FTF VARIABLE MOCK EXAM

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FTF VARIABLE MOCK EXAM

For Face to Face Variable Exam

Email *

LAST NAME, FIRST NAME, M.I *

I. MULTIPLE CHOICE.

Directions: Read each item carefully. Choose the best answer from the given options below.

Variable life insurance policy owners may make withdrawals in terms of ______________________. *

1 point

A. Number of units or fixed monetary amount through cancellation of units

B. Number of units of fixed monetary through reduction of the life cover sum assured

C. Fixed monetary amount only through reduction of the life cover sum assured

D. Number of units through cancellation of units

Which of the following factors contribute to the specific risk of an investment: *

1 point

A. I and II

B. II and III

C. I and III

D. I, II and III

The protection cost under a variable life insurance policy ___________________. *

1 point

A. I, II & III

B. I, II & IV

C. I, III & IV

D. II, III & IV

Policy fee payable by variable life insurance policy owner is to cover__________________ *

1 point

A. The handling charges by professional investment managers

B. The price of 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

What are the advantages of investing in preferred shares? *

1 point

A. I, II & III

B. I & II

C. I & III

D. II & III

What are the disadvantages of investing in common shares? *

1 point

A. I & II

B. I & III

C. II & III

D. I, II & III

With traditional participating life insurance products, the allocations to policy owners in the form of dividends ________________________: *

1 point

A. I, II & III

B. I, II & IV

C. I, III & IV

D. II, III & IV

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______: *

1 point

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 as assets are usually the last to depreciate

C. Invest in shares of stocks which are inherently of lower risk in nature and the prices of stocks are stable

D. Invest in shares of stocks and investors who buy such assets usually aim for capital appreciation

The selling price under a variable life insurance policy is: *

1 point

A. The price at which units under the policy are bought back by the life insurance company

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

C. Also known as the bid price

D. A fixed amount throughout the life of the policy

In risk-return profile of cash funds, bond funds, balanced funds, managed funds and equity funds, a risk-return graph will show that _____________ *

1 point

A. I, II & III

B. II, III & IV

C. I, II & IV

D. I, III & IV

Which of the following statements about the difference between variable life policies and endowment policies are TRUE? *

1 point

A. I & II

B. I, II & III

C. I & III

D. II & III

The fundamental differences between traditional participating life insurance policies and variable life insurance policies include _____________. *

1 point

A. I, III & IV

B. II, III, IV

C. I, II, III

D. I, II & IV

Rank the following investment instruments in terms of their level of risks, from the least risky to the most risky. *

1 point

A. I, IV, III & II

B. I, III, IV & II

C. I, IV, II & III

D. I, II, III & IV

What is the most suitable investment instrument for an investor who is interested in protecting his principal and receiving a steady stream of income? *

1 point

A. Equities

B. Warrants

C. Variable life policies

D. Fixed income securities

Which of the following statements BEST describes “variable life” policies? *

1 point

A. It is a fixed premium policy with returns that will not vary with the underlying value of investments.

B. It is a fixed premium policy with returns that will vary with the underlying value of investments.

C. It is a flexible premium policy with returns that will not vary with the underlying value of investments.

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

Rank the following in terms of their liquidity, from the least liquid to the most liquid: *

1 point

A. IV, II, III, I

B. III, I, IV, II

C. II, I, IV, III

D. II, IV, I, III

Investing in bonds offers the following advantages EXCEPT *

1 point

A. It offers protection to the principal and guaranteed steady stream of income

B. B. It is a place of temporary refuge when the investor foresees that the market outlook is uncertain

C. It allows the investor a chance for capital preservation

D. It enables the investor an opportunity for capital appreciation

Which of the following statements about variable life policies is TRUE? *

1 point

A. I, II & III

B. I & II

C. I & III

D. II & III

Risk can be classified into two particular categories in relation to investment. They include________: *

1 point

A. I & III

B. I & II

C. III & IV

D. II & IV

Which of the following statements is TRUE? *

1 point

A. I & II

B. I, II & III

C. I & III

D. II & III

The benefits of investing in variable life funds include ___________________ *

1 point

A. I, II, & IV

B. I, III & IV

C. I, II & III

D. II, III & IV

Which of the following information is NOT required to be disclosed to policyholders of variable life policies? *

1 point

A. The net withdrawal value as of the statement date.

B. The premiums received and charges levied during the period

C. The basis and frequency for valuing the assets.

D. Number and value of units held at the beginning of the period; bought and sold during the period; and held at the end of the period.

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? *

1 point

A. Ps. 43,400.90

B. Ps. 33,246.78

C. Ps. 22,500.00

D. Ps. 15,299.96

Investing in bonds offer the following EXCEPT *

1 point

A. Must be issued with a minimum death benefit

B. Must be issued with a maximum withdrawal value

C. It allows the investor a chance for capital preservation

D. It enables the investor an opportunity for capital appreciation

The duties of the trustee of unit trust do not include: *

1 point

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 trust deeds

C. Acting generally to protect the unit-holders

D. Holding the pool of money and assets in trust in behalf of the investors

Single premium variable life insurance policy: *

1 point

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

Which of the statements is true about CASH? *

1 point

A. It has a high yield potential

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

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

D. Investment in cash decrease when interest rates rise

Which of the following statements about rebating are TRUE? *

1 point

A. I & II

B. I & III

C. II & III

Which of the following statements about characteristics of variable life policies are TRUE? *

1 point

A. I, II & III

B. I & II

C. II & III

D. I & III

Which of the following statements are TRUE? *

1 point

A. I & II

B. I, II & III

C. I & III

D. II & III

A unit trust is ____________________ *

1 point

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

B. A close-end fund and does not have to dispose off if the large number investors sell their shares

C. One whereby the investor buys units in the trust itself and not share in the company

D. An organization registered under the SECURITY EXCHANGE COMMISSION (SEC) which usually invests in a wide range of equities and other investment

Which one of the following statements is FALSE? *

1 point

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

B. Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholder 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 underlying assets of the portfolio

The following statement about surrender value under traditional participating life insurance products are TRUE? *

1 point

A. Cash value is paid when 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 non – participating 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 up to the date of surrender

Under a regular premium variable whole life plan _______________________ *

1 point

A. II, III & IV

B. I, III & IV

C. I, II & IV

D. I, II & III

Diversification in investment involves___________________: *

1 point

A. Putting all the funds under management into one category of investment

B. Spreading the risk 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’s eggs in one basket

Why is it important that the customer must understand the sales proposal in full? *

1 point

A. Because the insurer does not guarantee any return

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

C. Because the agent may give the wrong recommendations

D. Because the policyholder expects higher returns

What should be the withdrawal values after a year? *

1 point

A. Php. 432,000.00

B. Php. 420,069.20

C. Php. 401,107.58

D. Php. 412,500.00

The characteristics of a variable life insurance include ________________: *

1 point

A. I, II & III

B. II, III & IV

C. I, II & IV

D. I, III & IV

The flexibility benefit of investing in variable life funds include _____________: *

1 point

A. All of the above

B. I, II & III

C. I, II & IV

D. I, III & IV

What are the benefits available when investing in variable life funds? *

1 point

A. I & II

B. I & III

C. I, II & III

D. II & III

Which of the following BEST describes the policy benefits of variable life policies? *

1 point

A. The policy benefits are payable only on 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

Which of the following statements about variable life policies are TRUE? *

1 point

A. I, II & III

B. I & II

C. I & III

D. II & III

Which of the following statements about benefits in variable life fund is FALSE? *

1 point

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 risk of investment portfolios

C. The fund relieves the investor from the hassle of administering his / her investment

D. The fund enables small investors to participate in a pool of diversified portfolio in which he / she, with a low investment capital, is likely to have acceded to

The switching facility under variable life insurance policies is a very useful __________ *

1 point

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

Which of the following statements about option top – up under variable life insurance is false? *

1 point

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 time of the top – up will be used in full, after deducting charges for top – ups, to purchase additional units of the variable life funds

C. Top – up policy, the policy owner pays further single premium at the time of the top – up

D. Policy owners are normally allowed to top – up their policies at any time, subject to a minimum amount

Which of the following statements about twisting is FALSE? *

1 point

A. Twisting is a special form of misrepresentation

B. It refers to an agents including a policyholder to discontinue policy with another company without disclosing the disadvantage of doing so

C. It includes misleading or incomplete comparison of policies

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

Which of the following statements about flexibility features of variable life policies is false? *

1 point

A. Policyholders may request for a partial withdrawal of the policy and the withdrawal amount will be met by cashing the units at the bid price.

B. Policyholders can take loans against their variable life up to the entire withdrawal value of their policies

C. Policyholders have the flexibility of switching from one fund to another provided it satisfies the company's switching criteria.

D. Policyholders have the flexibility of increasing or decreasing their premiums for regular premium variable life policies

The investment returns under variable life insurance policy _______________. *

1 point

A. I, II and III

B. I, II and IV

C. I, III and IV

D. II, III and IV

Mr. Juan dela Cruz is currently earning Php 30,000.00 per month. He is 35 years old and he 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? *

1 point

A. Participating Endowment

B. Variable Life policies

C. Participating whole life

D. Annuities

The objective of satisfying customers need profitably can be achieved by and agent through *

1 point

A. I & III

B. II & III

C. II & IV

D. II, III & IV

Which of the following is / are the main characteristic (s) of variable life policies? *

1 point

A. II

B. I

C. I, II & III

D. I & II

Which of the following statements is FALSE? *

1 point

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 the policyholders to switch to another variable life funds offered by the company

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

1 point

A. A diversified portfolio provides greater security to an investor having to sacrifice return for the portfolio

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

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

D. Diversification helps to spread the portfolio risk by investing in different categories of investment in a portfolio

Which of the following statements describe the differences between variable life products and participating products? *

1 point

A. I, II and III

B. I

C. I and III

D. II and III

Which of the following statements about investment objectives is false? *

1 point

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 higher education for their children

D. Investment in commodities has no regular income

Which one of the following statements about risks of investing in variable life funds is TRUE? *

1 point

A. Policy owners who are risk averse should buy life insurance policies with high equity investment

B. Investment in variable life funds which are fully invested in units of equity bonds are not suitable for policy owners who can tolerate the risks of short term fluctuation in their cash value

C. Policy owners who invest in variable life funds with high equity investment face higher 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

Which of the following statements about single premium variable life policies are TRUE? *

1 point