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Financial advisor > Vul reviewer set 2 > Flashcards

Vul reviewer set 2 Flashcards

1
Q

People generally invest their money to provide:
I. An improvement in their financial position
II. A less comfortable standard of living
III. Retirement income
IV. Funds for paying necessary expenses and taxes when the person dies
A. I, II and III
B. I, III and IV
C. I, II, and IV
D. II, III and IV

A

B. I, III and IV

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2
Q

Which of the following funds is comprised of a higher proportion of equity and a lower
proportion of fixed-income instruments?
A. Bond Funds
B. Cash Funds
C. Managed Funds
D. Mixed Funds

A

C. Managed Funds

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3
Q

Which of the following are the main characteristics of Variable Life Insurance policies?
I. The policies can be used for investments, as a source of regular savings and protection.
II. The withdrawal and protection benefits are determined by the investment performance
of the underlying assets.
III. The net withdrawal values of the policies are the gross withdrawal values shown in the
policy which includes cash dividends up to the date of surrender, less all indebtedness,
including interests.
A. I only
B. II only
C. I and II only
D. I, II and III

A

C. I and II only

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4
Q

Which of the following statements are FALSE?
I. The Policy owners may request a partial withdrawal of the policy and the amount will
be met by cashing the units at the offer price
II. The structure of charges and the investment content of a Variable Life Policy are
specified in the policy document and the policy statement.
III. Some Variable Life Policies grant loans to policy owners which is limited to a percentage
of the cash value.
IV. Commissions and office expenses are met by a variety of implicit charges, some of
which are variable.
A. I and II only
B. I and III only
C. II and III only
D. All of the above

A

B. I and III only

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5
Q

Which of the following statements about the feature of Regular Premium Variable Life Policy
are TRUE?
I. Top-ups are usually allowed.
II. The level of cover can be varied.
III. Premium holidays are usually allowed.
A. I and II only
B. I and III only
C. II and III only
D. I, II and III

A

D. I, II and III

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6
Q

Which one of the following statements is NOT TRUE about the benefits of investing in a
Variable Life insurance policy?
A. The fund provides a highly diversified portfolio, thus, lowering the risk of investment.
B. The fund relieves the investor from the hassles of administering his/her investment.
C. The fund ensures definite high yield for an investor since it is managed
by professionals who are well-versed in the management of risk of an
investment portfolio.
D. The fund enables small investors to participate in a pool of diversified portfolios in
which he/she is unlikely to have access to with low investment capital.

A

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

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7
Q

Which of the following statements describes the difference between Variable Life insurance
products and traditional participating products?
I. Variable Life insurance products allow policy owners to change the premium payments
but traditional participating life products do not.
II. Variable life insurance products can take the form of Whole Life or Endowment policies
but Traditional Life Policies cannot.
III. Variable Life Insurance products allow the policy owners to pay future single premiums
from time to time to add more units to his accounts but Traditional Life participating
products do not.
A. I only
B. I and III only
C. II and III only
D. I, II and III

A

B. I and III only

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8
Q

Which of the following are some of the flexibility features of Variable Life insurance policies?
I. Partial withdrawal
II. Variation in sum assured
III. Guaranteed withdrawal values
A. II only
B. III only
C. I and II only
D. I, II and III

A

C. I and II only

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9
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, it is
technically Whole Life insurance.
II. Top-ups or single premium injections are allowed.
III. Policy Owners have the flexibility of varying the life coverage.
A. I and II
B. I and III
C. II and III
D. I, II and III

A

C. II and III

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10
Q

The benefits of investing in Variable Life fund include:
I. Policy Owners have access to a pooled and diversified portfolio of investment.
II. The 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.
IV. The Policy Owner is relieved of the day to day administration of his investment
A. I, II, and III
B. I, II, and IV
C. I, III, and IV
D. All of the above

A

D. All of the above

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11
Q

The flexibility benefits of investing in Variable Life funds include:
I. Policy Owners can easily change the level of sum insured and switch their investments
between funds.
II. Policy owners can easily take premium holidays and add single premium top-ups.
III. Variable Life insurance products have simple product design with a clear structure
which caters separately for investment and insurance protection.
IV. Policy Owner can easily change the level of their premium payment.
A. I, II, and III
B. I, II, and IV
C. I, III, and IV
D. I,II,III, and IV

A

B. I, II, and IV

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12
Q

Which of the following statements describe the difference between Variable Life products and
traditional participating life products?
I. Variable Life products allow policy owners to pay top-up premiums from time to time to
buy more units for his account unlike traditional participating life policies.
II. Variable Life products allow policy owners to take premium holiday unlike traditional
participating life products.
III. Variable Life products can take the form of Whole Life or Endowment policies unlike
traditional participating life products.
A. I
B. I and II
C. I and III
D. I,II, and III

A

B. I and II

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13
Q

Your client is a 35 year-old male, earning P35,000 a month, has savings, and with a moderate
risk tolerance. What product would you recommend?
A. Participating Whole Life
B. Endowment
C. Term
D. Variable Life

A

D. Variable Life

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14
Q

In a Unit Trust Investment, the duties of a Trustee include all of these EXCEPT:
A. Selects and manages the investments of the Trust.
B. Holds the pool of money and assets in trust on behalf of the investors
C. Ensures that the fund managers adhere to the provisions of the trust deed.
D. Protects the interests of unit holders.

A

A. Selects and manages the investments of the Trust.

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15
Q

To the policy owners, administration benefits under Variable Life include:
A. Engaging independent professional fund managers personally to manage the
complicated transaction.
B. Constructing their own diversified portfolio.
C. Keeping track of their investment through the statements provided regularly
by the insurance company.
D. Exercising investment expertise by selecting funds that will give higher returns.

A

C. Keeping track of their investment through the statements provided regularly
by the insurance company

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16
Q

Which statement best describes Variable Life?
A. Fixed premium with returns that will not vary.
B. Fixed premium with returns that will vary.
C. Flexible premium with returns that will not vary.
D. Flexible premium with returns that will vary.

A

D. Flexible premium with returns that will vary.

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17
Q

Which statement about cash is TRUE?
A. Investment in cash increases when there is a bull run in the stock market.
B. Investment in cash decreases when there is a rise in interest rates.
C. Amount invested in cash is dependent on the size of the cash flow
requirement.
D. Its yield potential is high.

A

C. Amount invested in cash is dependent on the size of the cash flow
requirement.

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18
Q

Offer Price = P16 Administrative and Mortality Charges = P8,750
Bid-Offer Spread = 4.5% Top-up Fee = P700
Units = 25,000 Administrative Top-up Fee = P2,000
Policy Fee = P1,800
Presuming all charges are deducted by canceling units and that the bid price increases by 8%,
what is the withdrawal value after a year?

A. 432,000
B. 420,069.02
C. 401,107.58
D. 412,500

A

401,107.58

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18
Q

With traditional participating life insurance products, the allocations to policy owners of
dividends:
I. Are not directly linked to the investments of the life company.
II. Are smoothened
III. Do not have the highs and lows of investment returns in good times.
IV. Are not fixed.
A. I and II
B. I, II and III
C. I, II, IV
D. II and IV

A

D. II and IV

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18
Q

Which statements are FALSE regarding the difference between Endowment policies and
Variable Life policies?
I. The benefits and risks of Endowment and Variable Life policies directly accrue to the
Policy Owners.
II. The premiums and benefits of Endowment policies are stated at its inception while
those of Variable Life policies are flexible as they are account driven.
III. Their policy values directly reflect the performance of the fund of the life company.
A. I and II
B. I and III
C. II and III
D. I, II and III

A

B. I and III

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19
Q

These statements are true EXCEPT
A. No regular income may be gained from investing in commodities.
B. Investing in fixed deposits gives high guaranteed returns.
C. People invest money to enhance a comfortable standard of living.
D. People invest money to provide funds for the higher education of their children.

A

B. Investing in fixed deposits gives high guaranteed returns.

20
Q

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

A

A. The price at which units under the policy is offered for sale by the life
insurance company.

21
Q

Which statement regarding the risk of investment in Variable Life is TRUE?
A. Policy Owners who are risk averse should not purchase a life insurance policy with high
protection and guaranteed cash and maturity values.
B. Investments in Variable Life funds which are fully invested in units of equity funds 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 Traditional Life
insurance policies with high equity investment.
D. Policy Owners who are risk averse should buy Variable Life policies with high equity
investment.

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 Traditional Life
insurance policies with high equity investment.

22
Q

The statements below are true about the top-up option of a Variable Life insurance product
EXCEPT:
A. The Policy Owner pays further single premium to make a top-up.
B. Normally, Policy Owners are allowed to make a top-up on their policies at any time
subject to a minimum amount.
C. Policy Owners may buy additional units of Variable Life fund and these units
will be allocated to new Variable Life insurance policies.
D. Further premiums at the time of top-up will be used in full after deducting charges to
purchase additional units of the Variable Life funds.

A

C. Policy Owners may buy additional units of Variable Life fund and these units
will be allocated to new Variable Life insurance policies.

23
Q

If the current offer price = P2.50 and the bid-offer spread = 4% what is the bid price?
A. P2.40
B. P2.50
C. P2.60
D. P2.70

A

A. P2.40

24
Q

Which of the following statements are FALSE?
I. The bid-offer is used to provide a death benefit for the Variable Life insurance policy.
II. The bid price is always higher than the offer price.
III. The bid-offer spread is usually about 5%.
IV. There are two types of death benefits under the Variable Life insurance product. They
may offer either/or both types depending on its product design and on the discretion of
the policy owner.
A. I and II
B. II and III
C. II and IV
D. None of the above

A

A. I and II

25
Q

Which is NOT a characteristic of a Variable Life policy?
A. It is used solely for investment purposes.
B. The commission and office expenses are met by explicit charges.
C. It has generally, though not necessarily, more exposure to equity investments.
D. Its cash value is usually the value of units allocated to the policy calculated at the
prevailing bid price.

A

A. It is used solely for investment purposes.

26
Q

Which of the following statements about investment returns under a Variable Life insurance
policy is NOT TRUE?
A. It is assured
B. It is not guaranteed
C. It fluctuates based on the rise and fall of market prices
D. It is linked to the performance of the investment fund managed by the life
insurance company

A

D. It is linked to the performance of the investment fund managed by the life insurance company

27
Q

Which statements are FALSE regarding the difference between Endowment policies and
Variable Life policies?
I. The benefits and risks of Endowment and Variable Life policies directly accrue to the
Policy Owners.
II. The premiums and benefits of Endowment policies are stated at its inception while
those of Variable Life policies are flexible as they are account driven.
III. Their policy values directly reflect the performance of the fund of the life company.
A. I and II
B. I and III
C. II and III
D. I, II and III

A

B. I and III

28
Q

What are the ADVANTAGES of investing in preferred shares?
I. It has priority on company assets during dissolution
II. It has a benefit of capital appreciation
III. The shareholder has the right to a fixed dividend
A. I and II
B. I and III
C. II and III
D. I, II and III

A

D. I, II and III

29
Q

Which of the following information is NOT required to be disclosed to policy owners of Variable
Life policies?
A. The basis and frequency for valuing the assets.
B. The 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.
C. The net withdrawal as of the statement date
D. The premiums received and charges levied during the period.

A

A. The basis and frequency for valuing the assets

30
Q

The investment returns under Variable Life insurance policy
I. Are not guaranteed
II. Are insured
III. Are linked to the performance of the investment fund managed by the life office
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

31
Q

Which of the following are fixed income securities?
I. Corporate Stocks
II. Government Bonds
III. Preferred Shares
IV. Money Market Instruments
V. Properties
A. I, II, III and IV only
B. I and III only
C. I, III and V only
D. All of the above

A

A. I, II, III and IV only

32
Q

Which of the following investment options entitles the holder ownership and share of profits in
the form of dividends appreciation?
A. Cash
B. Bonds
C. Futures
D. Ordinary Shares

A

D. Ordinary Shares

33
Q

Which of the following statements are FALSE?
I. Higher Capital gain is normally associated with lower risk
II. One way to lower risk in investment is to diversify
III. One method of measuring risk is to determine the average return and its standard
deviation from future data
IV. Diversification can be achieved by investing in different countries and/or types of assets
V. An investor can always choose an investment that is risk free
A. I, II and III only
B. II, III and IV only
C. I, III and V only
D. All of the above

A

C. I, III and V only

34
Q

The difference between the offer price and the bid price is?
A. Bid price spread
B. Offer price spread
C. Bid-offer spread
D. None of the above

A

C. Bid-offer spread

35
Q

Which of the following information must NOT be conveyed to the client in the sale of Variable
Life insurance policies
A. Guaranteed interest rate
B. Time horizon of the product
C. Benefits illustrations using 10% as the gross
D. Rate of return

A

A. Guaranteed interest rate

36
Q

Term Insurance ____________________
A. Provides for payment of the sum insured when the life insured survives a specific
period.
B. Provides protection for a specific period and has no saving element.
C. Is the most complex and expensive of all life insurance products.
D. Provide for surrender of cash values on early termination of the insurance

A

B. Provides protection for a specific period and has no saving element.

37
Q

What are the disadvantage of investing in cash and deposits?
I. It is the safest type of investment.
II. They provide the lowest return.
III. There is reinvestment risk
A. I only
B. II only
C. II and III only
D. I, II and III

A

C. II and III only

38
Q

Which of the following are types of corporate stocks?
I. Debenture stocks
II. Government stocks
III. Loan stocks
IV. Money Market Instruments
V. Convertible Stocks
A. I, II and III only
B. I, II, III and IV only
C. I, III and V only
D. All of the above

A

C. I, III and V only

39
Q

Factors to consider in buying Properties:
I. Quality of land
II. The location of land
III. The value of building of land
IV. The investment
V. Place of work
A. I, II and III only
B. II, III and IV only
C. I, III and V only
D. All of the above

A

A. I, II and III only

40
Q

What are the basic types of real estate investments?
I. Rural Property
II. Domestic Property
III. Agricultural Property
IV. Commercial/Industrial Property
V. Foreign Property
A. I, II and III only
B. II, III and IV only
C. I, III and V only
D. All of the above

A

B. II, III and IV only

41
Q

The amount of risk a person can take depends on:
I. Age
II. Investment objective
III. Financial conditions
IV. Personality
A. I and II only
B. II, III and IV only
C. I, II and III only
D. All of the above

A

D. All of the above

42
Q

All of these are mandatory provisions in a Variable Life policy contract EXCEPT:
A. Incontestability Provision
B. The Entire Insurance Contract Provision
C. Misstatement of Age or Sex Provision
D. None of the above

A

D. None of the above

43
Q

What is the “Net Amount at Risk”?
A. The minimum death benefit
B. The excess between the minimum death benefit and the value of the policy
owner’s separate variable account
C. The sum insured
D. The difference between the minimum death benefit and the sum assured

A

B. The excess between the minimum death benefit and the value of the policy
owner’s separate variable account

44
Q

If a policy owner fails to pay premium on time and there are no withdrawal values in the
account, the policy will:
A. Continue in full force for a period of grace.
B. Terminate immediately on the day premium is due.
C. Continue at reduced sum assured.
D. Continue at the same sum assured for the same basic benefits.

A

B. Terminate immediately on the day premium is due.

45
Q

If a policy owner returns the Variable Life insurance contract within the cooling-off period, he
will receive:
A. A refund equal to the market value of the units plus initial charges.
B. All premiums paid.
C. A refund equal to the market value of the units only
D. Nothing.

A

A. A refund equal to the market value of the units plus initial charges.

46
Q

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

A

D. People invest money in equities to produce high and guaranteed income.

47
Q

The disadvantages of fixed income securities include:
I. The coupon rate is fixed and cannot respond to inflation.
II. The investors are exposed to market specific risks.
III. Fluctuations in bond prices may lead to capital losses.
A. II and III only
B. I and II only
C. I, II and III
D. I and III only

A

B. I and II only

48
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 II

A

A. I and II

Financial advisor (3 decks)

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