Part 2 Flashcards
Jenn has long-term growth as her investment objective and holds the following segregated funds in equal portions, each in a separate IVIC:
• AAA Canadian Equity Fund
• BBB U.S. Equity Fund
• CCC Emerging Market Fund
• DDD International Environmental Fund
She asks Richard, her new insurance agent, to give her his opinion on the risk she faces. What should Richard say?
A. She should be concerned about lack of diversification.
B. She should be concerned about interest rate risk.
C. She should be concerned about political risk.
D. She should be concerned about currency risk
D.She should be concerned about currency risk.
Brian, aged 45, is a single father to two children: Scarlett and Georgia, who are respectively 12 and 8 years old. He recently received a $50.000 inheritance from his uncle, and he wants to invest it towards his retirement. Brian works as a machinist, and his employer does not offer a retirement pension. Brian is not attracted to the low returns of guaranteed investments, and is willing to take medium risks for the potential of a decent return. He seeks advice from his life licensed insurance agent. What type of segregated funds should the agent recommended to Brian?
A. Specialty funds.
B. Balanced funds.
C. Income funds.
D. Bond funds.
B. balance funds
The Québec company Alpha Inc. offers its employees a DBPP and has decided to set up a GRRSP for its
employees. Below are some details pertaining to Claude, a company employee for many years.
• This year’s income amounts to $58,000
• Last year’s income amounted to $54,000
• No unused contribution room
• This year’s RRSP contribution limit stands at 18%
• Last year’s pension adjustment was $5,500
• This year’s pension adjustment is $6,000
What is the maximum amount Claude can invest in his employer’s GRRSP this year?
A. $3,720
B. $4,220
C. $4,440
D. $4,940
B. $4,220
Cory is a young electrician apprentice. He has the following assets and liabilities: Assets
• House: $140,000
• Income property: $160,000
• Land: $10,000
• Car: $15,000
• RRSPs (100% in the stock market): $34,000
Liabilities
• Mortgages: $245,000
• Car loan: $6,000
• Line of credit: $10,000
Which one of the following risks is Cory most exposed to?
A. Inflation risk.
B. Liquidity risk.
C. Market risk.
D. Credit risk.
B. Liquidity risk
Max, aged 65, is a very busy retiree. He spends about six months per year travelling. His portfolio is mainly invested in a technology company’s stocks. Me misses investment opportunities regularly because he does not monitor his accounts. When Greta, a licensed life agent, meets with Max to determine his income and estate plans, she finds he has no idea of the total value of his assets. What does Max need for his situation?
A. He needs to diversify into higher-risk investments that will reduce his exposure to interest risk and inflation risk.
B. He needs to ensure he does not begin Old Age Security payments since his income may indicate clawback will apply and he will incur a recovery tax.
C. He needs professional investment management through fund investing so that he is diversified
and can make decisions based on the known value of his assets.
D. He needs investor education from Greta so that he can better understand how to calculate the value of his assets.
D. He needs investor education from Greta so that he can better understand how to calculate the value of his assets.
Solange is the shareholder-manager of a very profitable company with 105 employees. She would like to set up an employee pension plan. She does not want the responsibility of guaranteeing a specific pension to her employees, nor does she want the company’s contributions to the plan to be treated as a taxable benefit for the employees. Which one of the following pension plans would be most suitable?
A. A PRPP.
B. A DCPP
C.A group TESA
D. A DBPP
D. A DBPP
On top of a DBPP, Françoise invested in group segregated funds three years ago. She intends to retire earlier than planned, in a year’s time, and will finance her income shortfall by making withdrawals from her group segregated funds. How can she go about making a claim?
A. She must complete a claim form; however, she will have to pay higher investment fees.
B. She must complete a claim form; however, she will lose the death benefit guarantee.
C. She can transfer the sums into a LIF and subsequently receive an income.
D. She can transfer the sums into a RRIF and subsequently receive an income.
C. She can transfer the sums into a LIF and subsequently receive an income.
Jacqueline is retiring and would like to have a guaranteed income stream for life. She sells her house and will put the proceeds towards the desired income. She would like to have certain income guarantees that are not linked to market performance but would like the income to be higher than current interest rates. What type of income fund meets Jacqueline’s needs?
A. ALIF
B. A segregated fund with GLWB
C. A prescribed life annuity
D. A non-prescribed life annuity
B. A segregated fund with GLWB
Randolph is a sole owner of a medium-sized business. He is divorced and has a 5-year-old son. Randolph’s health no longer allows him to purchase life insurance. He wants to invest $1 million in a fixed-income segregated fund and leave this money to his son in the event of his death. He discusses this subiect with Corinne, his insurance agent, who sells fixed income funds offered by several insurance companies with similar performances and portfolios. The expected reported returns from these funds after MERs are 3% annually. What recommendation should Corinne make to Randolph?
A. Choose a 100% maturity and death benefit with a 15-year maturity period.
B. Choose a 75% maturity and 100% death benefit with a 10-year maturity period.
C. Choose a 75% maturity and 75% death benefit with the reset feature.
D. Choose a 100% maturity and death benefit with a GMWB rider.
B. Choose a 75% maturity and 100% death benefit with a 10-year maturity period.
Judith has invested in an RSP for many years. When she retired at 65, she converted her RRSP to a life annuity with a 20-year guarantee period and designated her daughter Melanie as beneficiary. Judith died recently at age 86. Melanie now contacts a life insurance agent in order to claim the amounts owed to her under Judith’s annuity. What should the agent tell Melanie about her claim?
A. Melanie cannot make a claim.
B. Melanie can collect a monthly annuity payment until she turns 65
C. Melanie can collect the residual value of the annuity in a lump-sum payment.
D. Melanie can collect a monthly annuity payment for 20 years
A. Melanie cannot make a claim.
