Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial advisor > Vul reviewer set 1 > Flashcards

Vul reviewer set 1 Flashcards

1
Q

Variable Life insurance policy owners may make withdrawals in terms of _______________.
A. The number of units or fixed monetary amount through the cancellation of units.
B. The number of units or fixed monetary amount through reduction of the life cover sum assured.
C. The fixed monetary amount only through reduction of the life cover sum assured.
D. The number of units through the cancellation of units.

A

A. The number of units or fixed monetary amount through the cancellation of units.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Which one of the following statement about the flexibility features of Variable Life Policies is FALSE?
A. Policy owners may request for a partial withdrawal of the policy, and the withdrawal amount will be
met by cashing the units at bid price.
B. Policy owners can take loans against their Variable Life Policies up to the entire
withdrawal value of their policies.
C. Policy owners have the flexibility of switching from one fund to another provided it satisfies the
company’s switching criteria.
D. Policy owners have the flexibility of increasing or decreasing their premiums for regular premiums
variable life policies.

A

B. Policy owners can take loans against their Variable Life Policies up to the entire
withdrawal value of their policies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

The investment returns under Variable Life insurance policy
I. Are not guaranteed
II. Are assured
III. Are linked to the performance of the investment fund management by the life company
IV. Fluctuate according to the rise and fall of market prices
A. I, II and III
B. I, II and IV
C. I, III and IV
D. II, III and IV

A

C. I, III and IV

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

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.
A. I, and II
B. I, II and III
C. I and III
D. II and III

A

D. II and III

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Which of the following statement is FALSE?
A. Rebating is to offer a prospect a special inducement to purchase a policy.
B. Twisting is a specific form of misrepresentation.
C. Misrepresentation is a specific form of twisting.
D. Switching is a facility allowing policy owners to switch to another Variable Life fund offered by the
company.

A

C. Misrepresentation is a specific form of twisting.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Which of the following statements about Variable Life Policies are TRUE?
I. Offer price is used to determine the numbers of units to be cancelled from the account.
II. The margin between the bid and offer price is used to cover the management cost of the policy.
III. The policy value is calculated based on the bid price of units allocated into the policy.
A. I, II and III
B. I and II
C. I and III
D. II and III

A

D. II and III

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the most suitable investment instrument for an investor who is interested in protecting his principal
and receiving a steady stream of income?
A. Equities
B. Warrants
C. Variable Life policies
D. Fixed income securities

A

D. Fixed income securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the disadvantages of investing in common shares?
I. Dividends are paid not more than fixed rates.
II. Investors are exposed to market and specific risks.
III. Shares can become worthless if company becomes insolvent.
A. I and II
B. I and III
C. II and III
D. I, II and III

A

C. II and III

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Which of the following statements about the differences between Variable Life policies and Endowment
policies are FALSE?
I. The policy values of Variable Life and Endowment policies directly reflect the performance of the
fund of the life company.
II. The premiums and benefits of the Endowment policies are described at inception of the policy
whereas Variable Life policies are flexible as they are account driven.
III. The benefits and risks Variable Life and Endowment policies directly accrue to the policy owners.
A. I and II
B. I, II and III
C. I and III
D. II and III

A

C. I and III

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Which of the following statements about twisting is FALSE?
A. Twisting is a special form of misrepresentation.
B. It refers to an advisor inducing a policy owner to discontinue a policy with another company without
disclosing the disadvantage of doing so.
C. It includes misleading or the incomplete comparison of policies.
D. It refers to an advisor offering a prospect a special inducement to purchase a policy.

A

D. It refers to an advisor offering a prospect a special inducement to purchase a policy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Mr. Juan dela Cruz is currently earning P30,000/month. He is 35 years old and has a reasonable amount of
savings. He has a moderate level of risk tolerance. What kind of policy would you recommend for him to
buy?
A. Participating Endowment
B. Variable Life policies
C. Participating Whole Life
D. Annuities

A

B. Variable Life policies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the benefits available when investing in Variable Life funds?
I. The Variable Life funds offer policy owners an access to a pooled of diversified portfolios.
II. The Variable Life policy owner can vary his premiums payments, take premium holidays, add single
premium top-ups and change the level of sum assured easily.
III. The Variable Life policy owner can have access to a pool of qualified and trained professional fund
managers.
A. I and II
B. I and III
C. I, II and III
D. II and III

A

C. I, II and III

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

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
A. IV, II, III, I
B. III, I, IV, II
C. II, I, IV, III
D. II, IV,I II

A

C. II, I, IV, III

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

A UNIT TRUST is __________________________________________________
A. Established by a trust deed which enables a trustee to hold the pool of money and
assets in trust on behalf of the investor.
B. A closed-end fund and does not have to dispose of its assets if large number of investors sell their
shares
C. One whereby an investor buys unit in the trust itself and not from the shares in the company.
D. An organization registered under the Security and Exchange Commission (SEC) which usually invests
in a wide range of equities and other investments.

A

A. Established by a trust deed which enables a trustee to hold the pool of money and
assets in trust on behalf of the investor.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Under Variable Life Insurance policies ________________________________________
I. There is no guaranteed minimum sum for the purpose of declaring dividends.
II. There is no guaranteed minimum sum assured as a level of life insurance protection.
III. Each of the policy owner’s premiums will be used to purchase units, the number of which is
dependent on the selling price of each unit.
IV. Purchase of units can only be made from the Variable Life Fund itself, which will then create new
units and add the investment monies to the value of the fund.
A. I and IV
B. II and IV
C. III and IV
D. II and III

A

C. III and IV

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

The benefits of investing in Variable Life fund include:
I. Policy Owners have access to a pooled and diversified portfolio of investment.
II. Policy Owner can easily change the level of premium payments as the product design of Variable
Life insurance policies have clear structures which cater separately for investment and insurance
protection.
III. Policy Owners can gain access to Variable Life funds managed by professional investment managers
with proven track records.
IV. Policy Owners can buy a Variable Life insurance policy only with a high initial investment
A. I, II, and IV
B. I, III, and IV
C. I, II, and III
D. II, III and IV

A

C. I, II, and III

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Which of the following BEST describes the policy benefits of Variable Life policies?
A. The policy benefits are payable only for the death or disability.
B. The policy benefits will depend on the long-term performance of the life company.
C. The policy benefits are directly linked to the investment performance of the underlying assets.
D. The policy benefits are guaranteed.

A

C. The policy benefits are directly linked to the investment performance of the underlying assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Why is it important that the customer must understand the sales proposal in full?
A. Because the insurer does not guarantee any return
B. Because the impact of changes in investment condition on variable life policy borne
solely by the customer
C. Because the agent may give the wrong recommend

A

B. Because the impact of changes in investment condition on variable life policy borne
solely by the customer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Which of the following statements about rebating are TRUE?
I. Rebating is prohibited under the Insurance Code.
II. Rebating deals with offering the prospect a special inducement to purchase a policy.
III. Rebating will enhance the sales performance and uphold the prestige of an advisor.
A. I and II
B. I and III
C. II and III

A

A. I and II

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Which one of the following statements is FALSE?
A. Variable Life insurance policies offer investors policies with values and are indirectly
linked to the investment performance of the life company.
B. A life company will carry out a valuation of its funds yearly and any surplus may be allocated to
participating policy owners as cash dividends.
C. Both Whole Life and Endowment policies can be used as an investment media with benefits that
become payable at a future date.
D. The investment element of Variable Life policies varies according to the underlying assets of
portfolio.

A

A. Variable Life insurance policies offer investors policies with values and are indirectly
linked to the investment performance of the life company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Which one of the following statements about the option to top-up under Variable Life insurance products is
FALSE?
A. Policy owners may buy additional units of the Variable Life fund and these units will be
allocated to new Variable Life insurance policies.
B. Further premiums at the time of top-ups will be used in full, after deducting charges for top-ups, to
purchase additional units of the Variable Life funds.
C. To top-up policy, the policy owner pays further single premium at the time of top-up.
D. Policy owners are normally allowed to top-up their policies at any time, subject to a minimum
amount.

A

A. Policy owners may buy additional units of the Variable Life fund and these units will be
allocated to new Variable Life insurance policies.

21
Q

The characteristics of a Variable Life insurance policy include __________________.
I. Its withdrawal value and protection benefits are determined by the investment performance of the
underlying assets.
II. Its protection costs are generally met by implicit charges.
III. Its commission and company expenses are met by a variety of implicit charges with normally 6
months’ notice given by the life companies prior to any change.
IV. Its withdrawal value is normally the value of units allocated to the policy owner calculated at the bid
price.
A. I, II and III
B. II, III and IV
C. I, II and IV
D. I, III and IV

A

C. I, II and IV

22
Q

Which of the following statements about single premium Variable Life policies are TRUE?
I. There is no fixed term in a single premium Variable Life policy and therefore, they are technically
Whole Life insurance.
II. Top-ups single premium injections are allowed in these plans.
III. Policy Owners have the flexibility of varying the level cover.
A. I, II and III
B. II and III
C. I and II
D. I and III

A

B. II and III

23
Q

Investing in bonds offer the following advantages EXCEPT:
A. It offers protection to the principal and guarantees a steady stream of income.
B. It is place of temporary refuge when the investor foresees that the market outlook is uncertain.
C. It allows the investor a chance for capital preservations.
D. It enables the investors an opportunity for capital appreciation.

A

D. It enables the investors an opportunity for capital appreciation.

24
Q

Which of the following statements about Variable Life policies are TRUE?
I. The withdrawal value is not guaranteed.
II. The volatility of the returns depends on the investment strategy of the fund.
III. The Variable Life policy owner has direct control over the investment decisions of the Variable Life
fund.
A. I, II and III
B. I and II
C. I and III
D. II and III

A

B. I and II

25
Q

A Single Premium Variable Life insurance policy:
A. Must be issued with a minimum death benefit
B. Must be issued with a maximum withdrawal value
C. Has no death benefit
D. Has no withdrawal value

A

A. Must be issued with a minimum death benefit

26
Q

Which of the following statements about the characteristics of Variable Life policies are TRUE?
I. Variable Life policies generally have larger exposure to equity investments than with participating
and other traditional policies.
II. The protection costs are generally met by implicit charges, which vary with age and level of cover.
III. Commissions and company expenses are met by a variety of explicit charges, some of which are
variable.
A. I, II and III
B. I and II
C. II and III
D. I and III

A

B. I and II

27
Q

Which of the following statements about the benefits in Variable Life fund is FALSE?
A. The fund provides a highly diversified portfolio, thus, lowering the risk of investment.
B. The fund ensures definite high yield for an investor since it is managed by professionals
who are well-versed in the management of risks of investment portfolios.
C. The fund relieves the investor from the hassles of administering his/her investment.
D. The fund enables small investors to participate in a pool of diversified portfolios in which he/she with
low investment capital is likely to have acceded to.

A

B. The fund ensures definite high yield for an investor since it is managed by professionals
who are well-versed in the management of risks of investment portfolios.

28
Q

The Flexibility benefits of investing in Variable Life funds include_____________.
I. The policy owner can easily change the level of sum assured and switch their investment between
funds.
II. Policy owners can easily take premium holidays and add single premium to top-ups
III. Variable Life insurance products have simple product design with a clear structure, which cater
separately for investment and insurance protection.
IV. Policy owners can easily change the level of their premium payment.
A. All of the above
B. I, II and III
C. I, II and IV
D. I, III and IV

A

C. I, II and IV

29
Q

The Fundamental differences between traditional participating life insurance policies and Variable Life
insurance policies include__________________________.
I. Variable Life insurance policies are less likely to offer more choices in terms of the type of
investment funds.
II. The investment elements of Variable Life insurance policies are made known to the policy owner at
the outset and are invested in a separately identifiable fund which is made up of units of
investment.
III. Variable Life insurance policies offer the potential for higher returns.
IV. Traditional participating policies aim to produce a steady return by smoothing out market
fluctuation.
A. I, III and IV
B. II, III and IV
C. I, II and IV
D. I, III and IV

A

B. II, III and IV

30
Q

The switching facility under Variable Life insurance policies is very useful ________________.
A. For the purpose of profit planning by the life policies
B. For the purpose of assets planning by the trustee.
C. For the purpose of sales planning by the fund managers.
D. For the purpose of financial planning by the policy owners.

A

D. For the purpose of financial planning by the policy owners.

31
Q

Which of the following statements about surrender value under Traditional participating life insurance
products is TRUE?
A. Cash Value is paid when a yearly renewable term insurance policy is surrendered.
B. When a participating insurance policy is surrendered, the surrender value is calculated by multiplying
the bid price with the number of units.
C. The amount of surrender value is usually higher than the amount under nonparticipating policies and it varies with the age of the assured, being lower at older
ages.
D. In the case of participating policies, the net cash surrender value includes the surrender value of the
paid-up addition to the date of surrender.

A

C. The amount of surrender value is usually higher than the amount under nonparticipating policies and it varies with the age of the assured, being lower at older ages.

32
Q

Which of the following statements about the risk of investing in Variable Life funds is TRUE?
A. Policy owners who are risk averse should buy Variable Life Insurance policies with high equity
investment.
B. Investments 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.
C. Policy owners who invest in Variable Life funds with high equity investment face greater risk but can expect to achieve higher return than the Traditional Life insurance product over the long term.
D. Policy owners who are risk averse should not purchase life insurance policies with high protection
and guaranteed cash and maturity values.

A

C. Policy owners who invest in Variable Life funds with high equity investment face greater risk but can expect to achieve higher return than the Traditional Life insurance product over the long term.

33
Q

What would be the withdrawal value after a year?
Offer Price = P16.00
Bid-offer spread = 4.5%
Number of Units bought = 25,000
Policy Fee = P1,800
Admin and Mortality Charge = P8,750
Top-up Fee = P700
Admin for Top-up = P2,000
Sum assured is 190% of single premium or the value of the 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 the bid-offer spread is maintained at 8% and 4.5%
respectively.
A. Ps. 432,000.00
B. Ps. 420,069.00
C. Ps. 401,107.58
D. Ps. 412,500.00

A

C. Ps. 401,107.58

34
Q

The protection costs under a Variable Life insurance policy _________________.
I. Are met by flat initial charges for regular premium plans.
II. Are generally covered by the cancellation of units in the fund.
III. Are generally met by explicit charges stipulated openly in the policy terms.
IV. Vary with age of policy owner and level of cover.
A. I, II and III
B. I, II and IV
C. I, III and IV
D. II, III and IV

A

B. I, II and IV

35
Q

Which one of the following statements about diversification in Portfolio management is FALSE?
A. A Diversified portfolio provides greater security to an investor having to sacrifice the return for the
portfolio.
B. Diversification completely eliminate the risk of investing in stocks in a portfolio.
C. Diversification can involve purchasing different types of stocks and investing in stocks of different
countries.
D. Diversification helps to spread the portfolio risk by investing in different categories of investment in
a portfolio.

A

B. Diversification completely eliminate the risk of investing in stocks in a portfolio.

36
Q

What are the advantages of investing in preferred shares?
I. It gives shareholders the right to a fixed dividend.
II. Has the priority over company assets during dissolution.
III. They enjoy the benefits of capital appreciation.
A. I, II and III
B. I and II
C. I and III
D. II and III

A

A. I, II and III

37
Q

With traditional participating life insurance products, the allocations to policy owners in the form of
dividends:
I. Are not directly linked to the investments performance of the life company.
II. Have already been smoothened by the life company.
III. Do not have the highs and lows of investment returns as in good investment years of the life
company.
IV. Are not fixed at the inception of the policy, but are greatly dependent on the investment
performance of the life company.

A. I, II and III
B. I, II and IV
C. I, III and IV
D. II, III and IV

A

D. II, III and IV

38
Q

The objective of satisfying the customers’ need profitability can be achieved by an advisor through:
I. The giving of freebies to the customers.
II. Extensive investment training by the company.
III. The use of sales plan, where sales goals, strategies and objectives are coordinated with market
analysis, segmentation and targeting.
IV. The giving of monetary assistance and discount to customers.
A. I and III
B. II and III
C. I, II and IV
D. II, III and IV

A

B. II and III

39
Q

Which of the following statements about cash is TRUE?
A. It has high yield potential.
B. The amount invested in cash depends on the size of the cash flow requirement.
C. Investment in cash increases when there is a bull run in the stock market.
D. Investment in cash decreases interest rates rise.

A

B. The amount invested in cash depends on the size of the cash flow requirement.

40
Q

Under a Regular Premium Variable Whole Life insurance plan ________________________.
I. Premium top-ups and holidays, subject to the life company’s administrative rules are usually
allowed.
II. Life protection is the main objective of the plan with investment as a 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 and to provide a certain level of life cover.

A. II, III and IV
B. I, III and IV
C. I, II and IV
D. I, II and III

A

D. I, II and III

41
Q

Which of the following statements about investment objective is FALSE?
A. People invest money in fixed deposits to produce high and guaranteed returns.
B. People invest money to enhance a comfortable standard of living
C. People invest money to provide funds for the higher education of their children.
D. Investment in commodities has no regular income.

A

A. People invest money in fixed deposits to produce high and guaranteed returns.

42
Q

Which of the following are the main characteristics of variable life policies?
I. The policies can be used for investments, 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.
III. The net cash values of the policies are the gross withdrawal values shown in the policy which
includes cash dividends up to the date of surrender, less any indebtedness, including interest.
A. II
B. I
C. I, II and III
D. I and II

A

D. I and II

43
Q

Risk can be classified into two particular categories in relation to investment. They include ______:
I. The risk of not losing some or all of a 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.
A. I and III
B. I and II
C. III and IV
D. II and IV

A

D. II and IV

44
Q

The duties of the trustees of a unit do not include:
A. Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself.
B. Ensuring that the fund manager adhere to the provision of the trusts deeds
C. Acting generally to protect the unit-holders.
D. Holding the pool of money and assets in trust in behalf of the investors.

A

A. Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself.

45
Q

The policy fee payable by a Variable Life insurance policy owner is to cover _______:
A. The handling charges by professional investment managers.
B. The pric e for each unit bought under the Variable Life insurance policy.
C. The mortality costs of the Variable Life insurance policy.
D. The administrative expenses of setting up the Variable Life insurance policy.

A

D. The administrative expenses of setting up the Variable Life insurance policy.

46
Q

The selling price under a Variable Life insurance policy is:
A. The price at which units the policy is bought back by the life company.
B. The price at which units under the policy are offered for the sale by the life company.
C. Also known as the bid price.
D. A fixed amount throughout.

A

B. The price at which units under the policy are offered for the sale by the life company.

47
Q

In the 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 equity funds.
IV. The relatively risk-less cash funds sit at the bottom end of the graph.
A. I, II and III
B. II, III and IV
C. I, II and IV
D. I, III and IV

A

B. II, III and IV

48
Q

Diversification in investment involves ____________________________________.
A. Putting all the funds under management into one category of investment.
B. Spreading the risks of investment by not putting the fund into several categories of investment
C. Reducing the risks of investment by putting one fund under management into several categories of investment.
D. Reducing the risks of investment by putting all one’ eggs in one basket.

A

C. Reducing the risks of investment by putting one fund under management into several categories of investment.

49
Q

Variable Life funds can be invested in any financial instruments including cash funds, bond funds, equity
funds, property funds, specialized funds and diversified funds. Equity funds ____________:
A. Invest in shares of stocks and the magnitude of the change in unit prices will only depend on the
quantity of the equities held.
B. Invest in shares of stocks and during market recession, such assets are usually the last to
depreciate.
C. Invest in share of stocks which are inherently of lower risk in nature and the prices of stocks are
stable.
D. Invest in shares of stocks and an investor who buys such assets usually aims for capital appreciation.

A

D. Invest in shares of stocks and an investor who buys such assets usually aims for capital appreciation.

Financial advisor (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions