var cont.

50. Which of the following statements describe the differences between variable life products and participating products? 1. Var life products allow policyholders to vary the premium payments unlike participating products. 2. Var life products can take the form of the whole life or endowment policies with participating products. 3. Var life products allow policyholders to pay future single premium from time to time to add more units to this account unlike participating products.

a. 1,2,3

61. Which of the following statements are FALSE? I. The bid-offer spread is used to provide a death benefit for the variable life insurance policy. II. The bid-offer is always higher than the offer price. III. The bid-offer spread is usually 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 policyowner.

a. I and II only

51. 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

b. I, III and IV

75. The amount of risk a person can take depends on: I. Age II. Investment objectives III. Financial conditions IV. Personality

d. All of the above

68. The difference between the offer price and the bid price is? a. Bid-offer spread b. Offer price spread c. Bid price spread d. None of the above

a. Bid-offer spread

71. What are the disadvantages of investing in cash and deposits? I. There is investment risk. II. They provide the lowest return. III. It is the safest type of investment

b. I and II only

54. Which of the following statements about the feature of Regular Premium Variable Life Policy are TRUE? I. Top-ups are usually allowed. II. Premium holidays are usually allowed III. The level of coverage can be varied

d. I, II and III

64. Which of the following information is NOT required to be disclosed to policyowners to Variable Life policies? a. The premiums received and charges levied during the period. 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 basis and frequency of valuing the assets.

d. The basis and frequency of valuing the assets.

58. Which statement best describes Variable Life? a. Fixed premium with returns that will 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

d. Flexible premium with returns that will vary

69. Which of the following information must NOT be conveyed to the client in the sale of Variable Life insurance policies? a. Rate of return b. Time horizon of the product c. Benefits illustrations using the 10% as the gross d. Guaranteed interest rate

d. Guaranteed interest rate

77. 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 policyowner's separate variable account. c. The sum insured. d. The difference between the minimum death benefit and the sum assured

b. The excess between the minimum death benefit and the value of the policyowner's separate variable account

57. Which of the ff are true? 1. The policy value of variable life policies is determined by the offer price at the time of valuation 2. the policy value of endowment policies is the cash value plus any accumulated dividends less any outstanding loans due at the time of surrender 3. The life company needs to maintain a separate account for variable life policies distinct from the general account.

d. 2 & 3

83. 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

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

73. Factors to consider in buying Properties: I. Quality of land II. The location of land III. The value of building on land IV. The investment V. Place of work

a. I, II and III only

59. The statements below are true about the top-up option of a Variable Life insurance product EXCEPT: a. Policyowners may buy additional units of Variable Life fund and these units will be allocated to new Variable Life insurance policies. b. Policyowners are allowed to make top-up on their policies at any time subject to a minimum amount. c. The policyowner pays further single premium to make a top-up. 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. Policyowners may buy additional units of Variable Life fund and these units will be allocated to new Variable Life insurance policies. (FALSE)

56. In risk return profile of cash funds, bond funds, balanced funds, managed funds and equity funds, a risk return graph will show that 1. Higher return normally comes with lower risk. 2. Higher return normally comes with higher risk 3. At the top end of the graph are the equity funds. 4. the relatively risk-less cash funds

b. 2, 3, 4

80. The disadvantage 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.

b. I and II only

55. Which of the following statements describes the difference between Variable Life insurance products and Traditional participating products? I. Variable life insurance products allow policyowners 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 policyowners to pay future single premiums from time to time to add more units to his account but traditional life participating do not.

b. I and III only

74. What are the basic types of real estate investment? I. Rural property II. Domestic property III. Agricultural property IV. Commercial / Industrial property V. Foreign property

b. II, III and IV only

52. 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. Managed Funds c. Cash Funds d. Mixed Funds

b. Managed Funds

70. 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 savings element. c. Is the most complex and expensive of all life insurance products. d. Provides for surrender of cash values on early termination of the insurance

b. Provides protection for a specific period and has no savings element.

51. Assuming no movement in the prices and charges/ fees are deducted after the single premium has been invested into the account, how much will the policyholder lose if he surrenders the policy now? a. ps. 43400.90 b. ps 33246.78 c. ps 22,500.00 d. ps 15,299.96

b. ps 33246.78

67. 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.

c. I, III and V only

72. Which of the following are types of corporate stocks? I. Debenture stocks II. Government bonds III. Loan shares IV. Money market instruments V. Convertible stocks

c. I, III and V only

56. Which of the following are some of the flexibility features of Variable Life insurance policies? I. Guaranteed withdrawal values II. Variation in sum assured III. Partial Withdrawal

c. II and III only

78. If a policyowner fails to pay the premium on time and there are no withdrawal values in the account, the policy will: a. Continue in full force for a specific period of grace. b. Continue at a reduced sum assured. c. Terminate immediately on the day premium is due. d. Continue at the same sum assured for the same basic benefits

c. Terminate immediately on the day premium is due

79. If a policyowner returns the Variable Life insurance contract within the cooling off period, he will receive: a. Nothing. b. All premiums paid. c. A refund equal to the market value of the units only. d. A refund equal to the market value of the units plus initial charge

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

62. 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 the units allocated to the policy calculated at the prevailing bid price

d. Its cash value is usually the value of the units allocated to the policy calculated at the prevailing bid price.

57. To the policyowners, 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. Exercising investment expertise by selecting funds that will give higher returns. d. Keeping track of their investment through the statements provided regularly by the insurance company.

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

76. All of these are mandatory provisions in Variable Life policy contract EXCEPT: a. Incontestability Provisions b. The Entire Insurance Contract Provision c. Misstatement of Age or Sex Provision d. None of the above

d. None of the above

66. Which of the following investment options entitle the holder ownership and share of profits in the form of dividend appreciation? a. Cash b. Bonds c. Futures d. Ordinary Shares

d. Ordinary Shares

52. Which of the following statements BEST describes "variable life" policies? a. it is fixed premium policy with returns that will not vary with the underlying value of investment. b. it is a fixed premium policy with returns that will vary with the underlying value of investments. c. it is as flexible 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

d. it is a flexible premium policy with returns that will vary with the underlying value of investments

53. Which of the following statements are FALSE? I. The policyowners may request a partial withdrawal of the policy and the amount will be met by cashing the units at the offer price. II. Some variable life policies grant loans to policyowners which is limited to percentage of the cash value. III. The structure of the charges and the investment content of a variable life policy are specified in the policy document and the policy statement. IV. Commissions and office expenses are met by a variety of implicit charges, some of which are variable.

a. I and II only

81. Which of the following statements about twisting are TRUE? I. Twisting is a special form of misrepresentation. II. It refers to an agent inducing a policyholder to discontinue policy with another company without disclosing the disadvantage of doing so. III. It includes misleading or incomplete comparison of policies. IV. It refers to an agent offering a prospect a special inducement to purchase a policy

a. I, II and III

65. 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

82. Variable life funds can be invested in any financial instruments including bond, property, specialized, and equity funds. Equity funds ___________. a. Invest in share of stocks and investor who buys such assets usually aims for capital appreciation b. Invest in shares of stocks and the magnitude of the change in unit prices will only depend on the quantity of the equities held c. Invest in shares of stocks and during market recession, such assets are usually the last to depreciate d. Invest in share of stocks which are inherently of lower risk in nature and the prices of stocks are stable

a. Invest in share of stocks and investor who buys such assets usually aims for capital appreciation

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

a. It is assured. (FALSE)

60. If the current offer price = P2.50 and the bid-offer spread = 4%, what is the bid price? OFFER PRICE x (1- BID OFFER SPREAD) = BID PRICE a. P2.40 b. P2.50 c. P2.60 d. P3.70

a. P2.40

53. Which of the following factors contribute to the specific risk of an investment? 1. Rate of corporate taxes 2. Fraud by senior management 3. Financial leverage of the company

b. 2 & 3