Variable 2 Flashcards
The following statement about surrender value under traditional participating life
insurance products are TRUE?
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In the case of participating policies, the net cash surrender value includes the surrender value of the paid-up addition up to the date of surrender
When a participating insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with the number of units
Cash value is paid when yearly renewable term insurance policy is surrendered
The amount of surrender value is usually higher than the amount under non-participating policies and it varies with the age of the assured, being lower at older ages
The amount of surrender value is usually higher than the amount under non-participating policies and it varies with the age of the assured, being lower at older ages
Which one of the following statements about risks of investing in variable life funds is TRUE?
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Policy owners who are risk-averse should not purchase life insurance policieswith high protection and guaranteed cash and maturity values
Policy owners who are risk averse should buy life insurance policies with high equity investment
Investment in variable life funds which are fully invested in units of equity bonds are not suitable for policy owners who can tolerate the risks of short-term fluctuation in their cash value
Policy owners who invest in variable life funds with high equity investment face higher risk but can expect to achieve higher returns than the traditional life insurance product over the long term
Policy owners who invest in variable life funds with high equity investment face higher risk but can expect to achieve higher returns than the traditional life insurance product over the long term
What should be the withdrawal values after a year?
Offer Price = Php.16.00
Bid-Offer Spread = 4.5%
Number of units bought = 25,000
Policy Fee=1,800
Admin and Mortality Charge = 8,750
Top-up Fee = 700
Admin for Top-up = 2000
Sum assured is 190% of single premium or the value of units, whichever is higher.
ASSUMPTIONS:
1. Charges and fees are deducted after the single premium has been invested into the
account. 2.The growth rate of the unit price and bid-offer spread is maintained at 8%
and 4.5% respectively.
Php 432,000.00
Php 420,069.20
Php 412,500.00
Php 401,107.58
Php 401,107.58
The protection cost under a variable life insurance policy
I. Are met by flat initial charges for regular premium plans
II. Are generally covered by cancellation of units in fund
III. Are generally met by explicit charges stipulated openly in the policy terms
IV. Vary with the age of policy owner and level of cover
II, III, & IV
Which of the following statements about diversification in portfolio management is FALSE?
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Diversification helps to spread the portfolio risk by investing in different categories of investment in a portfolio
A diversified portfolio provides greater security to an investor having to sacrifice return for the portfolio
Diversification can completely eliminate the risk of investing in stocks in a portfolio
Diversification can involve purchasing different types of stocks and investing stocks in different countries
Diversification can completely eliminate the risk of investing in stocks in a portfolio
What are the advantages of investing in preferred shares?
I. It gives shareholders the right to a fixed dividend
II. Has the priority over the company
III. Assets during a dissolution
IV. They enjoy the benefit of capital appreciation
I, II, & III
With traditional participating life insurance products, the allocations to policy owners in the
form of dividends
I. Are not directly linked to the company’s investment performance
II. Have already been smoothened by the life company
III. Do not have the highs and lows of investment return as in good investments
years of life company
IV. Are not fixed at the inception of the policy but are greatly dependent on the
investment performance of the company.
I, II, & III
The objective of satisfying customers need profitably can be achieved by an agent through:
I. The giving of freebies to the customers
II. Extensive investment training by the company
III. The use of a sales plan, where sales goals, strategies, and objectives are
coordinated with the market analysis, segmentation and training
IV. The giving of monetary assistance and discount to the customers
II, & III
Which of the statements is true about CASH?
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Investment in cash increases when there is a bull run in the stock market
It has a high yield potential
Amount invested in cash depends on size of the cash flow requirement
Investment in cash decrease when interest rates rise
Amount invested in cash depends on size of the cash flow requirement
Under a regular premium variable whole life plan
I. Premium top-ups and holidays, subject to the company’s administrative rules are
usually allowed
II. Life protection is the main objective of the plan with investment as the nominal
purpose
III. Withdrawals after the payment of a few years’ premium are usually allowed
IV. A single premium contribution is made to the policy which uses the premium to
purchase units in a variable life fund to provide a certain level of life cover
I, II, & III
Which of the following statements about investment objectives is false?
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Investment in commodities has no regular income
People invest money in fixed deposits to produce high and guaranteed returns
People invest money to provide funds for higher education for their children
People invest money to enhance a comfortable standard of living
People invest money in fixed deposits to produce high and guaranteed returns
Which of the following is/are the main characteristic(s) of variable life policies?
I. The policies can be used for investment, as a source of regular savings and
protection
II. The withdrawal values and protection benefits are determined by the
investment
III. The net cash values of the policies are the gross cash values shown in the
policy that includes dividends up to the date of surrender less and indebtedness
including interest
I & II
Risk can be classified into two particular categories in relation to investment. They include:
I. The risk of not losing some or all of the person’s initial investment
II. The risk of rate of return on the investment not matching up to the individual’s
expectation
III. The risk of rate of return on the investment matching up to the individual’s
expectation
IV. The risk of losing some or all of a person’s initial investment
II & IV
The duties of the trustee of unit trust do not include:
*
Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself
Holding the pool of money and assets in trust on behalf of the investors
Acting generally to protect the unit-holders
Ensuring that the fund manager adhere to the provision of the trust deeds
Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself
Policy fee payable by variable life insurance policy owner is to cover
*
The handling charges by professional investment managers
The price of each unit bought under the variable life insurance policy
The administrative expenses of setting up the variable life insurance policy
The mortality costs of the variable life insurance policy
The administrative expenses of setting up the variable life insurance policy
The selling price under a variable life insurance policy is:
*
Also known as the bid price
A fixed amount throughout the life of the policy
The price at which units under the policy are offered for sale by the life company
The price at which units under the policy are bought back by the life insurance company
The price at which units under the policy are offered for sale by the life company
Diversification in investment involves
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Putting all the funds under management into one category of investment
Reducing the risks of investment by putting all one’s eggs in one basket
Spreading the risk of investment by not putting the fund into several categories of investment
Reducing the risks of investment by putting one fund under management into several categories of investment
Reducing the risks of investment by putting one fund under management into several categories of investment
Variable life funds can be invested in any financial instrument including cash funds,
bond funds, equity funds, property funds, specialized funds, and diversified funds. Equity
funds
*
Invest in shares of stocks which are inherently of lower risk in nature and the prices of stocks are stable
Invest in shares of stocks and investors who buy such assets usually aim for capital appreciation
Invest in shares of stocks and the magnitude of the change in unit prices will only depend on the quantity of the equities held
Invest in shares of stocks and during market recession, such as assets are usually the last to depreciate
Invest in shares of stocks and investors who buy such assets usually aim for capital appreciation
In risk-return profile of cash funds, bond funds, balanced funds, managed funds
and equity funds, a risk-return graph will show that:
I. Higher return normally comes with lower risk
II. Higher return normally comes with higher risk
III. At the top end of the graph are the equity funds
IV. The relatively risk-less cash funds sit at the bottom end of the graph
II, III, & IV
Which of the following statements are TRUE?
I. The policy value of variable life policies is determined by the offer price at the
time of valuation
II. The policy value of endowment policies is the cash value plus any accumulated
dividends less any outstanding loans due at the time of surrender
III. The life company needs to maintain a separate account for variable life policies
distinct from the general account
II & III
Rank the following in terms of their liquidity, from the least liquid to the most liquid:
I. Short term securities
II. Property
III. Cash
IV. Equities
II, I, IV, III
Which of the following statements describe the differences between variable life products and participating products?
I. Variable life products allow policyholders to vary the premium payments, unlike II. Variable life products can take the form of whole life or endowment policies with
participating products
III. Variable life products allow policyholders to pay a future single Premiums from time
to time to add more units to his account, unlike participating products
I, Il, and III
Assuming has ement it he ries accohat, howes are duct ed certher sose it he
surrenders the policy now?
Bid price=Ps. 13.00
Bid-offer spread=4%
Single premium =Ps. 450,000
Policy fee Ps. 1,800
Admin and Mortality charge=3%
Sum assured is 200% of single premium or the value of the units, whichever is higher 0/1
a. Ps. 43,400.90
b. Ps. 33,246.78
c. Ps. 22,500.00
d. Ps. 15,299.96
33,246.78
Which of the following statements BEST describes “variable life” policies?
a. It is a fixed premium policy with returns that will not vary with the underlying value of investments
b. It is a fixed premium policy with returns that will vary with the underlying value of investments c.
It is a flexible premium policy with returns that will not vary with the
underlying value of investments
d. It is a flexible premium policy with returns that will vary with the underlying value of investments
It is a flexible premium policy with returns that will vary with the underlying value of investments
Which of the following factors contribute to the specific risk of investment:
I. Rate of corporate taxes
II. Fraud by senior management
III. Financial leverage of the company
II and III
Investing in bonds offers the following advantages EXCEPT
a. It offers protection to the principal and guaranteed steady stream of income
b. It is a place of temporary refuge when the investor foresees that the market outlook is uncertain
c. It allows the investor a chance for capital preservation
d. It enables the investor an opportunity for capital appreciation
It enables the investor an opportunity for capital appreciation
Rank the following investment instruments in terms of their level of risks, from the least risky to the most risky
I. cash and deposit
II. derivatives
III. a well-diversified investment portfolio of a company
IV. stock options
I, IV, III & II
Which of the following information is NOT required to be disclosed to policyholders of variable life policies?
a. The net withdrawal value as of the statement date
b. The premiums received and charges levied during the period
c. The basis and frequency for valuing the assets
d. Number and value of units held at the beginning of the period; bought and sold during the period; and held at the end of the period
he net withdrawal value as of the statement date
Which of the following is/are the main characteristics (s) of variable life policies
I. The policies can be used for investment, as a source of regular savings and protection.
II. The withdrawal values and protection benefits are determined by the investment performance of the underlying assets.
IlI. The net cash values of the policies are the gross cash values shown in the policy that includes dividends up to the date of the surrender less any indebtedness including interests.
I and II
