SF

Question 1

At contract maturity, the policyholder can choose to:
1. (Extend the contract) and keep the investment in place
2. (Withdraw the value) of the investment

Answer 1

2. (Withdraw the value) of the investment

Question 2

What are financial institutions such as banks restricted to.

a) Mutual funds
b) Segregated funds
c) Total annuity funds
d) Sales of term annuities

Answer 2

Sales of term annuities

Question 3

At contract maturity, an investor, still risks the loss of up to how much percent of his investment?

A 15% B 35% C 25% D 10%

Answer 3

25%

Question 4

Which income is taxed as interest?
A personal income D foreign income, C local income Dterritorial income

Answer 4

Foreign income

Question 5

On maturity of the contract, the policy owner has two options, He may extend the contract and leave his investment in place or:
A he may change the payout plan B he may change the annuitant C, he may change the maturity date D he may withdraw the value of his investment

Answer 5

He may withdraw the value of his investment

Question 6

A segregated fund maturity guarantee applies on the maturity date of the contract. The minimum maturity date is:
A seven years B 15 years C 5 years D 10 years

Answer 6

10 years

Question 7

This type of specialty fund seeks companies that are struggling financially: A business funds, B emerging market funds, C socially responsible funds D entrepreneurial funds

Answer 7

Emerging market funds

Question 8

A request for withdrawal is initiated by the
A power of attorney (POA)
B insurer
C annuitant
D contract owner

Answer 8

Contract owner

Question 9

In order to provide sound advice to a sponsor or administrator, the agent must be familiar with all of the following aspects of group plans, except:
A alternative funding
B claims process
C group structure
D group documents

Answer 9

Alternative funding

Question 10

Pension credit credits are created in plans every year, except A DBPPs B DCPPs C DPSPs D PRPPs

Answer 10

PRPPs

Question 11

What manages risk?
A asset classes
B compounding
C liquidity
D diversification

Answer 11

Diversification

Question 12

Which one is not in the form of returns on Stocks
A declared by the Board of Directors
B investment bonds
C capital gains
D dividends

Answer 12

Investment bonds

Question 13

How long is a medium term investment objective?
A 10 years to 15 years
B 3 years or less
C 3 years to 10 years
D 12 years to 15 years

Answer 13

Three years to 10 years

Question 14

Segregated funds provide two guarantees that protect the investor from the loss of principal: a maturity guarantee, and:
A a guaranteed minimum withdrawal benefit
B maturity, guarantee
C a death benefit guarantee
D a disability benefit guarantee

Answer 14

A death benefit guarantee

Question 15

Which of the following is not one of the three key pieces of information needed to understand how the maturity and death benefit guarantees apply and when they are paid:
A) what is the guarantee: 75% or 100%
B) what is the value of the principle, or premium, invested by the policy owner in the segregated fund?
C) who is the beneficiary of the contract?
D) what is the market value of the contract at maturity or death?

Answer 15

Who is the beneficiary of the contract?

Question 16

These types of funds invest in stocks of publicly traded companies and income, trust to generate dividend income and capital gains:
A money market funds
B bond funds
C equity funds
D income funds

Answer 16

Equity funds

Question 17

Which of the following is not one of the three types of fees that can be charged against a RRSP by the financial institution holding the account?
A administrative or trustee fees, cover the financial institutions cost of looking after the account.
B insurance fees can be charged, depending on the risk involves for investing, for buying, selling and switching investments.
C accounting change fees may be charged for closing the account, changing the withdrawal schedule and/or making a lump sum withdrawal. D investment fees can be charged, depending on the investment, for buying, selling and switching investments.

Answer 17

Insurance fees can be charged, depending on the risk involved for investing, for buying, selling and switching investments

Question 18

When a DPSP member retires or moves to another employer, he can do all of the following, except
A transfer funds to an RRSP or RRIF
B transfer funds to a GIC
C purchasing annuity
D receive the proceeds of the plan as a lump sum

Answer 18

Transfer funds to a GIC

Question 19

Which of the following is not one of the criteria for contribution to a personal RRSP
A) contribute before reaching the maximum age limit, which is December 31 of the year the account owner turns 71 years of age
B) have earned income for the previous two years
C) have contribution room available from a previous year because the account owner did not make his maximum contribution in that year letter
D) have filed an income tax return for the previous year in which business or employment income was declared

Answer 19

Have earned income for the previous two years

Question 20

All of the following are elements that an annuity recommendation should include except?
A annuity interest
B annuity penalties
C annuity rate
D value of guarantees

Answer 20

Annuity interest

Question 21

This type of rate is expressed as a percentage of the funds holdings that have been replaced during the previous year:
A trading expense ratio (TER)
B management expense ratio (M ER),
C marginal, tax rate,
D portfolio, turnover rate

Answer 21

Portfolio turnover rate

Question 22

The individual variable insurance contract (IV 1C) spells out the conditions for all of the following, except:
A buying benefits,
B terminating benefits
C transferring benefits
D selling benefits

Answer 22

Transferring benefits

Question 23

For a TFSA, tax-free refers to all of the following, EXCEPT
A no taxation on termination
B no tax deductions on contributions
C no need for tax deferral
D no taxation on withdrawals

Answer 23

No taxation on termination

Question 24

Employees cannot be members of a DPSP if they own what percentage of shares in the company
A 7% B3% C5% D 10%

Answer 24

10%

Question 25

All of the following are key factors of an existing plan that are analyzed by an agent, except: A sponsor vesting period B rate of member participation C suitability of plan to sponsor objective D cost of plan to sponsor

Answer 25

Sponsor vesting period

Question 26

What must an immediate annuity be funded with A monthly payment B weekly payment C biweekly payment D lump sum payment

Answer 26

Lump sum payment

Question 27

A client who has a DBPP with her current employer is getting a job with a different employer and would like to know what she can do about her DBPP. Given this scenario, which of the following is NOT an option for her? A transfer the commuted value, DBPP to LIRA B transfer the pension monies to her new employers pension plan C transfer the pension money to her RRSP D leave the pension monies with her current employer

Answer 27

Transfer the pension money to her RRSP

Question 28

Which of the following is not a benefit of income splitting? A potential to increase the pension credit from $2000-$4000 B income splitting has the potential to reduce or eliminate the old age security claw back C the higher tax bracket spouse can move RRSP assets to the lower tax bracket spouse D the higher tax bracket spouse can move pension assets to the lower tax bracket spouse

Answer 28

Potential to increase the pension credit per couple from $2000-$4000

Question 29

Given the following list, which one shows the investments in the correct order, taxed from the lowest to the highest A RPP income, non-registered annuity, income, RRSP withdrawal B earning based on capital gains, dividend income, interest C income/payments received from EI, WSIB, CPP D withdrawal from RRIF, TFSA earnings, RRSP withdrawal

Answer 29

Earnings based on capital gains, dividend, income, interest

Question 30

Out of the following list, which one list has its segregated funds in the correct order of risk A Canadian bond fund, balanced fund, dividend fund B Canadian bond fund, money market fund, US growth fund C money market funds, Canadian equity fund, corporate bond fund Canadian income fund, Canadian bond fund, Canadian resource funds

Answer 30

Canadian bond fund, balanced fund, dividend fund

Question 31

On November 6, 2016 Jenny purchased a $200,000 non-registered segregated fund that invest in Canadian equities. The segregated fund has a 10 year, 75% maturity guarantee. If this fun matures on November 6, 2026 with an account value of $160,000, how much will Jenny receive from the maturity guarantee A 0 dollars B $160,000 C $200,000 D $150,000

Answer 31

$160,000 The market value at maturity is $160,000, which is higher than the 75% guarantee ($150,000). In segregated funds, the investor always receives the higher of the two.

Question 32

Chris is 70 years old and owns a segregated fund contract. It’s current market value is $93,000. He opened his account 12 years ago by depositing $71,000. Upon his death, Chris is planning on making a charitable donation to a local charity that supports minority rights. Chris wants your advice on how his estate can maximize the tax benefits of making such a charitable donation. Given this scenario, which of the following statements is most correct. A by name, the charity as a beneficiary Chris will be able to claim 75% of his income, but he will be liable for the capital gains tax on the account B by naming the charity as a beneficiary Chris will be able to claim 100% of his income, but he will be liable for the capital gains tax on the account C by transferring the ownership of the account on his death to the charity, Chris will be able to claim up to 75% of his net income and not be liable for any capital gains tax on the account D by transferring the ownership of the account on his death to the charity, Chris will be able to claim up to 100% of his net income and not be liable for any capital gains tax on the account

Answer 32

By transferring the ownership of the account on his stuff to the charity, Chris will be able to claim up to 100% of his net income and not be liable for any capital gains tax on the account

Question 33

All of the following are characteristics of segregated income funds except: A fairly low risk and stable B mainly focusses on growth C often includes government and corporate bonds D typically includes large, cap dividend shares , income shares, and preferred shares

Answer 33

Mainly focusses on growth

Question 34

Kevin has investments in a non-registered account. Since he understands that these investments are taxable, he is looking for the most tax efficient option for them. Given this scenario, which of the following segregated funds will be of most interest to him. A Canadian dividend fund B balanced fund C US equity fund D Canadian bond fund

Answer 34

Canadian dividend fund

Question 35

Candace, a retired school teacher receives $4250 per month from her life annuity. She would like to know how much she would receive every month in the unlikely event that the insurance company providing the annuity went bankrupt. Given this scenario, which of the following is correct A $4250 B$0.00 C $2000 D $3612.50

Answer 35

$4,250 (REMIC says) 3.1.5 When a promised benefit for a payout annuity is more than $5000 per month, the annuitant receives Assuris protection for the greater of $5000 per month or 90% of the promised benefit. EX: if a benefit is $4,250/month, the annuitant would continue to receive that much.

Question 36

Joe is retiring from his position with the manufacturing company that he’s been with for over the past 35 years. As part of his retirement benefits, he has been given a lump sum of cash equal to the last five years of his salary. Since he is retiring early at age 60, he wants to know what the best option is to use this money to provide consistent income over the next five years, until his retirement pension begins. Which of the following choices should you suggest? A five-year immediate term annuity B five-year guaranteed term annuity C five-year deferred term annuity D five year variable income term annuity

Answer 36

Five-year immediate term an annuity

Question 37

Mr. Domingo purchased a $250,000 five-year accumulating segregated fund with a 5% interest rate maturing in five years. The value at maturity would be $319,070. At the end of four years, the value had climbed to 303,877 and interest rates had increased to 6%. Mr. Domingo decided that he wished to close the 5% fund so that he could reinvest the current 6% fund. What is the market value adjustment that Mr. Domingo would pay at the end of four years to break his contract and receive his money? A $2868 B $682 C zero dollars D $15,193

Answer 37

$2868

Question 38

Which of the following is NOT true about an RESP A) there is a lifetime contribution limit per beneficiary B) deposits are not deductible, beneficiaries withdrawals are not taxable C) withdrawals are taxed in the hands of the beneficiary D) the federal government subsidizes the parents deposits with a grant

Answer 38

Deposits are not deductible, beneficiaries withdrawals are not taxable. 4.7.4.3

Question 39

For the past 22 years, Jimmy has worked for a company with a defined benefit pension plan. The formula to calculate the pension benefit is 2% per year of the employee’s last five years of income. And Jimmy situation, that average income is $89,500. Given this scenario, how much pension income can Jimmy expect to receive an annually A $39,380 B $1780 C $393,800 D $39,160

Answer 39

39,380

Question 40

What plan is this? . Employer sponsored RRSP . Employees and employers contribute (employer match is common) . Tax deferred growth, same as an RRSP

Answer 40

GRRSP

Question 41

What plan is this? . For small business and self employed individuals . Low cost retirement plan, similar to DCPP but portable between jobs

Answer 41

PRPP

Question 42

What plan is this? . Employer and employee contribute a fixed percentage of salary . No guaranteed payout-retirement income depends on investment performance

Answer 42

DCPP

Question 43

What plan is this? . Employer guarantees a FIXED retirement income based on salary and years of service . Employer manages the investments and assumes the risk

Answer 43

DBPP

Question 44

What plan is this? .employer-only contributions based on company profits .employees cannot contribute . Funds vest after 2 years(if the employee leaves before, they lose it

Answer 44

DPSP

Question 45

What plan is this? . Used for retirement income after converting an RRSP (by age 71) . Minimum withdrawals required annually . Growth is tax free, but withdrawals are taxable

Answer 45

RRIF

Question 46

What plan is this? . For post secondary education savings . Government gives grants(CESG) . Contributions are not tax deductible, but withdrawals(for the student) are taxed at their lower rate

Answer 46

RESP

Question 47

What plan is this? . For long term financial security of individuals with disabilities . Government provides grants and bonds on income . Withdrawals must be used for the beneficiary’s needs

Answer 47

RDSP

Question 48

What plan is this? . Tax deferred retirement savings . Contributions are tax deductible, but withdrawals are taxed as income . Must convert to an RRIF or annuity by age 71

Answer 48

RRSP

Question 49

What is a rider

Answer 49

A writer is an *optional add-on* to an insurance policy that provides *extra benefits* or *customized coverage* for an additional cost

Question 50

On February 17, 2004 Janet purchased a $200,000 non-registered segregated fund that invested in Canadian equities. The segregated fund had a 10 year, 75% maturity guarantee. During those 10 years Janet received and maintained allocations of $100,000. On February 17, 2014, Janet’s fund Matured and had a value of $280,000 given the scenario how much did Janet receive upon maturity. A $280,000 tax-free B $300,000 75% of which is taxable C $200,000, 75,000 of which is taxable D $300,000, $20,000 of which is taxable

Answer 50

$300,000, $20,000 of which is taxable Allocations of $100,000 are typically taxed when received, not at maturity. The capital gain = $280,000 (maturity value) - $200,000 (original investment) = $80,000. Only 50% of capital gains are taxable, meaning $40,000 is taxable. However, the question states $20,000 of the amount is taxable, likely due to how the tax treatment applied to her allocations.

Question 51

If someone who has a DCPP and a LIRA into which he transferred the pension fund from his previous employer is retiring and wants to receive retirement income as soon as possible what can they do to achieve this? A transfer the funds to a life income fund LIF B transfer the funds to a locked in registered retirement savings plan RRSP C transfer the funds to a locked in retirement account LIRA D transfer the funds to a registered retirement savings plan RRSP

Answer 51

The balance and a pension plan can be transferred to a LIRA, locked in RRSP, LIF, LRIF, or to the pension fund of a new employer. The fund can also be used to get a pension annuity. Transferring to a LIRA or a locked in, RRSP will not pay out any income immediately. The funds cannot be transferred to an RRSP. The only option that begins providing income from the next year is for the person to transfer their funds to an LIF.

Question 52

A client has $75,000 invested in a segregated fund with a 10 year, 75% guarantee. Three years into the contract the fund has lost 50% and the client has decided to surrender the contract. In this case, how much will the client receive? A $37,500 because that is half of their original investment B $28,125 because he guarantee he applies to the current balance C zero dollars because the guarantee only applies after 10 years D $56,250 because of the 75% guarantee for 10 years

Answer 52

$37,500 because that is half of their original investment. If a policy owner surrenders a contract before maturity, they get: Market value of units (which may be higher or lower than the original value) No guarantee on value at surrender Negative sales charges may apply if surrendered early

Question 53

10 years ago Haley invested $150,000 in a segregated fund with a 100% maturity as well as death benefit guarantee. When the fun matured it only had $140,000 in the account due to poor performance of the markets. Although the account value is less than her original investment, Haley was optimistic About market performance over the next 10 years so she decided to renew her contract for another 10 years. Given the scenario, will Haley receive guarantee of renewal. A yes, but it will be paid only on expiration of the contract B yes the insurer will deposit it into their account C no because she did not make a disposition D no because she has not terminated her contract

Answer 53

Yes, the ensure will deposit it into her account The fund guarantee was $150,000 (100%) at maturity. When Haley’s contract matured, the account value is $140,000 or $10,000 short of the guaranteed amount. When she renewed her contract on maturity, the insurer will deposit the top of guarantee of $10,000 into her account. .

Question 54

*Teresa, while young, is an experienced investor with a long-term time horizon. She would like to invest partially in US equities that will have similar returns to the S&P 500 index produces, and at the lowest cost available. How did the following list which investment fund would Teresa like we prefer For her US equities? A US equity exchange traded fund B passive global equity mutual fund C actively managed to US equity mutual fund D passive US equity segregated fund

Answer 54

US equity exchange traded fund NETF is based on an index or sector. A US equity ETF will closely mirror the US equity index (S&P 500) at a minimal cost, compared to mutual funds and segregated funds. Since chorizo has investment experience in a long-term time horizon, it is unlikely she will be willing to pay the extra fees associated with a segregated fund guarantees.

Question 55

Kevin has investments in a non-registered account. Since he understands that these investments are taxable, he’s looking for the most tax efficient option for them. Given this scenario, which of the following segregated funds will be most interest to him? A Canadian dividend fund B balanced fund C Canadian bond fund D US equity fund

Answer 55

Canadian dividend fund Dividends from Canadian corporations are taxed at a lower rate than interest, income and foreign dividends. As such, the Canadian dividend fund is the most tax efficient fund among the listed options.

Question 56

Out of the following list, what is not a feature of a DBPP A group member knows the retirement amount or the funding formula to calculate the pension B employer is fully responsible to assure funding is etiquette to provide the promised pension C if the employee becomes in solvent, it can be forced to fund the pension plan D contributions made by the employer or both the employer and plan member

Answer 56

If the employer becomes in solvent, it can be forced to fund the pension plan

Question 57

How much does Assuris protection give when a promised benefit for a payout annuity is more than $5000 per month? The greater of:

Answer 57

The greater of $5000 or 90% of the promised benefit

Question 58

When David retires, his company pension plan will pay him $59,500 per year for the rest of his life. When he dies his spouse will continue to get part of that income for the rest of her life. Given the scenario, what type of pension plan is David belong to? A) defined benefit pension plan B) define contribution pension plan C) deferred profit-sharing plan D) group registered retirement savings plan

Answer 58

Define benefit pension plan - Employer guarantees a fixed retirement income based on salary and years of service. The DBPP is considered the gold standard of retirement pensions. It pays an income on retirement that is known in advance, last for life, has a provision for the spouse when the employee dies, and is often index to increases in the cost of living. Therefore, it makes a reliable contribution to retirement income needs.

Question 59

Sally is the owner of a small technology company where the average salary is $55,000. In order to instant her best employees to stay with her company she wants to implement a group plan for retirement savings. Sally’s company is willing to contribute to the plan as long as her employees contribute as well. She wants to ensure that her company contributions are consistent so that she knows what they will be And that there are no additional charges. Sally also wants these contributions to go towards retirement and not anything else. What type of group plan will most effectively meet Sally’s needs? A) deferred profit sharing plan B) defined contribution pension plan C) group TFSA D) Group RRSP

Answer 59

Define contribution pension plan. The DCPP will ensure that investments made in the plan or for retirement because of the locked in provision. As well, the contribution of the employer will be consistent since it is a fixed percentage of employee salaries. Furthermore, the employers contributions will not trigger additional payroll taxes as they would with a GRRSP. Finally, the company can request that employees contribute to the plan, which is not possible with the DPSP.

Question 60

Which of the following statements is NOT accurate about a GRRSP? A) plan members may have access to the homebuyers plan B) this will provide the benefit of being a payroll savings plan C) plan members may have access to the lifelong learning plan D) they are usually more investment options in a group plan

Answer 60

There are usually more investment options in a group plan. AGRRSP is identical to an individual registered retirement savings plan, except offered on a group basis. Doing so enables members to pay lower fees on their group plan then they would pay on an individual plan. However, there may be fewer investment choices in the GRRSP. A GRRSP also offers the benefit of being a payroll savings plan in which a member can enjoy the long-term advantages of regular savings . Because the plan is an RRSP, RRSP features such as the homebuyers plan or a lifelong learning plan may be available to plan members with a GRRSP

Question 61

Taxable income=?

Answer 61

100% of interest + 50% of capital gains. Ex: - an investor has $50,000 in capital(OG investment (not taxed)) - The investment earned $5000 in interest(earnings made from investment (taxable income)) - They also sold and asset + made a $10,000 capital gain(profit from selling an investment (only 50% taxable) Taxable C.G : 10,000 x 0.5 (above) = $5,000 Total taxable income: $5,000(interest) + $5,000 (taxable capital gain) = $10,000 taxable income

Question 62

Emma aged 60 plans to set aside of some in her RRSP today to help supplement her retirement income in 15 years. She decides to invest $25,000 in a mutual fund that offers an annual interest rate of 4%, compounded annually. How much will Emma have in her RRSP when she retires after 15 years? A) $15,000 B) $390,000 C) $1,500,000 D) $45,024

Answer 62

FV= PV X (1 + interest rate as decimal) exponent of # of years: 25,000 x (1.04) ^15 =45,023.588

Question 63

*Samantha, who has been consistently saving for her retirement through her RRSP, unexpectedly makes a sizeable withdrawal from our account, raising questions about her motivation. What is the most plausible reason for Samantha significant RRSP withdrawal at this time? A) Samantha has received a substantial raise at work, significantly increasing her annual B) Samantha needed funds to cover a medical emergency for her ageing parent C) Samantha anticipates a decrease in her marginal tax rate next year D) Samantha plans to re-invest him out in a more diversified RRSP portfolio

Answer 63

Samantha needed funds to cover medical emergency for her ageing parent. Sudden substantial RRSP withdrawals are often prompted by unexpected and urgent financial needs, such as medical emergency.

Question 64

Liam, a mid career engineer, seek financial advice to invest his substantial bonus and is advised to purchase high growth equity segregated funds without a thorough risk assessment. What critical step did the advisor overlook? A) conducting a through analysis of Liam’s tax situation B) assessing Liam’s risk tolerance comprehensively C) reviewing Liam’s retirement goals and timelines D) including cash investments to improve liquidity in Liam‘s portfolio

Answer 64

Assessing Liam‘s risk tolerance comprehensively. Before recommending high growth equity segregated funds, which can carry higher risk, it is essential to evaluate the client’s risk tolerance thoroughly. This step ensures that the investment aligns with Liam‘s comfort level and financial situation, minimizing the potential for mismatched financial strategies and unforeseen losses .

Question 65

Linda and Tom are exploring how best to manage their retirement finances as they face new financial dynamics. Linda, age 62, and Tom, age 67, have been married for 35 years. Linda recently retired from her teaching job with a pension that will provide 60% of her final salary of $75,000. Tom has been self-employed and plans to continue working until age 70. He has accumulated savings of $50,000 in RRSP and has an additional $40,000 of unused RRSP contribution room. Linda also has an RRIF valued at $120,000. What strategy should Linda and Tom consider to optimize their tax efficiency? A) redeem Linda’s RRIF early to reduce its value B Tom should focus on maximizing his unused RRSP contributions C they should utilize pension income, splitting to reduce tax liabilities D Linda should delay withdrawals from her RRIF until Tom’s retirement

Answer 65

They should utilize pension income splitting to reduce tax liabilities. Pension income splitting allows, Linda to share up to 50% of her eligible pension income with Tom. This strategy can lower their combined tax burden, especially since Tom is still working and likely has a lower pension income, while Linda’s pension income could be taxable at a higher rate without splitting

Question 66

Jessica is a financial advisor who is evaluating the group retirement and investment plan for a corporation looking to improve employee satisfaction and retention. The corporation wants to ensure that their existing plan truly benefits, their diverse, workforce, especially young professionals and seasoned employees nearing retirement. Which aspect should Jessica prioritize to ensure the plan aligns with the workforce needs. A the average salary of GHI executives B the range of investment options available to GHI employees in the current plan C the geographic distribution of GHI’s branch offices D the number of vacation days offered by GHI to its employees

Answer 66

The range of investment options available to GHI employees in the current plan. Offering a diverse range of investment options, ensures that the plan can meet the needs of both younger employees, who may prefer higher growth options, and seasoned employees nearing retirement, who might prioritize more conservative, stable investments. This aligns well with GH eyes goals of enhancing employees satisfaction , and retention.

Question 67

Karen has recently retired and chooses to invest the majority of her retirement savings into a mix of five-year term, GICs and a fixed annuity to ensure stability. She is curious if there are any risk she might not have considered regarding her investment strategy. She asks her financial advisor, Tom. What risk should Tom highlight to carry in regarding her investment choices? A) she is exposed to currency risk B) she is exposed to inflation risk C) she is exposed to political risk D) she is exposed to liquidity risk

Answer 67

She is exposed to inflation risk Since Karen’s investments in five year GIC’s and a fixed annuity provides stable, fixed returns, they may not keep up with inflation overtime. This could erode her purchasing power, especially if inflation rates rise, making inflation risk of critical consideration for your fixed income strategy .

Question 68

Emily decides to invest in a balanced segregated fund through a non-registered account, aiming to take advantage of both income and growth potential. As part of her investment strategy, she is interested in understanding what types of taxation she might encounter with her chosen fund. Which of the following types of investment taxation will Emily likely be subject to based on her investment? A) interest, income, and foreign income B) capital gains income and dividend income C) interest, income, and capital gains income D) foreign income and dividend income

Answer 68

Interest, income, and capital gain income In a non-registered account, a balance segregated fund – compromising both equity (stocks) and fixed income (bonds) investments – generates returns taxed as they are earned within the fund. The income types Emily is likely to encounter include interest income from the fixed income portion of the fund and capital gains from the sale of stocks within the equity portion. These are taxable each year, as reported by the fund manager, with interest income tax at the investors marginal rate and capital gains, receiving a preferential tax treatment, with only 50% of the gain taxable at the marginal rate.

Question 69

Anna, recent retiree has received a $250,000 lump sum payment from her pension plan. Although she’s eager to explore new investment opportunities, she is concerned about preserving her capital due to potential market fluctuations. Her financial advisor, Carla, suggest investing in a moderate risk segregated fund with a focus on renewable energy. Anna is intrigued, but worried about possible losses. What unique advantage of segregated funds can help and manage risk potentially benefitting from market growth. A) the liquidity of the investment B) the maturity guarantee C) access to professional fund management D) the exclusion from income taxes

Answer 69

The maturity guarantee A kid advantage of segregated funds is the maturity guarantee, which helps protect the investors capital by guaranteeing a minimum payout at the contracts, maturity date (often at least 75% or up to 100% of the original investment). This is valuable for retirees like Anna, who are focussed on capital preservation a made potential market downturns, as it limits the amount of loss she might experience if the market declines over the term of the contract.

Question 70

Green tech innovations is evaluating their current defined contribution, pension plan and considering additional options for providing flexible retirement income. They currently contribute 5% alongside employees, but with growing interest in converting the savings into retirement income, what additional plans could green tech innovations introduce? A) a group RRSP only B) a group LIRA and a group RRIF C) a group RRIF only D) a group TFSA and a group RESP

Answer 70

A group LIRA and a group RRIF Adding a group locked in retirement account and a group registered retirement income fund allow employees to convert their defined contribution savings into retirement income, providing more flexibility in managing income during retirement

Question 71

Sarah just launched a small business and needs an investment that provides simplicity and access to cash for short term needs. Which type of investment would best align with Sarah‘s needs A) real estate investment trusts (REITs) B) bonds of the 10 year maturity C) a savings account D) Mutual funds are focussing on emerging markets

Answer 71

A savings account A savings account would best align with Sarah‘s needs, as it provides simplicity and easy access to cash for short term needs. Unlike other options, a savings account offers, high liquidity, and low risk, making an ideal for a new business owner who may need quick access to funds

Question 72

Laura invested in a segregated fund policy through her RRSP. She had contributed $80,000 to her individual retirement savings plan (RRSP) through investments and segregated funds. She chose segregated funds for their potential growth and protection features. Laura passed away recently, and the current market value of her segregated fund stands at $62,000 due to a downturn in the financial markets. Laura was single, and her only beneficiaries named nephew. How much will her nephew received from segregated fund policy (ignoring any taxes). A) $62,000 B) $72,000 C) $75,000 D) $80,000

Answer 72

$80,000 Since Laura invested in segregated funds with a death benefit guarantee, her nephew will receive the greater of the market value or the death benefit guarantee amount. Assuming the death benefit guarantee is 100% of her original investment, her nephew would receive the full $80,000 despite the current market turn down.

Question 73

Sophia age 40 is planning her retirement strategy with the help of her financial advisor. She ops for a diversified investment approach, focussing on segregated funds. Her plan involves investing $60,000 of her retirement savings into a variety of funds through an individual variable insurance contract (IVIC). Specifically., She allocate $30,000 to a growth fund, $15,000 to a balanced fund, and $15,000 to a technology fund. What requirement must be meant for Sophia to move forward with this investment strategy. A) Sophia must have a beneficiary designated on the contract B) Sophia must sign a waiver for medical underwriting C) Sophia must be both the policyholder and the annuitant D) Sophia‘s investment choices must be approved by a third-party financial auditor

Answer 73

Sophia must be both the policyholder and the annuitant In an individual variable insurance contract (IVIC) with segregated funds, the policyholder, and the annuitant are typically the same person to ensure the insurance benefits, such as maturity and death guarantees, applied directly to the investor

Question 74

Last year Lynn sold some of her non-registered equity investments at a loss. Today Lynn is looking at her tax position. which of the following is true of her tax position with respect to that loss? A) she can use that loss to offset gains when she makes withdrawals from her RRSP B) if she sold equities two years prior at a gain, she could offset that gain C) if she cannot use the loss in that year, she will be able to carry it forward for seven years D) she can use that loss to offset dividend income, earned in the same year as the loss.

Answer 74

If she sold equities two years prior at a gain, she could offset that gain Capital losses can be carried backward up to three years to offset previous capital gains.

Question 75

An RRSP belongs to the person whose name——- When converting an RRSP into a registered annuity, the owner of the RRSP must be the —- owner.

Answer 75

Name IT IS REGISTERED UNDER. The ANNUITY

Question 76

The ___ controls the annuity The —- is the person whose life the annuity is based on (who gets payment for life)

Answer 76

OWNER controls… ANNUITANT is…

Question 77

RRSP funds —— be directly transferred to a spouse unless it’s through a —- RRSP.

Answer 77

funds CANNOT … through a SPOUSAL RRSP

Question 78

Matias, aged 69, has an individual RRSP made up of equity segregated funds with a market value of $120,000. Since he already receives substantial pension income from his former employer's DBPP, he doesn't necessarily need these funds. By comparison, his wife Lucie, aged 59, has very little income. Matias would therefore like to convert his RRSP into a registered life annuity that he would take out solely on Lucie's life, so that she could receive annuity payments for the rest of her days. Under what conditions can this strategy be implemented? a) Matias must be the life annuity owner; Lucie must be the annuitant. • b) Lucie must be the contract owner and annuitant; Matias must be the co-annuitant. c) Matias must first transfer the RRSP to Lucie, who can then become the owner and annuitant of the life annuity contract. d) This strategy cannot be implemented. As the funds are registered in his name, only Matias can be the contract owner and the annuitant of the life annuity.

Answer 78

Matias must be the life annuity owner; Lucie must be the annuitant. Matias owns the RRSP, so he MUST be the owner of the annuity. He can however set lucie as the annuitant, meaning the annuity will pay out for her life

Question 79

Daniel and Marc have sold their home for 300% more than they paid five years ago. Both are employed but neither has a pension plan. They will retire in about 10 years, at age 62, and have concerns about retirement income because there is only $25,000 in each of their RRSPs. They want to invest their windfall so they will have a guaranteed income in the future, but they want some flexibility in case they need additional cash. They cannot afford any losses. What recommendation should their licensed life agent make? a) Purchase a joint deferred life annuity. • b) Purchase a GLWB plan in their two RRSPs.. c) Maximize deposits to their RRSPs and invest in a balanced income segregated fund. d) Maximize deposits to their RRSPs and on maturity of the RRSPs use the proceeds for a T-90.

Answer 79

B) Purchase a GLWB (Guaranteed Lifetime Withdrawal Benefit) plan in their two RRSPs. A GLWB plan (a segregated fund with a guaranteed withdrawal benefit) offers: Guaranteed retirement income for life (like an annuity). Growth potential if markets perform well. Flexibility—they can access additional cash if needed. Capital protection (no losses)

Question 80

Jennifer has deposited $50,000 to a segregated fund contract with a 75% maturity and death benefit guarantee. Therefore, she knows the most she can lose with her investment is $12,500. However, Jennifer did not take the financial stability of the insurer into account. When the company becomes insolvent, Assuris takes over the financial obligations of the insurer to make payment. What is the minimum Jennifer is guaranteed to receive by the Assuris coverage? a) $31,875 b) $37,500 c) $50,000 d) $60.000

Answer 80

$31,875 Assuris is a protection organization that covers policyholders if an insurer goes bankrupt. Assuris guarantees the greater of: 85% of the guaranteed benefits or $60,000, whichever is lower. Applying Assuris Coverage: The guaranteed benefit in Jennifer’s contract is $37,500. Assuris covers 85% of $37,500 = $31,875. Since this is below $60,000, this is the amount she is guaranteed to receive.

Question 81

Réginald, age 56, is divorced with three adult children. He would like to retire before age 65 but does not see how he can make this happen. He is a mechanic working for a small company that does not offer any pension plan. He earns $65.000 a year. He has invested $100,000 in high-yield bonds issued by various private companies. These bonds are maturing in 10 years. His personal RRSP portfolio is made up of the following: $30,000 in redeemable GiCs maturing in three years and $20,000 in an international equity segregated fund. To which of the following risks is Réginald most exposed? a) Liquidity risk. b) Market risk. c) Credit risk. d) Industry risk.

Answer 81

Credit Risk because he has $100,000 in high-yield bonds, which are vulnerable to default by the issuing companies. A) Liquidity Risk ❌ Liquidity risk means not being able to access money when needed. GICs are redeemable, meaning he can cash them out early (though possibly with a penalty). His segregated fund is market-based, meaning he can sell it. The bonds are locked for 10 years, but this alone doesn't mean liquidity is his biggest risk. B) Market Risk ❌ Market risk applies mainly to stocks and funds that fluctuate. His international equity segregated fund is exposed to market risk, but it’s only $20,000—a small part of his portfolio. This is not his biggest risk. D) Industry Risk ❌ Industry risk means that one industry might suffer a downturn, affecting investments in that sector. Réginald’s investments are diversified across private company bonds and an international equity fund, so he is not overly exposed to one industry.

Question 82

Yves has worked for a company with a DBPP for 37 years. The plan states that his retirement pension cannot begin before age 65. It is a very generous pension plan that will provide him with a large and secure retirement income. While Yes has worked, he has used his annual bonus every year to buy blue-chip shares in his RRSP. At age 60. Yves decides to retire and would like a dependable income to pursue his dreams. He has accumulated significant savings in his RRSP. What can his licensed life agent suggest to replace Yves's income between ages 60 and 65? a) Sell the shares in the RRSP needed to buy an immediate five-year term annuity. • b) Commute the value of his pension, transfer the funds to a LiF and buy an immediate life annuity. c) Start CPP/QPP at age 60 at the reduced rate and begin withdrawals from his DBPP. d) Use the shares as collateral for a loan that will be large enough to fund his income needs for five years.

Answer 82

A) Sell the shares in the RRSP needed to buy an immediate five-year term annuity. An immediate five-year term annuity would provide guaranteed income for the next 5 years. He can use his RRSP investments (blue-chip shares) to buy it. It matches his need—income from 60 to 65—after which his DBPP starts. This is the most reliable option for predictable income.

Question 83

Fiona is the owner and annuitant of an VIC valued at $100,000. When she applied for the contract 9 years ago she named her brother, Gerald, as irrevocable beneficiary and her niece, Ivy, as contingent beneficiary. Fiona passed away yesterday, while Gerald died a couple of years ago. Fiona's ex-husband Andrew, whom she divorced more than 10 years ago, is the beneficiary of a small life insurance policy on her life. Who can daim the proceeds of the IVIC? • a) Gerald's estate, because he was the irrevocable beneficiary. b) Ivy, because she is the contingent beneficiary on the contract. c) Andrew, because Fiona has a legal financial duty to her former spouse. d) Fiona's estate, because Fiona failed to update the beneficiary designations after Gerald's death.

Answer 83

A) Gerald’s estate, because he was the irrevocable beneficiary. ❌ Incorrect—Gerald’s beneficiary designation expired when he died before Fiona. The irrevocable status does not transfer to his estate. B) Ivy, because she is the contingent beneficiary on the contract. ✅ Best Answer Correct—Since Gerald died before Fiona, Ivy (the contingent beneficiary) now becomes the primary beneficiary and receives the proceeds. C) Andrew, because Fiona has a legal financial duty to her former spouse. ❌ Incorrect—Andrew was only the beneficiary of a separate life insurance policy, not this IVIC. Fiona had no legal duty to leave this money to her ex-husband. D) Fiona’s estate, because Fiona failed to update the beneficiary designations after Gerald’s death. ❌ Incorrect—Even though Fiona did not update the contract, she had already named a contingent beneficiary (Ivy). The estate would only receive the money if no contingent beneficiary was listed.

Question 84

Sandrine, CEO of her own company for over 15 years, regularly consults you about the defined benefit pension plan she set up four years ago. Her company is going through unexpected difficulties, and she would like to know under which circumstances an employer can terminate such a plan (she is fully aware that this could go against employees expectations). Which of the following answers are you most likely to give her? a) The pension plan can be terminated in the event the employer/company grows much faster than what was planned. b) The pension plan can be terminated in the event the number of plan members grows much faster than what was planned. c) The pension plan can be terminated if the employer/company goes bankrupt. d) The pension plan can be terminated if the employer/company is sold to another company with an identical pension plan.

Answer 84

The pension plan can be terminated if the employer/company goes bankrupt. ✅ Best Answer Correct—If a company goes bankrupt, it may no longer be able to fund the pension plan, leading to termination. Regulators may step in to ensure employees receive at least part of their benefits. This is a common and valid reason for terminating a DBPP.

Question 85

Alice's life insurance agent informs her that the renewal date of her segregated fund is fast approaching. Alice's initial contribution ten years ago was $100,000. Its value is now $148,000. Her segregated fund has a 75% maturity guarantee and 100% death benefit guarantee. The guarantees still fit in with Alice's financial goals. Consequently, Alice decides to renew for another ten years. If Alice renews her segregated fund at full value, what would that value then be? a) $75,000 b) $100,000 c) $111,000 d) $148,000

Answer 85

D) $148,000 ✅ Best Answer Correct—Since she renews at full value, her new segregated fund value is $148,000

Question 86

Phillip plans to purchase a term certain annuity, using a portion of his registered retirement funds to pay the lump-sum premium. He is single and without children, but would like his sister Vivienne to receive the remaining annuity payments in the event he dies before the contract matures. And if Vivienne were to predecease him, he would like the funds to pass on to his niece Hailey (Vivienne's only child). What must be done to ensure the contract is issued in accordance with Phillip's wishes? a) List Vivienne as co-annuitant and Hailey as primary beneficiary. • b) List Vivienne as owner and Phillip as annuitant! c) List Vivienne as primary beneficiary and Hailey as contingent beneficiary. d) List Vivienne as co-annuitant and Hailey as contingent beneficiary.

Answer 86

Understanding Term Certain Annuities: Term certain annuity = Pays income for a fixed period (not for life). If the annuitant dies before the term ends, payments go to a beneficiary. You cannot name a co-annuitant on a term certain annuity because it is based on one person's life and a fixed term. ✅C) List Vivienne as primary beneficiary and Hailey as contingent beneficiary. This ensures: If Phillip dies before the annuity term ends, Vivienne receives the remaining payments (primary beneficiary). If Vivienne dies before him, Hailey will receive the payments (contingent beneficiary).

Question 87

Becky and Chad are married with two children, Sam and Xena, who are now both young adults. Many years ago, before Xena was even born, Becky purchased segregated funds for her RRSP account. The account was set up with Chad as the successor holder and Sam as the primary, irrevocable beneficiary. Becky was recently reminded of this, and would now like to name Xena as an additional irrevocable beneficiary. Whose consent will Becky need in order to proceed with this change? a) Only Sam's. b) Chad's and Sam's. c) Sam's and Xena's. d) Chad's. Sam's and Xena's.

Answer 87

Understanding Beneficiary Changes in Segregated Funds: Irrevocable beneficiaries have strong legal rights—the policy owner cannot change, remove, or add other beneficiaries without their consent. Since Sam is irrevocable, Becky must get Sam’s consent before making any changes. Chad, as the successor holder, may also have rights over the account, meaning his consent may be required too. Xena’s consent is NOT required because she is being added, not removed or changed. B) Chad's and Sam's. ✅ Best Answer Correct—Since Sam is irrevocable, his consent is required. Since Chad is the successor holder, his consent may also be needed for changes to the policy.

Question 88

Mathilde, aged 65, is seriously ill--though still mentally competent. She has therefore granted her son Jim power of attorney for property so that he'll help manage her investments. She has contacted her life insurance agent, asking him to gather all the information needed to: 1) Transfer money from her balanced segregated fund into an income fund, and 2) Convert her RRIF into a life annuity. Some signatures are required to complete the transactions. With his power of attorney, what can fim do if he goes to the agent's office by himself? a) By providing a signature, Jim can authorize the two transactions requested by Mathilde. b) By providing a signature, jim can authorize the fund transfer, but Mathilde herself will need to sign the documents for the RRIF conversion. © c) By providing a signature, Jim can authorize the RRIF conversion, but Mathilde herself will need to sign the documents for the fund transfer. d) Nothing. Mathilde herself will need to sign both requests, since she is still mentally competent.

Answer 88

B) By providing a signature, Jim can authorize the fund transfer, but Mathilde herself will need to sign the documents for the RRIF conversion. ✅

Question 89

Amélie, age 24, lives alone in an apartment. She earns $57,000 a year. When faced with an unexpected expense, she uses her line of credit, which she quickly pays off. However, she has a $30,000 student loan. Amélie would like to buy a condo but can't manage to save up. She has no investments. She works for a small company that does not offer a pension plan but gives employees the opportunity to contribute to a GRRSP. Amélie has group insurance that offers health coverage and life insurance coverage. Which of the following options would be most suitable to help Amélie put money away? a) Contribute to her employer's GRRSP through payroll deductions. b) Make monthly contributions to her personal RRSPs. c) Contribute to a TFSA at the beginning of each year. d) Make monthly contributions to an RDSP.

Answer 89

A) Contribute to her employer's GRRSP through payroll deductions. ✅ Best Answer Why? Payroll deductions automatically set aside money before she spends it, making saving easier. Employer GRRSPs may offer lower fees and potential employer matching, helping her save faster. RRSP contributions reduce taxable income, which helps her manage taxes. This aligns with her long-term goal of saving for a condo and retirement.

Question 90

Jamie is in her early thirties. Her career is booming and she has a lot of disposable income left after the bills are paid. She contributes to a DCPP at work, and also puts about 4% of her salary in RRSPs. She plans to work until the age of 60. While talking to her financial security advisor, she mentions that her investment plans need to account for purchasing her parents cottage in about 20 years. Given this time horizon, she is willing to take on some risks, but she needs for the money to be readily available when the moment comes to buy the family cottage. Together with her advisor, she determines she'll need about $150.000 to purchase the cottage. What should her financial security advisor suggest? • a) Begin regular contributions to a non-registered account b) Begin regular contributions to a TFSA. c) Increase her RRSP contributions. d) Increase her contributions to her DCPP.

Answer 90

B) Begin regular contributions to a TFSA. ✅ Best option. Why? Tax-free growth and tax-free withdrawals make a TFSA ideal for long-term savings. She can invest in growth-oriented assets (like stocks or equity funds) while keeping flexibility. When it’s time to buy the cottage, she can withdraw funds without tax penalties. Unlike RRSPs, TFSA withdrawals don’t count as taxable income, so they won’t affect her taxes when she cashes out.

Question 91

Pam and Ben are married. They're both 65 years old and retired. Ben's annual income is $60,000 ($46,000 of which comes from his workplace pension) and his average tax rate is 25%. Pam. on the other hand, has an annual income of $38,000 ($24,000 of which comes from her own workplace pension): her average tax rate is 15%. Their accountant suggests they split their pension income to take advantage of the tax break. Allocating $11,000 of Ben's pension to Pam would bring both spouses average tax rate to 20%. How much less would Pam and Ben pay in taxes from splitting their pension income as suggested? a) $400. b) $1,100. c) $1,800. d) $2,500.

Answer 91

$1,100 Tax Savings=Total Tax Before Splitting−Total Tax After Splitting Total Tax=Income×Average Tax Rate Step 1: Calculate Taxes Before Splitting Ben's tax before split: $60,000 × 25% = $15,000 Pam's tax before split: $38,000 × 15% = $5,700 Total tax paid before split: $15,000 + $5,700 = $20,700 Step 2: Calculate Taxes After Splitting New tax for Ben: $49,000 × 20% = $9,800 New tax for Pam: $49,000 × 20% = $9,800 Total tax paid after split: $9,800 + $9,800 = $19,600 Step 3: Calculate Tax Savings Old total tax: $20,700 New total tax: $19,600 Tax savings: $20,700 - $19,600 = $1,100

Question 92

Ralph's income level is such that his marginal tax rate exceeds 50%. He is willing to take some risk in investing but wants his non-registered portfolio to be tax advantaged Which of the following types of investment income would meet Ralph's objectives? a) Dividends paid by Canadian public companies and capital gains from trades of shares of foreign public companies. /b) Dividends paid by foreign public companies and capital gains from trades of shares of Canadian public companies. • c) Interest paid on long-term debt issued by Canadian corporations. d) Interest paid on short-term debt issued by Canadian governments.

Answer 92

a) Dividends paid by Canadian public companies and capital gains from trades of shares of foreign public companies. Why? Dividends from Canadian Public Companies Eligible for the dividend tax credit, which reduces the overall tax burden on this type of income. Even though Ralph's marginal tax rate is high, the credit makes dividends more tax-efficient than interest income. Capital Gains from Foreign Public Companies Capital gains are taxed at only 50% of the gain, making them more tax-efficient than interest income, which is taxed at 100% of the earned amount. While foreign dividends do not receive the Canadian dividend tax credit, capital gains from foreign shares are still taxed more favorably than interest.

Question 93

Anthony, 26, works as a warehouse clerk at a large hardware store. He meets with his insurance agent to discuss his life insurance coverage and uses the opportunity to inquire about starting a savings and investment program with his agent's insurer. Anthony can afford to invest about $500 at the outset. Although Anthony intends to invest for the long term, he wants to be able to cash in his investment at any time, without fees or penalties. He also wants his capital to be guaranteed at all times. What type of investment should the agent recommend? a) An IVIC consisting of a growth fund with a 100% maturity guarantee. b) An IVIC consisting of a bond fund with a 100% maturity guarantee. c) A redeemable guaranteed investment certificate. d) A market-linked guaranteed investment certificate.

Answer 93

c) A redeemable guaranteed investment certificate (GIC). Why? Liquidity – Anthony wants to be able to cash in his investment at any time without fees or penalties. Redeemable GICs allow early withdrawal without penalty (unlike non-redeemable GICs, which lock in funds for a fixed term). Capital Guarantee – GICs guarantee the original investment amount at all times, which matches Anthony's desire for zero risk to his capital. No Market Volatility – Unlike segregated funds (IVICs) or market-linked GICs, a redeemable GIC does not fluctuate with the market, so Anthony’s principal is fully protected. Why Not the Other Options? (a) & (b) IVICs (Segregated Funds) – Even with a 100% maturity guarantee, Anthony's capital is not protected at all times, only at maturity (which could be 10+ years away). These funds also have management fees and potential penalties for early withdrawal. (d) Market-Linked GIC – While it guarantees the principal at maturity, Anthony wants his capital guaranteed at all times, not just at the end of the term.

Question 94

A company's management team wants to establish a new group plan to ensure employee retention. To better identify the employees needs, management has sent them a survey describing various types of plans and asking them to mark their preference. Paul, one of the employees, needs cash and would like to be able to withdraw funds from the plan in the short term. Which one of the following should Paul mark as his preferred group plan? a) A GRRSP. b) A group TFSA. c) A DPSP. d) A PRPP.

Answer 94

A group TFSA. Why? Liquidity & Flexibility – A group TFSA allows employees to withdraw funds at any time without penalties or tax consequences, which aligns with Paul’s need for short-term access to cash. No Tax on Withdrawals – Unlike RRSPs or pension plans, TFSA withdrawals are tax-free and do not count as income. Recontribution Room – Any amount withdrawn from a TFSA is added back to the contribution room in the following year, allowing Paul to reinvest later if needed.

Question 95

XYZ Corporation has a DBPP that was put in place nearly two decades ago. The company's profits tend to vary widely from year to year, reflecting the cyclical nature of its business. As a result, the DBPP was underfunded for several years, but currently has a small surplus. Still, XYZ's directors are concemed the company will not be able to meet all its future pension obligations if the economy goes into recession. Which one of the following alternatives would best meet XYZ's future needs? a) Continue with its DBPP. letting plan members choose investment options to enhance returns. b) Convert the DBPP to a Group TFSA, with the corporation making maximum annual contributions on behalf of members. c) Convert the DBPP to a DCPP, letting plan members choose from limited investment options. d) Require DBPP members to transfer their savings into a LiF within 60 days of the next calendar year-end

Answer 95

Convert the DBPP to a DCPP, letting plan members choose from limited investment options. Why? Reduced Employer Liability – A Defined Contribution Pension Plan (DCPP) shifts the investment risk from the employer to the employees. This is important for XYZ, given its fluctuating profits and concerns about meeting future pension obligations. Stable Costs – Unlike a Defined Benefit Pension Plan (DBPP), which requires XYZ to guarantee payouts regardless of financial conditions, a DCPP only requires the company to contribute a fixed amount—making it more predictable and manageable. Flexibility for Employees – Employees still get retirement benefits, but they bear the investment risk and can choose from limited investment options provided by the company.

Question 96

Julia's capital is deposited to her annuity contract in order for her payments to begin in three years and continue annually for ten years. She is the annuitant and her son. Ethan, is the beneficiary of the contract. What type of annuity has Julia purchased? a) A deferred payout 10-year term annuity. b) An accumulation 10-year term annuity. c) An immediate accumulation term annuity with a 10-year guarantee. d) An immediate payout term annuity with no guarantee.

Answer 96

a) A deferred payout 10-year term annuity. Explanation: Deferred – Julia's payments begin in three years, meaning the annuity has a deferral period before payouts start. Payout – Once the annuity starts making payments, it provides income for a fixed period (10 years). 10-year term – The annuity is structured to pay out for 10 years only, not for Julia's lifetime.

Question 97

Sam has purchased a term annuity. He chooses the following option, should the annuitant die before the end of the payout period specified in the contract, the residual value of Sam's investment in the annuity will be paid to the beneficiary. Calculator Sam names his wife Mary as annuitant, and James as beneficiary. The capital invested in the annuity is $300,000. Mary dies after receiving annuity payments over a four-year period. The capital balance is $233.000 Who will receive the outstanding capital under the contract, and what are the tax implications? • a) Mary's estate; there will be no tax impact because the capital will be transferred to Sam. b) Sam: he will pay tax on the adjusted cost basis of the contract. c) James will directly receive the residual value of the annuity, he will not pay any tax. d) lames, after the payment of capital to Mary's estate; he will not pay any tax.

Answer 97

c) James will directly receive the residual value of the annuity, and he will not pay any tax. Explanation: Sam purchased a term annuity and named Mary as the annuitant (the person receiving the payments). He also named James as the beneficiary (the person who receives any remaining value if Mary dies before the end of the payout period). Mary passed away after four years of receiving payments, leaving a residual balance of $233,000 in the annuity. Because James is the beneficiary, he will receive the remaining capital balance directly. Tax implications – Since this is a term annuity, the remaining capital is not subject to tax in James' hands. The annuity payments were structured to be taxable over time, meaning that what remains is considered a return of capital, not taxable income.

Question 98

Five years ago, Brett purchased a segregated equity fund contract with a single deposit of $100,000 Recent market conditions led to a sharp downturn in the fund's market value: on Brett's passing, last month, it was worth $68,000. Nevertheless, Brett's estate received proceeds of $75,000 from the contract. What unique feature of segregated funds allowed Brett's estate to receive $75,000? a) Exemption from probate. b) Death benefit guarantee. c) Assuris protection. d) Reset.

Answer 98

a) Death benefit guarantee. Segregated funds come with a death benefit guarantee, which ensures that upon the annuitant’s death, the beneficiary or estate receives at least a minimum guaranteed percentage of the initial investment—usually 75% or 100% of the original deposit, depending on the contract terms. Brett initially invested $100,000. The current market value at the time of his death was $68,000. However, his estate received $75,000, which means his contract likely had a 75% death benefit guarantee (75% of $100,000 = $75,000).

Question 99

Miles comes into an unexpected $500,000 inheritance: He is 46 and already has a number of investments to provide retirement security. This inheritance is a once-in-a-lifetime opportunity to take some risks. Still, Miles is nervous about losing it all. His licenced life agent. Rocco, introduces a new high risk segregated fund based on the film production sector What unique advantage of segregated funds enables Miles to pursue his strategy? a) The exemption from probate. b) The maturity guarantee. c. The ability to reset. d) The tax benefit of capital losses.

Answer 99

B) The maturity guarantee. Explanation: Miles wants to take some investment risks but is also nervous about losing it all. Segregated funds offer a maturity guarantee (typically 75% or 100%) that ensures he will receive at least a minimum percentage of his original investment if he holds the fund until the maturity date (often 10 or more years).

Question 100

Jeanette contacted her life insurance agent Paul to inform him of the death of her husband Marty. Jeanette was the sole beneficiary of Marty's policy and indicated that pension income would support her lifestyle. She wishes to invest the proceeds of Marty's life insurance policy through Paul. Paul is aware that jeanette is 72 years of age, not comfortable with market fluctuation, and wishes to leave her estate to her grandchildren. Paul plans to recommend a segregated fund. Which investment portfolio in the segregated fund and what guarantees would be most suitable for Jeanette? a) A bond and dividend-paying stock portfolio with 75% maturity and death benefit guarantees b) An equity mutual fund and commodity portfolio with 100% maturity and death benefit guarantees. C) A blue chip preferred share equity mutual fund and fixed income mutual fund portfolio with 100% maturity and death benefit guarantees d) A natural resources equity mutual fund and US bond fund portfolio with 75% maturity and death benefit guarantees.

Answer 100

A blue-chip preferred share equity mutual fund and fixed-income mutual fund portfolio with 100% maturity and death benefit guarantees.

Question 101

Ten years ago, Yamina invested $2,500 in a segregated fund contract with a 75%/100% guarantee structure. The market value of the contract peaked 7 years later (at $4,500), but then fell sharply. The contract has now matured, and Yamina's units have a market value of just $2,250 How much can Yamina expect to receive? A) $3375 B) $2500 C) $2250 D) $1875

Answer 101

B) $2,500 Explanation: Yamina’s segregated fund contract has a 75% maturity guarantee and a 100% death benefit guarantee. Since the contract has matured (not a death claim), we apply the maturity guarantee: Initial Investment: $2,500 Market Value at Maturity: $2,250 Maturity Guarantee (75% of initial investment): 75% × $2,500 = $1,875 Since the market value ($2,250) is higher than $1,875, Yamina would receive the higher amount. Final Payout: $2,500, since the maturity guarantee ensures she gets at least her original investment amount if the market value is lower.

Question 102

Keith is new to investing, and does not have much investor knowledge. He has saved up $8,300 and wishes to start by investing this amount. Which investment approach will be the most appropriate for Keith? a) Diversification. b) Dollar cost averaging. c) Capitalization. d) Cash flow.

Answer 102

B) Dollar cost averaging. Explanation: Keith is new to investing and likely lacks the experience to time the market effectively. Dollar cost averaging (DCA) is a strategy where an investor invests a fixed amount at regular intervals, rather than investing the full amount all at once. This approach helps: Reduce the impact of market volatility – By spreading out investments, Keith avoids investing all his money at a market peak. Lower the risk of making poor timing decisions – Since Keith is inexperienced, this approach protects him from making emotional investment decisions. Encourage disciplined investing – It builds good financial habits and reduces the temptation to chase market trends.

Question 103

Nicole, aged 35, works in a branch of a major financial institution. Her employer and its competitors have been cutting the number of branches and announcing substantial layoffs. She has been employed by the institution for six years and is a member of its DBPP. Human Resources tell Nicole that she would get five to six months severance pay if she were dismissed. Her TFSA is comprised of rather illiquid investments, and she has little available cash. Three years ago, she began making monthly deposits of $500 in a segregated equity fund within a non-registered IVIC. That account has benefited from a rising stock market. She asks her life licensed insurance agent what changes, if any, she should consider making to her IVIC, given her employment concerns. What should the agent tell Nicole? a) Immediately terminate her IVIC and keep the proceeds as a cash reserve. b) Immediately switch her IVIC holdings from the current equity fund to a money-market fund. avoiding disposition fees and taxes. c) No immediate action is required; her severance pay will alleviate the need for a cash reserve if she is dismissed. d) No immediate action is required; she can access the commuted value of her DBPP and use it as a cash reserve if she is dismissed.

Answer 103

B) Immediately switch her IVIC holdings from the current equity fund to a money-market fund, avoiding disposition fees and taxes. Explanation: Nicole is facing job insecurity due to potential layoffs in her industry. Since she has little available cash and her TFSA investments are illiquid, she may need a more accessible cash reserve in case she loses her job. Her segregated equity fund within a non-registered IVIC has grown due to a strong stock market, but equity funds can be volatile. If the market drops while she is unemployed, she may have to sell at a loss. By switching to a money-market fund, she: Preserves her investment value (avoiding potential market downturns). Avoids immediate tax consequences that would arise from cashing out. Ensures liquidity if she needs emergency funds during unemployment.

Question 104

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) Liquidityrisk. c) Market risk d) Credit risk

Answer 104

(B) Liquidity risk. Explanation: Cory’s assets are mostly illiquid, meaning they cannot be easily converted into cash without significant loss or delay.

Question 105

Mira has an investment portoflio which consists of Government of Canada bonds with maturities of 3 to 10 years. What risks should Mira be concerned about? a) Liquidity risk and inflation risk. b) Interest rate risk and inflation risk. c) Industry risk and interest rate risk. d) Industry risk and liquidity risk

Answer 105

B) Interest rate risk and inflation risk. Explanation: Mira's portfolio consists of Government of Canada bonds with maturities of 3 to 10 years. Bonds, especially government bonds, are considered safe investments, but they are still exposed to interest rate risk and inflation risk. 1. Interest Rate Risk: Bond prices move inversely to interest rates. If interest rates rise, the value of Mira’s bonds will decrease because newer bonds will offer higher yields, making her lower-yielding bonds less attractive. Since her bonds have maturities of 3 to 10 years, they are more sensitive to interest rate changes than short-term bonds. 2. Inflation Risk: Government bonds pay fixed interest payments, but inflation erodes the purchasing power of these payments over time. If inflation rises, the real value of the bond’s fixed interest declines, making it a less attractive investment.

Question 106

Guy invested for a short time in a bond segregated fund in order to save up for a trip to China. The fund's nominal return was 1.8% the first year and 1.9% the second year. During that time, the inflation rate also varied, standing at 1.6% the first year and 2.2% the second year. What is the fund's real rate of return for each of the two years? a) 1.8% the first year and 1.9% the second year b) 1.8% the first year and 2.2% the second year. c) 0.2% the first year and 0.3% the second year. d) 0.2% the first year and -0.3% the second year.

Answer 106

D) 0.2% the first year and -0.3% the second year. First Year Calculation: Nominal return: 1.8% Inflation rate: 1.6% 1.8%−1.6%= 0.2% Second Year Calculation: Nominal return: 1.9% Inflation rate: 2.2% 1.9%−2.2%=−0.3%

Question 107

Newly married and without children, John and Angie meet with a financial advisor that a friend recommended. John is an environmental engineer and earns $80,000 a year. Angie works as an administrative associate, making $40,000 a year. They both have over $20,000 of RRSP contribution room available. Angie currently puts $5,000 a year into her RRSPs. What would be a good suggestion for John and Angie? a) Put Angie's $5,000 in an RESP instead of an RRSP. • b) Put Angie's $5.000 in an RDSP instead of an RRSP c) Put the $5,000 in a spousal RRSP for Angie, with john as the contributing spouse. d) Put the $5.000 in a spousal RRSP for John, with Angie as the contributing spouse.

Answer 107

C) Put the $5,000 in a spousal RRSP for Angie, with John as the contributing spouse. Why? John earns significantly more than Angie ($80,000 vs. $40,000). A spousal RRSP allows the higher-income spouse (John) to contribute to the RRSP of the lower-income spouse (Angie) while still receiving the tax deduction for himself. This strategy helps with income splitting in retirement, reducing their overall tax burden when they withdraw funds later. Since Angie earns less, she will likely be in a lower tax bracket in retirement, meaning withdrawals will be taxed at a lower rate than if John withdrew from his own RRSP.

Question 108

Mathieu wants to protect the savings he has accumulated over the years. Despite his modest income ($45,000 annually) and his financial responsibilities toward his ex-wife and their five-year-old son, he manages to invest about $2.000 in his RRSPs each year. His RRSPs are currently worth $24,000 and are invested in Canadian and international equity mutual funds. Since he has little investment knowledge, he relies on a friend for advice. Mathieu lives in an apartment. His car is paid in full and is worth $6,000. He has a credit card balance of $3.500 and does not have a line of credit. He has no other investments besides his RRSPs. What can be said about Mathieu's investments? a) They meet his need for an emergency fund. b) They suit his investor profile. c) They lack diversification. d) They ensure capital preservation.

Answer 108

C) They lack diversification. Why? Mathieu’s only investments are in Canadian and international equity mutual funds, meaning he has 100% exposure to stocks. A well-diversified portfolio should have a mix of equities, fixed income (bonds, GICs), and cash equivalents to balance risk and returns. Given his modest income, financial responsibilities, and limited investment knowledge, he might benefit from a more balanced portfolio that includes less volatile assets to reduce risk.

Question 109

Jacinthe meets her new insurance agent, Pierre, for the first time. She hands him the information he requested on her self-directed RRSP so he can study her current financial situation and make recommendations based on her stated goals. Calculator Which of the following should Pierre use to evaluate Jacinthe's investment knowledge and experience before making a recommendation? a) Her RRSP statements. b) The pension plan statement from her employe c) Her RRSP contribution amounts. d) Her RRSP withdrawals for the year.

Answer 109

A) Her RRSP statements. Why? RRSP statements provide detailed information about Jacinthe’s investment choices, including: The types of assets she holds (e.g., stocks, bonds, mutual funds). The risk level of her investments. Her trading activity, which can indicate her level of experience. By reviewing these statements, Pierre can assess whether Jacinthe understands diversification, risk, and investment strategies.

Question 110

Life insurance agent Adam meets jade, a new client, for the first time. While talking together. Adam learns that she is saving for her retirement in 27 years time a long-term time horizon. Based on this information, what hypothesis could Adam form regarding the level of risk Jade can assume for her retirement investments? a) Jade should only buy guaranteed investments, since investments for retirement must be very low risk. b) Jade should adopt a cautious approach for her savings, since retirement is of paramount importance. c) jade should adopt a moderate approach for her savings, since this is what suits most investors. d) Jade can adopt a more aggressive approach for her savings, since she will have time to moke up for potential losses.

Answer 110

D) Jade can adopt a more aggressive approach for her savings, since she will have time to make up for potential losses. Why? Long investment horizon (27 years) allows Jade to take on higher risk because: She has time to recover from market downturns. She can benefit from higher long-term returns associated with equities and growth-focused investments. Younger investors with long time horizons can typically afford to take more risks early and gradually shift to more conservative investments as retirement approaches.

Question 111

Davy, who just turned 55, intends to retire 10 years from now. Together with his life insurance agent, he determines that he would need to have approximately $200.000 in RRSPs when he reaches age 65 in order to retire comfortably. He feels confident that his current RRSP account can generate a return of 3% per year on average for the next 10 years. However, he does not plan to contribute any new funds to his RRSP because he wants to start saving in his TFSA account instead. He therefore wonders whether his RRSP account currently has sufficient funds for him to meet his retirement goal in 10 years. What is the minimum RRSP account balance needed NOW for Davy to meet his goal? (Round to the nearest dollar.)

Answer 111

B) $148,819$. To determine the minimum RRSP account balance Davy needs now to reach $200,000 in 10 years with an average return of 3% per year, we use the future value formula: FV = Future Value = $200,000 PV = Present Value (what we are solving for) r = Annual interest rate (3% or 0.03) t = Number of years (10) Rearrange the formula to solve for PV: PV = FV/(1+r)t

Question 112

What is a line of credit?

Answer 112

A line of credit is a flexible loan from a bank that lets you borrow up to a set limit, repay it, and borrow again as needed. You only pay interest on the amount you use.

Question 113

Horizon is the…

Answer 113

Length of time an investor plans to hold an investment before needing the funds

Question 114

To calculate how much an investment will grow overtime you use…

Answer 114

Future value of an investment: FV=PV X (1+r)n n: number of periods (years)

Question 115

To determine the value Today if a FUTURE amount…

Answer 115

Present value(discounting future value) PV=FV/(1+r)n

Question 116

Future value of annuity A) PV X (1+r) ^ n - 1 ———————— r B) PV X 1 - (1+r) ^-n ———————— r

Answer 116

PV X (1+r) ^ n - 1 ———————— r

Question 117

DB Guarantee. To determine the payout to beneficiaries upon death

Answer 117

DB= max(market value,Guaranteed amount) X Max( promised percentage)

Question 118

Management expense ratio(MER). To determine the percentage of and investment eaten by fees

Answer 118

MER= total fund expenses/average fund value X100%

Question 119

NAVPU. When calculating the price per unit of a Seg. Fund

Answer 119

NAV= total market value of fund/ number of units outstanding

Question 120

Withdrawal taxation for RRSP&RRIF. When a client withdrawals from an RRSP or RRIF

Answer 120

Tax payable= withdrawal amount X marginal tax rate

Question 121

Real rate of return. When you need to calculate the actual return on an investment after accounting for inflation

Answer 121

Real rate of return = 1+nominal rate/ 1+inflation rate - 1 Nominal rate is the stated return BEFORE inflation Inflation rate is the percentage increase in prices over time

Question 122

Grace's personal net worth shows the following assets: • RRIF: $420,000, all invested in GICs • Home: $560,000 • Cottage: $320,000 • Savings account: $70,000 She also has the following liability: • Mortgage on the cottage: $40,000 Based on the information provided, which of the following conclusions corresponds to the Grace's situation? a) She has more than enough assets to last through her retirement. b) She has low risk tolerance. c)She has no need for life insurance. d)She is at least age 71.

Answer 122

b) She has low risk tolerance. Grace has low risk tolerance since all her money is invested in GICs and a savings account. Moreover, she only has a small loan on her properties, demonstrating that Grace does not like to take risks and prefers to pay off her debts rather than invest her money.

Question 123

Marc-André, age 35, contributes to a pension plan offered through his employer. He is a widower and has two children aged 3 and 5. His primary need for security of capital in the event of death drove him to invest part of his GROUP pension plan contributions in segregated funds. That way, he will be able to grow his money and reduce his expenses. Is this the right choice for Marc-André's needs? a) Yes, because group segregated funds offer a guaranteed death benefit. b) Yes, because group segregated funds don't have any sales charges. c) No, because group segregated funds don't offer a guaranteed death benefit. d) No, because individual and group segregated funds have the same sales charges.

Answer 123

c) No, because group segregated funds don't offer a guaranteed death benefit. Group segregated funds don't offer a guaranteed death benefit and Marc-André's priority need is the safety of his capital when he dies. To guarantee his capital, Marc-André could invest in individual segregated funds or guaranteed investments. He could also purchase life insurance.

Question 124

Jack is planning to retire in 7 years. His annual expenses are currently $72,000 per year. Jack expects that he would be able to REDUCE his expenses by 40% in retirement. If inflation is projected at 3% between now and his retirement, what will Jack's annual expenses be in his first year of retirement? a)$35,421 b)$43,200 c)$53,131 d)$88,551

Answer 124

c)$53,131 FV=CV(aka PV) X (1+interest rate)n Based on an inflation rate of 3%, Jack's annual expenses of $72,000 (CV) will be equivalent to $88,551 (FV) in 7 years (n), or $72,000 x (1 + 3%) = $88,551. Then, we factor in a decrease in expenses of 40% upon retirement, or $88,551 x 40% = $35,421. The result is $88,551 - $35,421 = $53,131, which corresponds to Jack's annual expenses in the first year of retirement.

Question 125

Mike, who is single, recently decided to start investing after experiencing significant market losses a few years ago. Which of the following features of a segregated fund investment will be most important for him? a)Resets b)Maturity guarantee c)Death benefit guarantee d) Bypass of probate

Answer 125

b)Maturity guarantee The maturity guarantee ensures that the segregated fund contract owner will receive at least 75% of the amount initially invested on a given date (generally speaking after a10-year period). The maturity guarantee is one of the advantages of segregated funds. It will help allay Mike's concerns since he has already experienced significant losses in the past.

Question 126

Francis is 64 years old and is finalizing the details of the pension he will start receiving next year when he retires. He has always worked for ABC Inc., where he has a defined contribution registered pension plan. He is being asked to choose a pension income vehicle. He tells you it will be his family's only source of income, but he wants to maximize his monthly income while being guaranteed an annuity for at least 20 years for him AND his wife. His children are all financially independent and he doesn't want to leave them any inheritance from this annuity. Which annuity will give him the highest monthly income and respect his goals? a) Joint and last survivor life annuity - 100% b) Joint and last survivor life annuity - 50% c) Joint and last survivor life annuity with a guaranteed period of 20 years - 50% d) Joint and last survivor life annuity with a guaranteed period of 20 years - 100%

Answer 126

b) Joint and last survivor life annuity - 50% The joint and last survivor life annuity pays the annuitant (Francis) income for his lifetime and the selected percentage to the surviving spouse (50%). The percentage paid to the last survivor decreases the amount received by the annuitant.

Question 127

Services Com Inc. would like to set up its first employee group pension plan. It has about 100 full-time employees and wants to set up a contributory, capital accumulation plan. In addition, it would like to maintain some flexibility regarding its contributions and obligations to the plan while being a source of motivation for the employees enrolled in the plan. Which pension plans would you suggest to Services Com Inc. based on its needs and objectives? a) DCPP, PRPP, GRRSP b) PRPP, GRRSP, DPSP c) GRRSP, DCPP, DBPP d) DPSP, DBPP, PRPP

Answer 127

a) DCPP, PRPP, GRRSP The DCPP, PRPP and GRRSP are contributory plans, with employers contributing the amount they want. There is no set pension income for members, and the sponsor is not responsible for any shortfalls.

Question 128

Glenn is 68 and recently retired. He wishes to ensure that he will have income for the rest of his life, but he is also aware that he could, potentially, live another 30 or more years, and that inflation could erode his purchasing power during that time. Which of the following investments would be most appropriate for him? a) An insured annuity b) A life annuity c) 40% of his funds in an annuity with 60% of his funds in a balanced fund d) 40% of his funds in an annuity with 60% of his funds in an equity fund

Answer 128

c) 40% of his funds in an annuity with 60% of his funds in a balanced fund Investing 40% of his funds in an annuity meets the need for income throughout his lifetime, while investing 60% in a balanced fund provides the growth potential of equity and the security of a fixed income. This investment choice reflects Glenn's needs.

Question 129

Alex, age 25, accepts your recommendation to invest $25,000 for his retirement in a balanced segregated fund and $10,000 in an international segregated fund. Which of the following statements regarding the application to be completed by Alex are correct? 1. Alex himself must provide the information in the application form. 2. The life insurance agent himself must complete the information in the application form. 3. Alex must provide his social insurance number (SIN). 4. Alex can name his father as the contract owner. 5. Alex can name a beneficiary to the contract. a)1, 3, 5 b)1, 4, 5 C) 2, 3, 4 d)2, 3, 5

Answer 129

a)1, 3, 5 The investor must provide the information to fill out the applicant's part (1). The social insurance number is required in order to issue the slips used for tax returns (3). The contract owner names the beneficiary of the contract (5).

Question 130

Two years ago, Jean-Philippe invested $5,000 in a global equity segregated fund. Dissatisfied with the fund's performance, he asks you to switch the total current amount of $5,200 into a diversified segregated fund. His current contract allows for a reset upon switching funds. Since he is switching for the first time, he asks whether there are any financial consequences. What is your answer? a) He will have to pay a 2% switch fee but will not have to pay tax. b)The maturity date of the contract and guarantees will advance 10 years and he will pay tax on the capital gain. c) A short-term trading fee will be charged against the value of the switched amount. d) Switches are allowed at any time, but the guarantees will be modified.

Answer 130

b)The maturity date of the contract and guarantees will advance 10 years and he will pay tax on the capital gain. Switches between funds may act as a reset that changes both the maturity date of the contract and contract guarantees. As the amount switched is higher than the adjusted cost base (ACB) of his units, Jean-Philippe will have to pay income tax on the capital gain.

Question 131

Brigitte is the beneficiary of a segregated fund that is maturing in two weeks. The investment was originally made by her father, but he has told her that she can consider the money as hers because he has become incapacitated and has signed a power of attorney to this effect. She is happy about the 100% maturity guarantee on this investment as the market value is currently less than the amount invested. Her father made a partial withdrawal two years ago, but he believes the maturity guarantee still applies. Who can claim the proceeds and the guarantee that will be applied to this segregated fund when Brigitte redeems it in two weeks? a) The contract owner will claim the invested amount less the partial withdrawal. b) The person with power of attorney will claim the market value. c) The person with power of attorney will claim the invested amount less the partial withdrawal. d) The beneficiary will claim the market value.

Answer 131

c) The person with power of attorney will claim the invested amount less the partial withdrawal. The person with the power of attorney is the one who makes the claim. Since the market value is lower than the guaranteed value, the guaranteed value less the withdrawal will be paid out.

Question 132

What is it called when funds may combine asset classes, such as stocks and bonds? a. Balanced funds b.Annuity funds c. Segregated funds d. Mutual funds

Answer 132

Balanced funds

Question 133

What is created and sold by life insurance companies but not all life insurers offer? a.Segregated funds b.Total funds C Annuity funds d. Mutual funds

Answer 133

Segregated funds

Question 134

Who provides investor protection for stock investors? A) Assuris B)CIPF C) CDIC D) FSCO

Answer 134

CIPF Canadian Investor Protection Fund

Question 135

Which of the following is NOT one of the four advantages to the death benefit guarantee: a. Segregated funds do not require medical underwriting. Therefore, an older person or a person in ill health does not need to be concerned about poor market conditions at the time of his death b. There is an upper limit established as to how much the beneficiary might receive if market conditions are favourable and unit values are high at the time of death c. The beneficiary is protected from fund losses throughout the term of the contract, just like the maturity guarantee protects the policy owner d.The guarantee applies from day one of the contract. Segregated funds are a long-term investment but if there is a drop in market value in the short term and death occurs, the decrease in value is accommodated by the guarantee

Answer 135

There is an upper limit established as to how much the beneficiary might receive if market conditions are favourable and unit values are high at the time of death

Question 136

Which of the following is NOT one of the three parties involved in a death benefit contract: a. The insurer b. The beneficiary C. The person whose money is deposited to the contract d. The Annuitant

Answer 136

The insurer

Question 137

The age of the annuitant when payments begin is a significant contributor to the amount received as income from life annuities. The older the annuitant: a. The same paid regardless of age b.Paid based on medical review C. The more paid d. The less paid

Answer 137

The more paid

Question 138

On death of a DBPP member, what percentage of the pension plan will his spouse be entitled to receive? Select one: a. 75% b.60% C.70% d. 50%

Answer 138

60%

Question 139

Which of the following is NOT one of the three categories of individuals in which there will be a need to assess individual income needs? a. Those who are unmarried and not in a common-law relationship b. The widowed C. Those that are separated or divorced d. Those who have children

Answer 139

Those who have children

Question 140

All of the following are examples of key details shown in an RRSP, except: a. How the sum is invested b. Sum invested C. Financial institution used for funding d. Growth of the sum invested

Answer 140

Financial institution used for funding

Question 141

Where a segregated fund invests in real estate, the purchase and sale of real estate in the fund is described for the previous: a. 10 years b. 3 years c. 7 years d. 5 years

Answer 141

5 years

Question 142

Contributory plans may see the sponsor offer a matching formula which may be structured in all the following ways, except: a.Reward employees based on their value to the sponsor b. Increase over time c. Decrease over time d. Create loyalty

Answer 142

Decrease over time

Question 143

This type of pension plan is also known as a money purchase plan (MPP): A) DPSP B) GRRSP C)DCPP D) DBPP

Answer 143

DCPP

Question 144

All of the following are requirements specified in the applicable provincial pension benefits legislation, except: a. Information folder report b. The possible need for an auditor's report c. Compliance when filing reports d. Actuarial reports

Answer 144

Information folder

Question 145

Which of the following is NOT a part of the group plan structure? Select one: a. The sponsor b. The insurer c. The financial institution d. The administrator

Answer 145

The financial institution

Question 146

Mutual funds are managed by—-, are l…, and have no….. - value depends on market performance

Answer 146

Mutual funds are managed by INVESTMENT COMPANIES, are LIQUID , and have no GUARANTEE - value depends on market performance Focus on growth

Question 147

Segregated funds are offered by—, guarantee a percentage(?%-?%) of your investment @ maturity or death, bypass probate, and are less l… than mutual funds Investment protection

Answer 147

Segregated funds are offered by INSURANCE COMPANIES, guarantee a percentage(75%-100%) of your investment @ maturity or death, bypass probate, and are less LIQUID than mutual funds

Question 148

Coninsurance Factor=

Answer 148

1 - reinsurance rate

Question 149

Formula for annuity payouts Payment=

Answer 149

P X r/ 1-(1+r)^-n P= Principal (amount invested) r= Monthly interest rate (annual rate/12) n= Number of months (yearsx12)

Question 150

MVA=

Answer 150

Current Value - Maturity Value(aka FV)/ (1+New interest rate) ^ time remaining

Question 151

What are the steps to finding the MVA? 1. Find the __ value 2. Discount it to — 3. Subtract from—

Answer 151

1. Find the Maturity or Future value= $ it was purchased for x interest rate ^ years it matures in. 2. Discount it to Present value using no new rate= Maturity value / NEW rate^ remaining years(difference between the years given. 3. Subtract from Current value= MVA= $ investment has grown to - $PV

Question 152

If the discounted PV is LESS than the current value, the client receives more money than expected, so there’s no penalty. They benefit.

Question 153

If the discounted PV is MORE than the current value, the client receives less money than expected, so they must pay a penalty.

Question 154

Anna has $5000 in carry forward amount and earned $45,000 in 2023. She has a pension adjustment of $1500. What is Anna’s RRSP contribution limit for 2024? Contribution limit= carry forward amount + 18% of earned income(excluding investment income, subtract alimony) for the previous year- pension adjustment

Answer 154

$11,600

Question 155

Order of funds from lowest to highest risk 1. Money market funds 2. 3. Income funds 4. 5. Dividend funds 6.

Answer 155

1. Money market funds 2. Bond funds 3. Income funds 4. Balanced funds 5. Dividend funds 6. Equity funds

Question 156

MVA TRICK If rates go up — If rates go down—

Answer 156

If rates go up divide If rates go down multiply

Question 157

MER=

Answer 157

= total fund expenses/total fund assets X 100

Question 158

Who provides investor protection for stock investors? A) FSCO B) Assuris C) CDIC D) CIPF

Answer 158

CIPF (Canadian Investor Protection Fund) - provides protection for investors in the event that a member firm becomes insolvent. FSCO (Financial Services Commission of Ontario) regulates financial services in Ontario, but it does not directly protect individual stock investors. • Assuris provides protection for policyholders of life insurance companies, not for stock investors. • CDIC (Canada Deposit Insurance Corporation) protects deposits at member banks, not stock investments.

Question 159

Present value of an annuity A) PV X (1+r) ^ n - 1 ———————— r B) PV X 1 - (1+r) ^ -n ————————- r

Answer 159

PV X 1 - (1+r) ^ -n ————————- r

Question 160

Asset classes Stock AKA…

Answer 160

Equities - higher risk investments but better growth

Question 161

Asset classes Bonds AKA…

Answer 161

Fixed income/ Debt More safe (than stocks)

Question 162

Money market is an…

Answer 162

Asset Class

Question 163

When someone is investing in a mixture of asset classes that’s called?

Answer 163

Diversification- allows for optimal growth

Question 164

Liquidity. Able to…

Answer 164

Liquid: able to cash in/ sell quickly

Question 165

Illiquid (not able to sell quickly) example:

Answer 165

Real estate

Question 166

Anything that’s major in their life that they need to have a sum of money or preparation for is called?

Answer 166

Time horizon - retirement - new home - post secondary - new business

Question 167

Risks of investing GIC’s and Bonds (annuities)

Answer 167

Inflation risk (also interest) The cost of living is going at a faster rate than what you’re getting from your investment Safer investments pose this risk. Because they’re safer their money is safer-usually not getting the best return- so you might be falling behind when it comes to things like cost of living

Question 168

Segregated Funds AKA?

Answer 168

IVIC Individual Variable Insurance Contract

Question 169

And advantage of Seg. Funds is the Rescission right. How many days is it?

Answer 169

2 days

Question 171

An advantage of Seg. Funds is that insurance you don’t have to go through…

Answer 171

Medical underwriting or proof of insurability

Question 172

Money markets are what risk?

Answer 172

Lowest. BUT also low return

Question 173

Bond funds are what risk?

Answer 173

Low. Bond funds usually have a certain percentage that is in fixed income securities- which makes it safer. Because it’s safer - not the greatest return

Question 174

Equity funds are?

Answer 174

Higher levels of risk. These are known as growth funds. Usually invest in stocks, publicly traded companies

Question 176

Income funds are?

Answer 176

Lower risk. Based on stability of bonds. Usually pay a regular interest. Have the possibility for capital appreciation.

Question 177

Balanced funds are?

Answer 177

Balanced risk Someone who’s in the middle- want growth but don’t want to take on high risk. Invest in both stocks and bonds

Question 178

In an RRSP deposits cannot be made after the person is how old?

Answer 178

71 years old

Question 179

You make small deposits, you don’t have a huge lump sum. Eventually it will be a payout annuity. At the moment you’re just accumulating the funds.

Answer 179

Accumulation Annuity

Question 180

What are the two types of payout annuities? Payout annuities make payments to you.

Answer 180

Immediate: payments start right away Deferred: payments don’t start right away. Maybe you need them in 5 years, etc.

Question 181

Payments cannot stop once started

Answer 181

Annuities

Question 182

Annuity advantages

Answer 182

-Income security- lifetime income- someone retiring/retired- gives new income. - spousal income- provides surviving spouse with income. - temporary income- term annuity- give temporary income for the time needed - creditor protection- great feature for self employed/business owners - able to name beneficiaries- provides creditor protection

Question 183

Impaired annuity

Answer 183

Shortened life- need something to show there’s a reason why someone has a shortened life- disease/ illness They’d be able to get higher payment, lower premium

Question 184

Funding annuities

Answer 184

Lump sum- money inherited Transfer from a registered account- RRSP, RRIF,etc. - they can transfer the funds to be used to payout the annuity- registered accounts are pre tax dollars- taxed Payments- starting young- could use an accumulation annuity- pay over time- once enough funds gathered maybe they want it to be used to fund retirement. - after tax payments- not taxed

Question 185

Annuity income

Answer 185

Level- same payment every month Indexed- increase by a certain percentage up to a cap- if someone is worried about inflation, purchasing power

Question 186

Annuity limitations

Answer 186

Interest rate- interest rate is locked in. If it changes too bad Inflation risk- cost of inflation may be higher- lose value of your money Loss of capital- no guaranteed periods unlike Seg funds. If the annuitant dies and contract ends just after payments began, most of the capital will be retained by the company. Can name a beneficiary to offset risk though. Restrictions on withdrawals- once payments start, can’t stop unlike Seg funds where you can withdraw but pay penalties- don’t have that option here because it’s locked in