the cash value positive

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7
Q

American style options may be excercised

A

At any time up to the cut off time

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8
Q

The owner of a variable annuity is guaranteed to receive payments for a minimum of 15 years. This annuity is a

A

Life annuity with period certain

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9
Q

A customer buys an 8 1/2% T-Bond maturing in 5 years. He also buys a T-Bond put. Interest rates appreciate to 10%. Which of the following will occur upon sale of the bond and exercise of the put?

A

Position will be closed for a loss

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10
Q

The strike price of treasury bond options is stated as a percentage of the

A

Face amount of the underlying bonds

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11
Q

Which of the following is true about variable annuities?

A

They are regulated by state departments of insurance
They are regulated by the investment company act of 1940
They are considered securities products

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12
Q

John owns a contract that entitles him to buy 100 shares of ABC at a specified price prior to a fixed expiration date. John owns a

A

Call option

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13
Q

A customer has a portfolio of treasury securities. In order to increase investment income

A

Write calls

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14
Q

If you anticipate interest rates to decline you would recommend a

A

T-Bond yield put

T-Bond call

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15
Q

The market price of ABC stock is $17.25. The ABC June 20 call

A

Is out of the money

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16
Q

The expense limitation clause of a life insurance policy

A

Requires the insurance company to pay administrative expenses above the maximum charges stated in the policy

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17
Q

A deferred variable annuity may be a suitable investment for which of the following investors?

A

A 55 year old investor with a high income looking for a tax deferred investment which will provide inflation protected income during retirement years

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18
Q

The owner of a variable annuity is guaranteed to receive payments for a minimum of 15 years. This is annuity is a

A

Life annuity with period certain

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19
Q

Variable life policy provision allow for

A

Changing among investment alternatives in the separate account without tax liabilities

Converting the policy to a whole life policy

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20
Q

If an insured commits suicide within the first 2 years of a variable life policy issue the insurance company

A

Returns the premiums paid into the policy

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21
Q

A domestic company is exporting goods to Europe. Which of the following option strategies would it use?

A

Buy euro puts

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22
Q

What are the benefits of writing covered calls?

A

Income and a partial hedge

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23
Q

Which of the following apply to a call option contract?

A

The right to buy at a strike price

The obligation to sell at a strike price

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24
Q

Which of the following statements is true?

A

Covered options writers own the underlying shares

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25
Q

The strike price of treasury bond options is stated as a percentage of the

A

Face amount of underlying bonds

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26
Q

A company is building a plant in Japan using Japanese Labor. The company will pay the labor force in Japanese yen in approximately 3 months. The company believes the dollar will decline against the yen. In order to best protect itself what option position should the company choose?

A

Buy Japanese yen call

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27
Q

What is the cost of a March 120 T-Bond call with a premium of .20?

A

$625

28
Q

Which of the following apply to put option contracts?

A

Right to sell at a strike price

Obligation to buy at a strike price

29
Q

The options disclosure document of the options clearing corporation OCC must be sent to the customer

A

At or prior to account approval

30
Q

The securities in the separate account of a variable annuity include common stocks because

A

Prices of common stock tend to reflect increases or decreases in the cost of living

31
Q

The best definition of an annuity unit is

A

An accounting measure that is created at the beginning of the annuity period and is used to determine the amount of future annuity payments

32
Q

A variable life insurance policy states of the following

A

Current and maximum investment management fee
Current and maximum administrative expenses
Current and maximum mortality costs

33
Q

A mutual fund portfolio manager expects interest rates to increase. He wishes to protect his treasury bond portfolio but also wishes to generate some additional income. What would be the most appropriate action for the portfolio manager to take?

A

Sell T-Bond calls

34
Q

Which of the following settlement options will give the annuitant the highest periodic payment?

A

Straight life

35
Q

American style options may be exercised

A

At any time to the cut off time

36
Q

A variable life policy’s nonforfeiture provision

A

Entitles the policy owner to he cash value less any outstanding loan amount if the policy is terminated

37
Q

A simultaneous investment in a call and a put on the same underlying security with the same strike price and the same expiration date is a

A

Straddle

38
Q

If XYZ stock is trading at 27.50 which of the following options are in the money?

A

XYZ July 25 call

XYZ August 30 put

39
Q

An investor is very bullish on a stock. Which of the following actions would provide the greatest potential short term gain based on this belief?

A

Buy one call on the stock

40
Q

Which of the following is guaranteed?

A

Interest on a fixed annuity contract
Interest and principle on direct government obligations
Death benefit on a whole life insurance policy

41
Q

An investor owns 1000 shares of ABC a biotechnology company that is still in the early stages of testing a new drug. The price of the stock dropped recently but the investor believes that the drug the company is developing will be a blockbuster. Which of the following strategies would enable the investor to increase the overall return on his portfolio during this time?

A

Write 10 ABC calls

42
Q

Which types of variable annuities use accommodation units to track the owners interest in the separate account?

A

Single premium deferred annuity

Periodic payment deferred annuity

43
Q

The holder of a call option on a T-Bond will profit under all of the following circumstances

A

Yields on T-Bonds decrease

Prices of T-bonds increases

44
Q

A US corporation imports goods from Switzerland. Which of the following option positions should it choose to best protect itself?

A

Buy Swiss franc calls

45
Q

When Bob Turner does he was the owner of a variable life insurance policy that had a $110,000 cash value and a $250,000 death benefit. Three years earlier he had taken out a loan on the policy for $30,000. How much in death benefit proceeds will his beneficiary receive?

A

$220,000

46
Q

An option contract that gives the holder of the contract the right to sell the underlying security at the strike price is a

A

Put option

47
Q

An annuity owner chooses the straight life annuitization option because

A

It provides the maximum cash flow of all his options

48
Q

The buyer of a long straddle

A

Buys a put and a call on the same underlying security with the same strike price and expiration date

49
Q

Cash value in variable life policies are required to be made available to the policyholder if the premium payments stop. This is the contractual feature known as the

A

Nonforfeiture provision

50
Q

An option spread with the same expiration but different strike prices is called a

A

Vertical spread

51
Q

Which of the following securities acts governs the variable annuity separate account?

A

The investment company act of 1940

52
Q

Which of the following are correct statements about the separate account in a variable contract?

A

The separate account is segregated from the general account
The separate account cannot be mixed with assets from the mutual fund family’s regular funds even if managed by the same fund manager

53
Q

All of the following are true of voting rights of variable life policy owners

A

Have one vote for every $100 of cash value
Have the same rights as investment company shareholders
Are entitled to vote on investment objectives of the separate account

54
Q

What type of annuity contract could act as a hedge against either inflation or deflation?

A

Combination annuity

55
Q

The cash value of a variable life policy

A

Is not guaranteed
Increases as premiums are paid
Fluctuates based on the performance of the securities in the separate account

56
Q

Recommending the exchange of a deferred variable annuity is subject to suitability standards and to all of the following additional considerations

A

Features and enhancements of the new annuity that would benefit the customer
Surrender charges on the existing annuity
Loss of benefits of the existing annuity

57
Q

The function of a prospectus in association with a variable contract is to

A

Provide the consumer with complete information in order to make an informed decision

58
Q

A customer buys an 8 1/2% T-Bond maturing in 5 years. He also buys a T-Bond put. Interest rates appreciate to 10%. Which of the following will occur upon sale of the bond and exercise of the put?

A

Position will be closed for a loss

59
Q

Triple witching involves the expiration of which of the following four times a year?

A

Equity options

Equity option indexes

60
Q

Concerning valuation of variable annuity all of the following are true

A

The value of a unit varies with the performance of the separate account
The value is expressed in units similar to mutual fund shares
Units are revalued daily similar to mutual fund shares

61
Q

ABC stock is trading at $18.30 a share. The ABC June 20 put has a premium of $2.60. It has a time value of

A

$0.90

62
Q

Which annuity option provides the largest payout and costs the least?

A

Life only annuity

63
Q

The manager of a bond fund has used the strategy of writing covered T-Bond calls as a means of increasing the funds yield Distributions to shareholders from this source of income will be treated for tax purposes as

A

Capital gains

64
Q

The cash value of the separate account of a variable life policy is $1,000. How many votes may the policy owner cast on matters requiring policy owner approval?

A

10

65
Q

Most stock options are settled which way?

A

Physically

66
Q

Actuarial science considers a person to be statistically dead at

A

Age 100

67
Q

A grandfather wants to buy an annuity that will be the best benefit to both his son and grandfather. What annuity type would best suit his needs?

A

Joint and last survivor

SIE (23 decks)

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