CEILLI- Set 2 2010

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CEILI - SET 2

Anticipated Questions with Answers

1 The term ‘Investment-linked’ in Malaysia shall be similar to the term "__________________" in the United Kingdom and to the term "_______________________" in the United States.

A Unit-Linked and Unit Trust

B Unit-Linked and Variable Life

C Unit Trust and Variable Investment

D Investment Trust and Variable-Linked

2 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 & II

B I & III

C II & IV

D III & IV

3 Diversification in investment involves __________________________.

A reducing the risks of investment by putting the fund under management into several categories of investment

B reducing the risks of investment by putting all one’s eggs in one basket

C putting all the funds under management into one category of investment

D spreading the risks of investment by not putting the fund into several categories of investment

4 People generally invest their money to provide:

I. an improvement in their financial position II. a less comfortable standard of living

III. income in retirement IV. funds for paying necessary expenses and taxes when the person dies

A I, II & III

B I, III & IV

C I, II & IV

D II, III & IV

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5 Three elements affect the accessibility of the funds. They include __________________.

I. the age and attitude of the investor towards risk II. the initial cost in setting up or buying into the investment

III. the time horizon of needs of the fund IV. the cost or penalty of realising the investment before its maturity period

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

6 What is/are the characteristic(s) of warrants?

I. warrants give the holder the option to subscribe for ordinary shares at a predetermined conversion ratio

II. warrants give the holder the option to subscribe for ordinary shares at a predetermined exercise price

III. warrants are usually detached from the loan stock and traded separately in securities market

IV. warrants are issued on their own

A I

B I, II & III

C I, III & IV

D I, II, III & IV

7 The following characteristics of shares at a predetermined conversion ratio warrants are true, EXCEPT

A warrants gives the holder the option to subscribe for ordinary shares at a predetermined conversion ratio

B warrants gives the holder the option to subscribe for ordinary shares at a predetermined exercise price

C the life span of a warrant can be varied at the discretion of the holder

D the option attached to the warrants can be exercise by subscribing for ordinary shares in cash, by exchanging the loan stock or by a combination of both

8 The disadvantage of warrants or TSR is _____________________.

A investor have to put in a large initial outlay to establish an exposure to the shares

B on expiry, warrants which are not exercised lose their value completely

C like ordinary shares, there is no chance for price recovery

D by selling the warrants given to an investor in the first instance; the investor cannot benefit from the capital gain

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9 Rank the following investment vehicle 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 option

A I, III, IV & II

B I, IV, III & II

C I, II, III & IV

D I, IV, II & III

10 Which of the following is NOT a type of fixed income securities?

A money market instruments

B government bonds

C preference shares

D none of the above

11 Which of the following statements about corporate bonds are FALSE?

I. medium or long term debt obligation of a company secured by specific assets II. the higher the security pledge and the credit worthiness of the company

III. the higher the rate of return will be unsecured bonds carry lower rates of interest than secured bonds

A I, II

B I, III

C II, III

D I, II & III

12 What are the advantages of investing in preference shares?

I. it gives shareholder the right to a fixed dividend II. has priority over company assets during dissolution

III. they enjoy benefit of capital appreciation

A I, II

B I, III

C II, III

D I, II & III

13 Which one of the following investment vehicles are for capital appreciation purpose?

A corporate bonds and preference shares

B preference shares and ordinary shares

C corporate bonds and ordinary shares

D ordinary shares and option

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14 What are the disadvantages in investing in ordinary shares?

I. dividends are paid not more than the fixed rate II. investor are exposed to market and specific risks

III. shares can become worthless if company becomes insolvent

A I, II

B I, III

C II, III

D I, II & III

15 The three basic types of corporate stocks include ___________________.

A futures, investment trusts and options

B fixed income stocks, treasury bills and time deposits

C debenture stocks, loan stocks and convertible stocks

D preference stocks, unit trusts and derivatives

16 Investing in bonds offers the following advantages EXCEPT

A it is a place of temporary refuge when the investor foresee that the market outlook is uncertain

B it offers protection to the principal and guaranteed steady stream of income

C it enables the investor an opportunity for capital appreciation

D it allows the investor a chance for capital preservation

17 Spot markets, a type of cash markets are ___________________.

A markets which quote prices referred to the current market price of an item available for immediate delivery

B markets for deferred delivery of commodities

C markets that are traceable only from the late 20 century

D known to establish forward contracts featuring the contract price and future delivery dates

18 Which of the following fixed income securities yield the highest return?

A government bonds

B corporate bonds

C convertible bonds

D unsecured non-convertible bonds

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19 Which of the following statements about fixed income securities are FALSE?

I. the interest rate is directly proportional to the price of the bonds II. the coupon rate is directly proportional to the price of the bonds

III. the longer the maturity period, the more volatile the price of the bonds will be

A I & II

B I & III

C II & III

D I, II & III

20 Which of the following statements about investment objectives is FALSE?

A people invest money to enhance a comfortable standard of living

B people invest money in fixed deposits to produce high and guaranteed returns

C people invest money to provide funds for higher education for their children

D investment in commodities no regular income

21 Which of the following investment options has all the advantages of capital appreciation, liquidity and inflation hedge?

A cash

B bond

C futures

D ordinary shares

22 An investment trust is _______________.

A one whereby investor buy units in the trust itself and not shares in the company

B an organisation registered under the Societies Act which usually invests in a wide range of equities and other investment

C a closed-end fund and does not have to dispose off its assets if large number of investors sell their shares

D established by a trust deed which enables a trustee to hold the pool of money and assets in trust on behalf of the investor

23 Which one of the following statements about diversification in portfolio management is FALSE?

A diversification can completely eliminate the risk of investing in stocks in a portfolio

B diversification helps to spread the portfolio risk by investing in different categories of investment in a portfolio

C diversification can involve purchasing different types of stocks and investing in stocks of different countries

D a diversified portfolio provides greater security to an investor having to sacrifice the return for the portfolio

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24 Investing in properties can __________________.

A provide good capital appreciation cut a poor flow of income

B be high risks investment especially if good repayment methods are obtained

C result in easy disposal of the properties during economic recession

D result in free capital gain through proper mortgaging of the properties

25 Which of the following statement is TRUE?

A amount invested in cash depends on the size of cash flow requirement

B investment in cash decrease when interest rates rise

C investment in cash increase when there is a bull run in the stock market

D it has high yield potential

26 The duties of the trustee of unit trust do not include ________________.

A ensuring that the fund manager adhere to the provision of the trusts deeds

B acting generally to protect the unit-holders

C holding the pool of money and assets in trust on behalf of the investors

D managing the portfolio of investments and administering the buying and selling of shares in the unit trust itself

27 Term insurance _______________.

A provides for payment of the sum assured when the life assured survives a specific period

B is one that if the life assured survives the specified period, the policy ceases and no return of premiums is given

C is the most complex and expensive of all the life insurance

D provides for surrender or cash values on early termination of the insurance

28 Whole life and endowment policies are known as ______________________, because they may be for a guaranteed return only.

A profit or participating policies

B options

C non-profits or non-participating policies

D spot transaction

29 The first new generation investment-linked life insurance product was ______________.

A an individual retirement annuity for the self-employed by London & Manchester Assurance Company limited in 1957

B variable life insurance in the US in 1976

C the Hambro Whole Life Plan introduced in 1977

D in 1973 by NTUC Income Singapore

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30 The introduction of the _____________________ is one of the factors which contributed to the expansion of the investment-linked insurance business in Singapore.

A the formation of the Investment Scheme by the Central Provident fund in 1997

B the requirement of the Securities Exchange Act 1934 that all insurance agents and agency office employees dealing in variable life insurance must pass an examination in securities business

C the introduction of the Enhanced Investment Scheme by the Central Provident fund in 1993

D the regulation of investment companies management and operation including that of insurance companies underwriting variable life

31 Under the Securities Exchange Act 1934 of US ________________________.

I. insurance agents and agency office employees dealing in variable life insurance must register with the National Association of Securities Dealers

II. insurance companies or the sales company dealing in variable life insurance must register as a broker-dealer

III. insurance agents and agency office employees dealing in variable life insurance must pass an examination in securities business

IV. a prospectus disclosing the identity and nature of the insurer’s business, among others, must be provided by the insurers to potential client

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

32 Apart from the investment management charges, what other kind of charges do single premium investment-linked policy charge?

I. policy fees II. administrative and mortality charges

III. assurance charges

A I & II

B I & III

C II & III

D I, II & III

33 The investment returns under an investment-linked life insurance policy _________________.

I. are not guaranteed II. are assured

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 & III

B I, II & IV

C I, III & IV

D II, III & IV

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34 The initial units form of charge under the investment-linked life insurance policies _________.

I. will have higher annual management charges such as 6% per annum throughout the term of the policy contract

II. means that their cash value of the initial units is much lower than their III. is much less commonly used these date than in the past IV. bear lighter discontinuance charges

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

35 Policy fee payable by an investment-linked life insurance policyowner is to cover _________.

A the mortality costs of the investment-linked life insurance policy

B the administrative expenses of setting up the investment-linked life insurance policy

C the handling charges by professional investment managers

D the price for each unit bought under the investment-linked life insurance policy

36 Under a regular premium investment-linked whole life insurance plan ______________.

I. premium top-ups and holidays, subject to the life office’s administrative rules are usually allowed

II. life protection is the main objective of the plan with investment as a nominal purpose

III. withdrawals and surrenders, usually after the payment of a few years premium are allowed

IV. a ‘one-off’ premium contribution is made to the policy which uses the premium to purchase units in an investment-linked fund and to provide certain level life cover

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

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37 The characteristics of an investment-linked life insurance policy include ____________.

I. its cash 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 commissions and office expenses are met by a variety of explicit charges

with normally 6 months notice given by the life offices prior to any change IV. its cash value is normally the value of units allocated to the policyowner,

calculated at the bid price

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

38 Which of the following statements about the characteristics of investment-linked policies are TRUE?

I. investment-linked policies generally have a larger exposure to equity investment than with profits and other conventional policies

II. the protection costs are generally met by implicit charges, which vary with age and level of cover

III. commission and office expenses are met by a variety of explicit charges, some of which are variable

A I & II

B I & III

C II & III

D I, II & III

39 Which of the following is/are the main characteristic(s) of investment-linked life policies?

I. the policies can be used for investment, as source of regular savings and protection

II. the cash 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 cash values shown in the policy that includes reversionary bonus up to the date of surrender, less all indebtedness include interest

A I

B II

C I & II

D I, II & III

40 Surrender charges under the investment-linked life insurance policies _________________.

A are deducted from the value of units at surrender

B are deducted from the value of units at the commencement of the policies

C are applicable to policies with not uniform allocation

D represent initial expenses which have already been incurred and recovered

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41 The offer price under an investment-linked life insurance policy is _____________.

A a fixed amount throughout the life of the policy

B also known as the bid price

C the price at which units under the policy are bought back by the life office

D the price at which units under the policy are offered for sale by the life office

42 The fundamental differences between traditional with-profit life insurance policies and investment-linked life insurance policies include ___________.

I. investment-linked life insurance policies are less likely to offer more choice in terms of the type of investment funds

II. the investment element of investment-linked life insurance policies is made known to the policyowner at the outset and is invested in a separately identifiable fund which is made up units of investment

III. investment-linked life insurance policies offer the potential for higher returns IV. traditional with profits life policies aim to produce a steady return by smoothing

out market fluctuation

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

43 The protection costs under an investment-linked life insurance policy ______________.

I. are met by a flat initial charge for regular premium plans II. are generally covered by cancellation of units in the fund

III. are generally met by explicit charges stipulated openly in the policy terms IV. vary with age of policyowner and level of cover

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

44 Investment-linked funds can be structured into two ways, namely accumulation units and distribution units. In accumulation units, the investment income of the funds is _____________.

A ploughed back into the fund, thus the unit prices will increase over the long term

B ploughed back into the fund, thus the unit prices will decrease over the long term

C used to purchase additional units to be distributed to the policyowners, thus the unit price remains unchanged but the policyowners gets more units

D used to purchase additional units to be distributed to the policyowners, thus the unit price decreases and the policyowners get more units

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45 Which of the following statement(s) about switching is/are TRUE?

I. switching facility allows a policyholder the liberty to move part or all of his money from one fund to another

II. switching facility can be useful for retirement and education fees planning III. if the company offers only one fund to its policyholders, it will normally include a

switching facility IV. it is advisable for policyholders to switch assets in the bond type funds (which are

more variable in returns)

A I & II

B II

C III

D III & IV

46 The switching facility under investment-linked life insurance policies is very useful ________.

A for the purpose of assets planning by the trustee

B for the purpose of profit planning by the life policies

C for the purpose of financial planning by the policyowners

D for the purpose of sales planning by the fund managers

47 Which one of the following funds comprises a higher proportion of equity and a lower proportion of fixed income instruments?

A Bond funds

B Mixed funds

C Property funds

D Managed funds

48 Which of the following funds normally include a provision for the deferment of unit redemption by the manager, for up to 12 month, except for death?

A Property funds

B Managed funds

C Equity funds

D Government bond funds

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49 Investment-linked funds can be invested in any financial instruments including cash funds, bond funds, equity funds, property funds, specialised funds and diversified funds. Diversified funds ____________.

I. include funds invested in a wide variety of assets such as equities, bonds, properties, cash, etc.

II. include funds invested in fixed proportion of specialised assets, for example, 70% of the funds are in equities and 30% in bonds

III. include funds that are restricted to investment in a particular country only such as the ASEAN Fund, the Emerging Markets Fund and the International Bond Fund

IV. invest in a wide variety of assets, their allocation of funds will depend on the fund managers’ views of the future prospects of the financial markets involved

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

50 Investment-linked funds can be invested in any financial instruments including cash funds, bond funds, property funds, specialised funds and diversified funds. Equity funds ________________________.

A invest in stocks and shares and the magnitude of the change in unit prices will depend on the quantity only of the equities held

B invest in stocks and shares and are inherently of lower risk in nature and the prices of the stocks and shares are stable

C invest in stocks and shares and investor who buy such assets usually aim for capital appreciation

D invest in stocks and shares and during market recession, such assets are usually the last to depreciate

51 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

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

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52 Single premium investment-linked life insurance policy

A has no death benefit

B has cash value

C must be issued with a minimum of RM3000

D must be issued with a minimum of RM5000

53 Under investment-linked life insurance policies _________________.

I. there is no guaranteed minimum sum assured for the purpose of declaring bonuses

II. there is no guaranteed minimum sum assured as a level of life insurance protection

III. each of the policyowners’s will be used to purchase units, the number of which is dependent on the offer price of each unit

IV. purchases of units can only be made from the investment-linked fund itself, which will then create new units and add the investment monies to the value of the fund

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

54 Under an investment-linked life insurance policy, if a policyowner pays a regular payment to the insurance company; this is normally for _________________.

A Regular premium plans

B Annual policy plans with renewals

C Top-up policy plans

D Single premium plans

55 Under the dual pricing method of single premium policies, ________________.

A the policyowner buys the units at the life office’s buying price and sells the units at the life office’s selling price

B the policyowner buys the units at the offer price and sells the units at the bid price

C there is only one price quoted whether the policyowner is buying or selling his units

D the bid price is always higher than the offer price

56 Under the single pricing method of single premium policies, the number of units that can be bought is equivalent to ___________.

A the premium paid divided by the unit price

B the premium paid less policy charges divided by the unit price

C the premium paid divided by the bid price

D the premium paid less policy charges divided by the bid price

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57 Under the dual pricing method of her single premium investment-linked life insurance policy, Agnes had allocated an amount of RM4,000 premium to buying units. The number of units that Agnes holds is 4,000. After 10 years, the offer price is now RM1.97. The bid-offer spread is 5%. The mortality charge is 1% and the policy fee is RM100. The ending value of investment, the return on gross premium and the annual yield under Agnes’s policy are ____________.

A RM7,311.14, RM1.828 and 0.062 or 6.2% respectively

B RM7,701.20, RM1.925 and 0.118 or 11.8%

C RM7,486, RM1.871 and 0.087 or 8.7% respectively

D RM7,311.14, RM1.924 and 0.118 or 11.8% respectively

58 Investment-linked life insurance policyowners may make withdrawals in term of _____________.

A number of units through cancellation of units

B fixed monetary amount only through reduction of the life cover sum assured

C number of units or fixed monetary amount through reduction of the life cover sum assured

D number of units or fixed monetary amount through cancellation of units

59 The number of units under a single pricing method single premium investment-linked life insurance policy is 3,800 with a sum assured of RM5,000. The offer price when the policyowner first pays his premium is RM1.00. The units price at the time of the policyowner’s death is RM1.22. Under the unit value plus sum assured type of death benefits, this will result in a death benefit of ___________.

A RM9,636

B RM8,800

C RM5,000

D RM4,636

60 The following statements about investment-linked policies are true EXCEPT

A some investment-linked policies grant loans to policyholders and it is limited to a percentage of cash value

B the structure of charges and the investment content of investment-linked policy are specified in an investment-linked policy

C policyholders may request for a partial surrender of the policy and the withdrawal amount will be met by cashing the units at the offer price

D all or part of the premiums of an investment-linked policy will be applied to purchase units in the fund

61 Which of the following statements about single premium investment-linked policies are TRUE?

I. there is no fixed term in a single premium investment-linked policy and therefore, they are technically whole life assurance

II. top-ups or single premium injections are allowed III. policyholders have the flexibility of varying the level cover

A I & II

B I & III

C II & III

D I, II & III

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62 What are the risks involved in investing in investment-linked products?

I. the risk of insolvency of the life insurance company due to the depletion of the life funds

II. the risk of fluctuations of the unit price of the policy that may rise or fall, depending on the current market situation

III. the risk of the cash and maturity values of the policy being adversely affected if the bid price of the units falls

A I & II

B I & III

C II & III

D I, II & III

63 Which one of the following BEST describes the policy benefits of investment-linked policies?

A the policy benefits are guaranteed

B the policy benefits are payable only on death or disability

C the policy benefits will depend on the long-term of the life office

D the policy benefits are directly linked to the investment performance of the underlying assets

64 Which one of the following statements about the benefits in investment-linked fund is FALSE?

A the fund provides a highly diversified portfolio, thus, lowering the risk of investment

B the fund relieves the investor from the hassle 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 risks of investment portfolios

D the fund enables small investor to participate in a pool of diversified portfolio in which he/she, with low investment capital is unlikely to have acceded to

65 What are the benefits available when investing in investment-linked funds?

I. the investment-linked funds offer policyholders an access to a pooled or diversified portfolio

II. the investment-linked policyholder can vary his premium payments, take premium holidays, add single premium top-ups and change the level of sum assured easily

III. the investment-linked policyholder can have access to a pool of qualified and trained professional fund managers

A I & II

B I & III

C II & III

D I, II & III

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66 The benefits of investing in investment-linked funds include _______________.

I. policyowners have access to a pooled or diversified portfolio of investment II. policyowners can easily change the level of the premium payments as the

product design of investment-linked life insurance policies have clear structures which cater separately for investment and insurance protection

III. policyowners can gain access to investment-linked funds managed by professional investment managers with unproven tracked records

IV. policyowners can buy an investment-linked life insurance policy with an initial investment of as low as RM4,000

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

67 Which one of the following statements about the flexibility features of investment-linked policies is FALSE?

A policyholders have the flexibility of switching from one fund to another provided it satisfies the companies switching criteria

B policyholders may request for a partial surrender of the policy and the withdrawal amount will be met by cashing the units at bid price

C policyholders can take loans against their investment-linked policies up to the entire cash value of their policies

D policyholders have the flexibility of increasing or decreasing their premiums for regular premium investment-linked policies

68 The flexibility benefit of investing in investment-linked funds include ______________.

I. policyowners can easily change the level of sum assured and switch their investment between funds

II. policyowners can easily take premium holidays and add single premium top-ups III. investment-linked life insurance products have a simple product design with a

clear structure with caters separately for investment and insurance protection IV. policyowners can easily change the level of their premium payment

A I, II & III

B I, II & IV

C I, III & IV

D I, II, III & IV

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69 Policyowners of investment-linked life insurance policies are relieved of the day-to-day administration of their investment. All that are required of them include ____________.

I. their engaging independent professional fund managers personally to manage the complicated transactions

II. their constructing their own diversified portfolio and passing them on to the life offices

III. keeping track of their investment through the unit statements provided regularly by their life offices

IV. keeping track of the unit price published in financial pages of major newspapers

A I & II

B I, II & III

C I, II & IV

D I, II, III & IV

70 The following statement about risks of investing in investment-linked funds is TRUE.

A policyowners who are risk averse should not purchase life insurance policies with high protection and guaranteed cash and maturity values

B policyowners who invest in unitised 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

C investment in unitised funds which are fully invested in units of equity funds are not suitable for policyowners who can tolerate the risks of short term fluctuation in their cash value

D policyowners who are risk averse should buy investment-linked life insurance policies with high equity investment

71 The administrative fee, insurance charge, fund management fee and the like under an investment-linked life insurance policy are ______________.

A usually guaranteed

B not subject to review

C subject to change by the life office after written notice is given

D always up-front charges

72 Why is a term assurance policy not suitable for investment purpose?

A it is a short term policy

B there is no investment element in a term policy

C term policies are meant solely for protection needs

D the cash value in a term is not enough to cover the investment returns from other investment vehicles

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73 Which of the following statements describe the differences between investment-linked products and with-profits products?

I. investment-linked products allow policyholders to vary the premium payments unlike with-profits products

II. investment-linked products can take the form of whole life or endowment policies with-profits products

III. investment-linked products allows policyholders to pay future single premiums from time to time to add more units to his accounts unlike with-profits products

A I

B I & III

C II & III

D I, II & III

74 The criteria for comparing traditional life insurance products with investment-linked life insurance products include _____________.

I. the life offices management expertise II. the products investment returns and risks

III. the policies premium computation IV. death benefit provided under the policies

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

75 Which one of the following statements is FALSE?

A life office will carry out a valuation of its funds yearly and any surplus may be allocated to with-profits policyholder as reversionary bonus

B investment-linked life insurance policies offer investors policies with values indirectly linked to the investment performance of the life office

C the investment element of investment-linked policies varies according to underlying assets of the portfolio

D both Whole Life and Endowment policies can be used as an investment media with benefits than become payable at a future date

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76 Which one of the following statements about the difference between investment-linked policies and endowment policies are FALSE?

I. the policy values of investment-linked and endowment policies directly reflect the performance of the fund of the life office

II. the premiums and benefits of the endowment policies are described at inception of the policy whereas investment-linked policies are flexible as they are account driven

III. the benefits and risk of investment-linked and endowment policies directly accrued to the policyholders

A I & II

B I & III

C II & III

D I, II & III

77 Which one of the following statements describe the differences between investment-linked products and with products?

I. Investment-linked products allow policyholders to pay top-up premiums from time to time to buy more units to his account unlike with-profits products

II. Investment-linked product allow policyholders to take a premium holiday unlike with-profits products

III. Investment-linked products can take the form of whole life or endowment policies unlike with-profits products

A I

B I & II

C I & III

D I, II & III

78 With traditional with-profit life insurance products, the allocations to policyowners in the form of bonuses __________.

I. are not directly linked to the life offices investment performance II. have already been smoothened by the life offices

III. do not have the peaks and troughs of investment return as in good investment years of life offices, contributions have been made to reserve and vice versa

IV. are not fixed at the inception of the policy, but are greatly dependent on the investment performance of the life offices

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

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79 Reversionary bonus under traditional with-profit life insurance policies ___________.

A is paid at the time of death under the life policies or on maturity of the policies

B can either be simple (based purely on the original sum assured) or compound (based on the sum insured less previous bonuses)

C once allocated can, however, be removed or reduced when the life office cannot afford to sustain it

D is usually expressed as a percentage of the sum assured and will vary in accordance with the performance of the underlying assets of the unitised fund

80 The death benefit under regular premium investment-linked life insurance policies is either ______________.

I. the sum assured chosen by the life assured or the value of the units in the fund at the bid price, whichever is higher

II. the sum assured chosen by the life assured plus the value of units in the fund at the bid price

III. the minimum sum assured or the value of the units in the fund at the bid price, whichever is higher

IV. the minimum sum assured plus the value of the units in the fund at the bid price

A I & II

B II & III

C III & IV

D I & IV

81 The following statement about surrender value under traditional with-profit life insurance products is TRUE.

A the amount of surrender value is usually higher that the amount under without-profit policies and it varies with the age of the assured, being lower at older age

B in the case of with-profit policies, the net cash surrender value includes the surrender value of the reversionary bonus up to the date of surrender

C other than term insurance of more than 20 years, limited payment is made when such insurance policies are surrender

D when a with-profit insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with number of units

82 The following statement about surrender value under investment-linked life insurance is TRUE.

A the amount of surrender value is always higher than the amount under with-profit policies

B for dual pricing policies, the surrender value is the offer price multiplied by the number of units

C for single pricing policies, the surrender value is the market price multiplied by the number of units

D the amount of surrender value varies with the age of the policyowner, being higher at older ages

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83 The following statement about option to top-up under investment-linked life insurance products is FALSE.

A policyowners are normally allowed to top-up their policies at any time, subject to a minimum amount

B to top-up a policy, the policyowner pays further single premium at the time to top-up

C policyowners may buy additional units of the investment-linked fund and these units will be allocated to new investment-linked life insurance policies

D further premiums at time of top-up will be used in full, after deducting charges for top-ups, to purchase additional units of the investment-linked fund

84 Which of the following statement are TRUE?

I. the policy values of investment-linked 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 reversionary bonus less any outstanding automatic premium loans and any interest due at time of surrender

III. the life office needs to maintain a separate fund for investment-linked policies distinct from the life fund as in the case for conventional policies

A I & II

B I & III

C II & III

D I, II & III

85 The following statements about taxation are true, EXCEPT

A capital gain is not taxable

B capital losses is not tax deductible

C dividend income is not subjected to withholding tax according to the prevailing corporate tax rate

D if personal tax rate is less than corporate tax rate, shareholder is entitle to rebate on the portion of the dividend paid as tax

86 The principal legal document regulating income tax in Malaysia is the ___________.

A Income Tax Act, 1967

B Insurance Act, 1996

C Contracts Act, 1950

D Companies Act, 1965

87 An insurer must provide each investment-linked policyholder with

A an advice of daily investment of funds

B a policy statement and the fund performance report

C the company annual financial reports

D the funds manager entertainment expenses

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88 In order to encourage national thrift and promote individual financial independence particularly in old age, tax relief is allowed in respect of premiums paid on life insurance and deferred annuities which is on the ________________.

I. Individual’s life II. The life of the spouse of the individual

III. The joint lives of the individual and his/her spouse IV. The lives of the individual and his/her immediate family members

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

89 Under the free-look provision

A there is no free-look provision in an investment-linked policy as there is no life insurance

B the agent can decide when he wants to deliver the policy

C the agent can decide within 15 days of the issuance of the policy to demand a full refund of all his units at offer price

D a policyholder has only 15 days from the date he receives the policy document to examine and decide the suitability of the policy and demand a full refund

90 Effective from the year of assessment 1997, the sum of tax relief allowable ____________.

A in respect of payment of life insurance premiums for a life insurance policy is subject to the limit of 7% of the capital sum assured of the policy

B in respect of separate assessments for married couples, the limit of 7% in respect of payment of life insurance premiums is the same in total

C is RM2,500 plus RM2,000 for education and medical insurance

D in respect of payment of life insurance premiums for a life insurance policy is no longer subject to the limit of 7% of the capital sum assured of the policy

91 Which one of the following statements about investment-linked policies are TRUE?

I. the cash value is not guaranteed II. the volatility of the returns depends on the investment strategy of the fund

III. the investment-linked policyholders has direct control over the investment decisions of the unitised fund

A I & II

B I & III

C II & III

D I, II & III

92 Which one of the following statement is FALSE?

A The principles of investment-linked policies vary but all operate on the same features

B Investment-linked policies can be classified single premium assurance plans or regular premium assurance plans or investment-linked annuities

C Investment-linked policies can be used for investment, regular savings and protection

D The cash value and protection benefits are determined by the investment performance of the underlying assets

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93 Which one of the following statements about investment-policies are TRUE?

I. offer price is used to determined the number of units to be credited to the account

II. the margin between the bid and offer price is used to cover the marketing cost of the policy

III. the policy value is calculated based on the bid price of units allocated into the policy

A I & II

B I & III

C II & III

D I, II & III

94 BNM’s circular JPI:1/1997 on Specification of Assets for the purpose of a Licensed Insurer’s Margin of Solvency _________________

I. is not applicable to the investment-linked funds, in view of the nature of the business that investment-linked funds could be invested 100% in equities

II. specifies the extent of a class of assets or description of assets that may be taken into account for the purpose of a licensed insurer’s margin of solvency

III. is applicable to the investment-linked funds as all laws to investment-linked life insurance policies

IV. specifies the class or description of assets of a licensed insurer that may be taken into account for the purpose of a licensed insurer’s margin of solvency

A I, II & III

B I, II & IV

C I, III & IV

D II, III & IV

95 Which one of the following statements are true for investment-linked policies?

I. the owner of an investment-linked policy must be at least 18 years old II. there is no requirement of insurable interest for investment-linked policies

III. there is no restriction on the age of the life assured

A I & II

B I & III

C II & III

D I, II & III

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96 What are required of an insurance agent conducting investment-linked life insurance business?

I. relevant knowledge and understanding of the technical aspects of investment-linked life coverage

II. ability to give financial advice according to clients’ needs III. general idea only of investment-linked life coverage IV. good marketing strategy with promising talk

A I & III

B I & IV

C II & III

D III & IV

97 Owing to changes in the market environment, many insurance companies now sell their products on a ___________.

A Sales-oriented basis

B Hard sales basis

C Market oriented basis

D Varied product basis

98 Why is it so important that the customer must understand the recommendation in full?

A because the insurer may give the wrong recommendations

B because the insurer does not guarantee any return

C because the impact on changed in investment condition of investment-linked life policy falls wholly on the customer

D because the policyholder expects higher return

99 The objective of satisfying customers needs 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 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 the customers

A I, II & IV

B II, III & IV

C I & III

D II & III

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100 Why is the personal delivery of policy regarded as an important aspect of providing after-sale service?

I. it alleviates the customer’s cognitive dissonance by the agents reassurance on the right purchase

II. the agent can take the opportunity to obtain more names of referred leads and other prospects

III. it re-emphasize the agents commitment to provide the policyholder with quality service

IV. policyholder is encouraged to call the agent whenever the need arises

A I, II & III

B II, III & IV

C I, III & IV

D All

101 In Part II of the General Sales Principles of LIAM’s Code of Conduct, intermediaries are forbidden to ________________.

I. sell high premium policy with good income for herself II. make inaccurate or unfair criticism of any insurers

III. deal with or source other specialist advice when in doubt except from his supervisor

IV. attempt to persuade a prospect to cancel any existing policies unless these are clearly unsuited to his needs

A I & II

B II & III

C II & IV

D III & IV

102 Which one of the following statements about rebating are TRUE?

I. rebating is prohibited under the Professional Agent Code of Conduct 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

agent

A I & II

B I & III

C II & III

D I, II & III

103 Which one of the following statements is FALSE?

A twisting is a specific form of misrepresentation

B misrepresentation is a specific form of twisting

C switching is a facility allowing policyholders to switch to other offered by company

D rebating is to offer a prospect a special inducement to purchase a policy

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104 Which one of the following statements about twisting is FALSE?

A it refers to an agent offering a prospect a special inducement to purchase a policy

B twisting is a special form of misrepresentation

C it refers to an agent inducing a policyholder to discontinue policy with another company without disclosing the disadvantage of doing so

D it includes misleading or incomplete comparison of policies

105 Misrepresentation resulting in inducing policyowner to cancel or have his policy made paid-up in order to purchase a new policy to earn more income for the agent is known as

A switching

B replacing

C twisting

D changing