1.

Natalie is single and wishes to save her income for use in retirement, but she
has the habit of spending all her money with nothing left to save. Which of
the following aspects of a group plan is most likely to be beneficial to Natalie?

A benefit of a group plan appreciated by employees is the disciplined savings

aspect of payroll deductions for plan contributions. Saving by payroll
deduction eliminates the temptation to spend take-home pay and save what
is left over. Instead, saving is achieved by removing the contribution directly
from earnings and then issuing the balance as take-home pay. There is no
opportunity to spend money that is not actually received and withdrawal
restrictions on locked-in savings further prevent access to money that is
slated for retirement.
2. Kelly has a diversified bond portfolio with a variety of coupon rates, terms-to-
maturity, and issuers. Kelly is concerned about managing the risks of her
bond portfolio. Identify which bond would carry the greatest amount of
interest rate risk.
Interest rate risk is most significant with the bond with the longest term-to-
maturity as this interest can fluctuate over the long term more than the short
term. To compensate investors for this additional risk, typically long-term
bonds are rewarded with a payment of a higher interest rate as compensation
for tying up their principal for a longer period.
3. Peter opens a $20,000 segregated fund account. However, soon after signing
the application and giving a cheque to his agent, Peter has second thoughts
about his decision. Peter received the confirmation of his purchase on
September 12.
The contract may be rescinded in writing to the insurance company, at the
address it has specified, within two business days after the contract owner
receives confirmation of the purchase.
4. Upon reviewing Chantal’s assets and liabilities, it is revealed that she
owns:
 Home worth $425,000 on which she has a $200,000 mortgage
 Car worth $20,000 with a loan balance of $8,000
 $500,000 whole life insurance policy with a cash surrender value of
$30,000
 $50,000 in her Registered Retirement Savings Plan (RRSP)
 $15,000 in her Tax-Free Savings Account (TFSA)
 $3,000 in her bank account
She also owes $10,000 on her line of credit, which has a $25,000 limit.
What is Chantal’s net worth?
Net worth = value of all assets − value of all liabilities
Chantal’s assets: $425,000 (house) + $20,000 (car) + $30,000 (life
insurance CSV) + $50,000 (RRSP) + $15,000 (TFSA) + $3,000 (bank account)
= $543,000
Chantal’s liabilities: $200,000 (mortgage) + $8,000 (car loan) + $10,000
(amount owing on line of credit) = $218,000
Net worth = $543,000 − $218,000 = $325,000

5. Victor had invested in two real estate properties: one, a residential

property which was rented out, and the other a plot of land on which
he intended to build a future commercial space. Three years later,
Victor experiences financial hardship and decides to sell his properties.
He sells the residential property for a huge profit creating a taxable
capital gain, but the plot sells for a lower price creating capital loss.
How can Victor save on taxes in this situation?
Although a capital loss means an investor has lost money on his
investment, half the capital loss can be deducted from taxable capital
gains on other investments. The loss must be used first against capital
gains in the year the loss is incurred. However, if capital gains are
unavailable or insufficient in that year, the capital loss may be applied
against capital gains in any of the three previous years, or in any
future year. This reduces the amount of taxable capital gain and the
tax to be paid on that gain. Capital gains tax is the lowest rate of
investment taxation.
6. Damien is now retiring at age 65. He has a defined-contribution
pension plan (DCPP) through his employer. He also has a locked-in
retirement account (LIRA) account into which he had transferred the
balance from his previous employer’s pension fund. He needs to begin
his retirement income next year.
Which of the following options can Damien choose to receive funds
immediately from his pension funds?
 A group member with a DCPP is required to transfer his savings to an
account that requires minimum withdrawals when he decides to
receive his retirement income.
 The group member’s choices are restricted because the group
member’s savings are locked-in. This limits his choices to income-
paying accounts that accept locked-in funds such as group life income
funds (LIFs).
7. Ludvig invests $60,000 in a segregated fund with 75% maturity guarantee.
After five years, Ludvig wishes to withdraw 50% of the fund in order to make
a down payment on a house. At the time of withdrawal, the segregated fund
is worth $54,000. Calculate the amount that Ludvig will receive.
If an investor takes money out of a segregated fund before maturity,
the maturity guarantee does not apply. Ludwig would receive 50% of
the current value of the fund:
$54,000 × 50% = $27,000
8. Edgar owns a segregated fund investment which he purchased 5 months ago.
He is not satisfied with the fund’s performance and has decided to make a
fund switch. This will be his first switch since the contract was issued. He is
concerned about the switching charges and not sure if he will be allowed to
 make a switch now. Which of the following is true about switching between
funds?
He will not be required to pay any charges because this is his first switch.
Each insurer provides a number of switches a year for free. A withdrawal fee
may be charged when switches exceed this limit.
A fund switch is a change in investment from one fund to another. Fund
switches may be scheduled or unscheduled. An unscheduled switch is simply
made by request to the agent or insurer. The switch may be requested
because the investor wishes to rebalance the account or is dissatisfied with
fund performance, for instance. The request can happen at any time. A
minimum amount is required for the switch and the minimum balance for the
fund must be met.
9. Charana has just received the document package concerning his recent
segregated fund purchase sent by his agent, Latica. It seems a bit
overwhelming to him. He calls Latica and says that he is just leaving the
house for a business meeting and wants to know if one of the documents
provides him with a quick overview of the key facts. He promises to read all
the documents when he gets home that night. Which document can Latica
recommend he read immediately?
An information folder may lead off with a summary of key facts, which is
simply an overview of details provided again in the information folder itself.
This is the document that Latica would recommend he read immediately.
10. Tania is an insurance agent who is creating an investor profile for her
client, Robin. Tania examines Robin’s cash flow statement which is provided
below:

Robin’s cash flow is negative and he requires a debt management solution.

The cash flow statement can be developed for a period of time as long as a
year or as short as a month. It is most accurate when it is backed up with a
budget based on actual spending patterns.

The cash flow statement lists all sources of net income (income after income
tax) and subtracts all expenses including debt payment for liabilities and
potential child and spousal support. If a positive number results, money is
available for spending, saving, or investing. If a negative number results, a
debt management solution may be required, savings may have to be used, or
assets may need to be sold to pay down debt.
11. Danny who is 50 years old, wants to ensure that he has income for life
and wants to be protected against inflation. He estimates his life expectancy
to be another 40 years and the cost of living will increase substantially during
this period.

An indexed annuity sees payments increase based on the schedule provided

in the contract, in step with increases in the cost of living. An insured annuity
is a combination of a life annuity and a life insurance policy. This will not help
him fight the effects of inflation and may not provide him with adequate
income. A fixed annuity or an accelerated annuity will not take care of
inflation.
12. Jacquez is an insurance agent who is meeting his client to make a
recommendation for an annuity product. Jacquez should make
recommendations based only on:

The agent needs to keep himself apprised of new product introductions and
innovations. It is never appropriate to rely on former decisions or only on
knowledge of a stable of long-standing products. Every decision should be
based on a review of what is currently available, which will include the new
and old.
13. Lakshay is a permanent resident in Canada who is currently working on
a long-term project in Scotland. He wishes to invest in segregated funds and
appoints his brother, Divit, in Canada as his power of attorney (POA) to help
complete the segregated funds contract on his behalf. Which of the following
acts of Divit as a POA will require a legal opinion?
An agent may find a POA appointed for a client who is absent from the
country for a prolonged period of time. The individual with the POA can
complete and sign the application on behalf of the contract owner. However,
he may not have rights to name the beneficiary. A legal opinion should be
sought in this circumstance.
14. Anand is an insurance agent. He is virtually meeting a new client,
Rishi, to make an investment recommendation for segregated funds. Rishi is
planning to invest $50,000 in a guaranteed investment product. What should
Anand do before meeting Rishi virtually?

During the pandemic, the in-person approach has been largely replaced with
online virtual meetings, phone meetings, and electronic signatures. Clients
who are willing to receive documents online should be provided with them
prior to the virtual meeting to ensure that the clients have the documents,
and better yet, reviewed them before the meeting. Clients should not be
required to courier a cheque; the agent should arrange a pickup. The need to
meet virtually eliminates the physical signature on documents.
15. Raghav receives an annual pension of $16,580 and his marginal tax
rate is 34%. He splits his pension with his wife, Tanya, who has a marginal tax
rate of 27%. As a result of this income splitting, the rounded off amount
Raghav will be saving on taxes is:

Income splitting is a strategy that can be explored to take advantage

of the different marginal tax rates of spouses. When income splitting
occurs, income is apportioned between spouses so that some of the
income is moved to a spouse who pays tax at a lower marginal tax rate
than the other. By putting income into the hands of a spouse who pays
tax at a lower rate, money is saved.
Raghav receives $16,580 per year as a pension.
His marginal tax rate is 34%. He could pay as much as $5,637.2
($16,580 × 34%) in income tax on his pension.
Raghav splits his pension with Tanya so they each declare $8,290
($16,580 ÷ 2) as income.
Raghav’s wife, Tanya, has a marginal tax rate of 27%.
 Raghav’s income tax payable becomes $2,818.6 ($8,290 × 34%).
Tanya’s income tax payable is $2,238.3 ($8,290 × 27%).
Together they pay $5,056.9 in income tax ($2,818.6 + $2,238.3), a
saving of $580.3 ($5,637.2 – $5,056.9) compared to the tax due if
Raghav did not split his pension income.
16. Michael is a 70-year-old widower who wants to use his
Registered Retirement Savings Plan (RRSP) savings to purchase a life
annuity contract with a 20-year guarantee period. If Michael dies
before the end of the guarantee period, he wants the annuity to be
paid to his only daughter. If his daughter predeceases him, Michael
would like the annuity to go to his favourite charity.
Identify which party to the contract Michael's daughter would be.
In this scenario, the parties to the contract are as follows:
• Annuitant - Michael
• Primary Beneficiary - daughter
• Contingent Beneficiary - charity
With registered funds, the annuitant must be Michael, who is the owner of
the RRSP account. Should Michael pass away during the guarantee period,
the remaining funds will be paid to the primary beneficiary, who is his
daughter. Should the beneficiary (daughter) not survive the annuitant
(Michael), the funds would then be paid to the contingent beneficiary
(charity). With registered funds, the account owner would be the only
annuitant, and therefore there would not be a co-annuitant in this scenario.
17. Tanish wishes to purchase a segregated fund that primarily provides
income, but also provides some growth. He asks his advisor, Sahil, to
recommend a type of fund that would be suitable for this objective. What
would Sahil recommend?
Balanced funds are also known as balanced growth or balanced income
funds. A balanced growth fund emphasizes stocks. A balanced income fund
emphasizes bonds. A balanced income fund would invest in more bonds than
equities, providing mostly income, but some growth. A balanced growth fund
would primarily provide growth with some income, while a small-cap fund
would provide only growth and a money market fund would provide minimal
income and no growth. Tanish should choose the balanced income fund.
18. While explaining the fund details to his client Rabia, who is investing in
segregated funds for the first time, Najib presents the fund’s performance
data. Which of the following can Najib do while presenting performance data?
Performance data is always historical: what has happened over a specified
period of time. It may be useful to compare funds, but must never be used to
predict what will happen in the future. Moreover, many requirements must be
satisfied for performance data to be included in advertisements for funds and
it is essential that an agent not revise this data in any way. Funds with a
history of less than one year do not report performance data.
19. Tony is in a tight financial situation: his business is not earning any
income and he had to lay off his employees. The creditors of his sole
proprietorship are threatening him with legal action if he does not pay them
soon. Tony is considering declaring bankruptcy.
 Which of the following assets is MOST likely to be seized by a bankruptcy
trustee to pay Tony’s creditors?
Registered Retirement Savings Plan (RRSP) accounts and segregated funds with
a properly named beneficiary are protected from seizure in the event of a
bankruptcy. The only account that does not fall into these categories is the non-
registered account holding a mutual fund. This account can be seized if Tony files
for bankruptcy.
20. Ethan invested $50,000 in segregated funds which was a 10-year term
contract that offers a 75% maturity guarantee and a 100% death benefit
guarantee. Three years later, he decides to surrender the contract as he is in
need of the funds. How much does Ethan risk losing by surrendering the
contract before its maturity date?
While segregated funds are a relatively lower-risk investment, at contract
maturity an investor still risks the loss of up to 25% of his investment, the
difference between the amount invested and the minimum maturity
guarantee. Prior to contract maturity, an investor can lose up to the sum
invested since the maturity guarantee does not apply. Hence, Ethan can lose
up to $50,000, which is the total amount he had invested.
21. Lian invests in 100 units of segregated funds worth $10,000 where
each unit is worth $100. A few years later, Lian faces some financial issues
and chooses to withdraw $4,000 from the contract before its maturity date.
The current market value of each unit based on valuation following Lian’s
withdrawal request is $125. What outcome can be expected in this case?
Lian will have to redeem 32 units to receive $4,000 ($125 × 32) which is the
amount she needs. The withdrawal process begins by the investor informing the
insurer that issued the fund contract of the amount he wishes to withdraw. The
investor redeems the number of units that will provide the desired sum of money
based on their market value. The market value is determined at the valuation day
following the request.
22. Bowen meets with his client, Amrita, to provide her with a
recommendation for the segregated funds investment that she had
requested. After adequate explanation, Amrita chooses a product and
completes the application by making a deposit. She later receives an
electronic confirmation. Which of the following is true of the ongoing service
requirements of Bowen?
Bowen must inform Amrita that she must notify the agent or insurer of
changes to her personal situation that might affect the contract in place. If
there is a substantial loss in value of a fund, the client must be informed. At a
minimum the agent should meet with the client once a year to review the
selected investment and its performance. Significant changes to a fund
should be communicated to the client immediately and this is usually done by
the insurer rather than the agent.
23. Vicki is creating an investor profile for her new client, Ceara, and
asks her several questions to better understand her situation. Vicki
asks about Ceara’s current assets, savings, income, investment goals
and whether she has access to any programs to save for retirement.
Which question below will help Vicki get a complete snapshot of
Ceara’s investor profile?
 When creating Ceara’s investor profile, it is important that Vicki find out all of
Ceara’s liabilities and debts. While the amount of Ceara’s mortgage is
important, it could be only a part of her current liabilities; Vicki could be
missing out on part of the information that she needs.
24. Ines has deposited $50,000 to her segregated fund account and the
contract has 75% maturity guarantee. At maturity, her segregated fund is
worth $40,000. When her insurer is unable to pay the maturity guarantee due
to insolvency, Assuris coverage is applied. How much will Ines receive?
Assuris guarantees a segregated fund contract owner will retain up to
$60,000 or 85% of guarantees, whichever is higher. In other words, it allows a
segregated fund contract owner to retain 100% of his guaranteed investment
if it is equal to or smaller than $60,000.
Hence Ines will receive his market value of $40,000 which is greater than the
maturity guarantee of $37,500.
25. Manisha and her husband Kavin both invest $100,000 in two separate
segregated funds contracts with 75% maturity and death benefit guarantee.
While Manisha designates Kavin as the beneficiary in her contract, Kavin has
designated his estate as the beneficiary. In this case, which of the following
outcomes can be expected if one of them dies?
If Manisha dies, Kavin is most likely to receive the death benefit in a few
days. Segregated funds are redeemable on each valuation day. Therefore, the
account value can be received by the beneficiary within days instead of the
months it takes when an estate must go through probate. A named
beneficiary receives the proceeds from the contract probate-free. There will
be no saving if the estate is named as beneficiary. If the estate receives the
proceeds, it becomes part of the total estate value and subject to probate
fees where applicable.
26. Rachel is meeting her client, Riley, who owns a registered retirement
savings plan (RRSP) that is maturing soon. Riley has to decide whether to
convert his RRSP to an annuity or a registered retirement income fund (RRIF).
He asks Rachel for more information about annuities to help him decide.
Which of the following information is Rachel most likely to provide Riley?
Although annuities have been eclipsed in popularity by the RRIF as the typical
maturity option, which is based primarily on investment in guaranteed
investment certificates (GICs) and mutual funds, they are valuable as a
maturity option due to their dependability as a source of guaranteed income.
There is also no need for account management or ongoing decision-making
as there is with an RRIF account.
27. Julie is heavily invested in an equity mutual fund. Her financial
advisor tells her about the risks she faces with her investment.
What are the risks associated with Julie’s investment?
The risks associated with investing in equity investments are market risk and
industry risk.
28. Ivan is meeting with his financial advisor to discuss financial planning
for his 30-year-old sister, Lativa, who has a severe and prolonged mental
disability has been approved for the disability tax credit. They are both
Canadian residents. Lativa and Ivan's only surviving parent passed away
recently and left them with a cash inheritance. Ivan is the trustee and
guardian of his sister and wants to make sure that he arranges their finances
 as tax-efficiently as possible, protecting Lativa from financial hardship. With
$200,000 and interest in tax-deferred growth, what is an appropriate product
recommendation for Ivan to set up for Lativa?
The registered disability savings plan (RDSP) is an appropriate
recommendation to make to Ivan for the benefit of Lativa, as she meets the
eligibility criteria for the product, and investment income earned in the plan
accumulates tax-free. The benefits of this plan exceed that of the other
products as Lativa's RDSP might receive a Canadian disability savings grant
up to 300% and may be eligible for an annual contribution from the federal
government. Lativa would not be approved for underwriting for an individual
disability insurance plan as she is already disabled.
29. After analyzing his client’s needs, Edgar conducts a fund analysis to
determine the type of segregated fund most suitable for the client’s needs.
Edgar should consider getting approval from his compliance officer while
presenting the client with which of the following types of information?
Third-party sources of information, such as that gleaned from the Internet,
must be considered very carefully. Sources must be verified as being
accurate. The agent may wish to obtain approval from his compliance officer
before presenting any of this type of information to the client.
30. Which of the following investor profiles indicates a high need for estate
planning?
Benjamin’s profile indicates a high need for estate planning. Some people
have a very strong desire to leave an inheritance when they die. The
inheritance may be for children, family or friends, or for a charity. Such a
need means careful estate planning so that bequests can be filled according
to wishes.
31. Sadaf is interested in purchasing a segregated fund. She is comfortable
with taking some risk in order to obtain a slightly higher return. Her advisor
recommends a balanced fund for her. Which of the following balanced funds
would have the lowest risk?

The risk associated with these funds depends on how the balance is
weighted. Stocks are high-risk investments and bonds are low-risk
investments. When there is an even split, risk is averaged out. Balanced
funds suit an investor who wants some exposure to stocks, but is not
prepared for the volatility of stocks alone. ABC Balanced Fund has the lowest
equity component, so it would be the least risky.
32.Micah is a vegetarian and has a passion for helping animals. During his estate
planning, he has made it clear that he wants his estate to be donated to his
favourite charity that supports animals. It is important to him that the taxes
on his estate do not significantly reduce his donation when he passes away.
What should Micah’s advisor say to ease his concerns?
In the year that Micah passes away, his estate will be able to write off 100%
of his income (i.e., it will not be taxable). This credit will reduce his income
and allow him to donate the maximum amount of money to the charity.
33.Dorothy and Louise were joint annuitants on a last survivor, death of second
annuitant, no guarantee period, $1,000,000 annuity. Louise passed away, five
years before Dorothy. Upon the death of Dorothy, only $900,000 was paid out
in annuity payments. Who is the appropriate claimant for the balance?
An annuity contract with no guarantee period does not qualify for a claim.
34.Juan, aged 65, has an RRSP account with a balance of $1,486,400 that has
converted into an RRIF. His current tax rate is 45%. If he only withdraws the
minimum from his RRIF in the very first year when he is 65, what will he pay
in income tax on the withdrawal?
The minimum percentage of an RRIF account that must be withdrawn
yearly starts at age 65 and extends until age 95. The percentage range
starts at 4% at age 65 and goes to 20% at age 95. Based on his
account value and the minimum withdrawal percentage at age 65,
Juan will pay $26,755.20 in income tax.
$1,486,400 × 4% = $59,456
$59,456 × 45% = $26,755.20
35. Natasha is a life insurance agent. She is meeting with her new
client, Aram, to review the segregated fund contract before he invests
in the funds recommended by Natasha. Aram is not very fluent in
English. At their first meeting, Natasha understood that Aram wanted
to invest for a down payment on a home and for retirement. Due to his
aversion to risk and low level of knowledge for investment products,
they agreed on a low-volatility strategy. Although the language barrier
was somewhat of an issue at the first meeting, Natasha was able to
understand her client’s needs.

While reviewing the contract, however, it was evident that Aram had
trouble understanding the more technical aspects of the segregated
fund products, such as the maturity and death guarantees and the
difference between the different sales charges.
What should Natasha do?
Although Natasha and Aram understood each other when discussing
the objectives of the investment and establishing Aram’s investor
profile, it is important that the investor understands every aspect of
investing in a segregated fund before finalizing the sale so that he can
appreciate the consequences of his decision. In a situation like this,
where the agent is unsure of the client’s ability to understand a part or
all of the contract, the agent should seek advice from her direct
supervisor before proceeding.

While it is important that Aram understands the products that he is

purchasing, Natasha would not be acting in his best interest if she only
offered products that she can confirm he understands and avoided any
other products without consulting her supervisor to address Amar’s
comprehension difficulties.
36. Maddy is working with her client, Mia, who wishes to purchase
segregated funds for $30,000 with 75% maturity guarantee and 100% death
benefit guarantee. She also mentions that the maturity guarantee is most
important to her and that she wishes to use the money in five years to
purchase a house. Which of the following information should Maddy provide
Mia?
 The minimum maturity date is 10 years from the deposit date. Maddy should
let Mia know about this as she intends to withdraw the amount in five years.
Mia will lose the benefit of the maturity guarantee if she surrenders the
contract before its maturity date.
37. Keith deposits $15,000 in a segregated funds contract with 75%
maturity and 100% death benefit guarantee with his daughter as the
beneficiary. After three years, the market value of the contract rises to
$24,000. Keith’s contract offers a reset option and he opts to reset the
contract. What impact does this reset have on Keith’s contract?
If Keith dies after the reset, his daughter will receive a minimum of
$24,000 ($24,000 × 100%). If Keith chooses to withdraw funds two
years after the reset, he could lose a maximum of $24,000 as the
maturity guarantee does not apply. At contract maturity after reset, he
will either receive the market value or the maturity guarantee,
whichever is higher. Insurers do not provide a top-up if funds are
withdrawn before contract maturity.
The reset has two effects: it increases the value of the maturity and
death benefit guarantees and changes the contract’s maturity date.
The new maturity date of the contract is ten years from the reset date.
38. Gary is reviewing his portfolio. He notices a significant drop in the
value of a segregated fund that he recently purchased and is worried about
the fund. The last time that he spoke with his advisor was on the day that he
purchased the fund. He and his advisor have both been busy and not had
time to speak. What did Gary’s advisor fail to do?
The agent should follow up with the client once the sales process is
completed to ensure the client’s satisfaction with the product and to answer
any questions. The agent needs to meet with the client at least once a year
to review. The advisor cannot be expected to know in advance that the
investment will drop in value or change its risk profile.
39. Myriam is 60 years old and retiring in two months. To finance her
retirement, she has a GRRSP with her employer, an RRSP, a LIRA, and a TFSA.
She is also eligible to receive CPP and OAS. Which of the following retirement
plans will start to provide Myriam with an income stream only when she turns
65?
Group and individual RRSPs can be transferred to an RRIF at any age to start
receiving income. CPP retirement benefits are available as early as age 60,
although a benefit reduction would apply. OAS is not available before age 65.
40.Ram applies for a segregated fund investment and makes his first deposit.
After submitting his application, he receives a sample contract from the
insurer. After all the contract criteria have been satisfied, he obtains a final
contract with an effective date. By which date is Ram's purchase confirmed?
A contract may be attached to the application form or may be provided to the
investor after the insurer receives the application. The delivery of a sample
contract does not constitute purchase of the segregated fund. Purchase is
confirmed by the effective date of the contract. The effective date is the
valuation date following the receipt of the first deposit and when all contract
criteria have been satisfied.
41.Indra is meeting with her financial advisor to better understand her
retirement savings. She is 60 years old and has just retired from a large
 company after working there for several decades. Her employer provided a
deferred profit-sharing plan (DPSP). She plans to start a small hobby
business, where she will be the only employee, and live off the earnings from
the business for another five years before dipping into her retirement
savings. Her RRSP and TFSA are maxed out. What should Indra do with her
DPSP?
Indra does not need any income in the immediate future, so the most
appropriate decision she could make is to purchase deferred annuity with the
funds from her DPSP. She is no longer employed by the sponsor of the DPSP,
so she cannot leave the funds behind. She will be the only employee in her
new business, so a GRRSP is not a possible solution.
42.Annika owns a segregated fund contract that pays an annuity once she is
retired, with her husband as a beneficiary. Shortly after retirement, she
decides to purchase a condominium and needs a large sum of money for the
down payment. She calls her agent, Mirel, and asks to terminate the contract.
Mirel tells her that she cannot terminate the contract. What circumstances
would cause Mirel to say that?
A contract may be terminated at any time by completing the withdrawal form
providing the contract has not matured and annuity payments have not
started. Annika has already started receiving annuity payments hence the
contract cannot be terminated.
43.Ronald is considering the purchase of an annuity for $1,000,000. Income from
the annuity in the immediate future is important to him. He is 72 years old
and would like to know that if he passed away while he was still receiving
income from the annuity, the balance would go to his spouse as a lump sum.
What is an appropriate way to structure an annuity for Ronald's needs, all
other things being equal?
All things being equal, the shorter the term of an annuity, the higher the
income. This rules out life annuity options. Furthermore, a joint and last
option would require the insurance company to pay out across two lifetimes,
reducing the promised monthly benefit. Out of the options presented, a single
term-10 annuity would provide the highest monthly income benefit. Ronald
requested that any amount of money he had not received back from his
principal be paid out to his spouse, the beneficiary, as a lump sum. As such, a
single term-10 annuity with capital protection guarantee would promise the
highest monthly income and return any capital not paid out as income in a
lump sum. The installment refund choice would have returned any unpaid
capital in monthly payments.
44.Allan is planning to buy a house in 3 years. He wants to know how much he
should invest today to have $50,000 in 3 years, which he intends to use as a
down payment. The current annual interest rate is 5%. How much should
Allan invest now to have $50,000 in 3 years?
Allan needs to invest $43,191.88 at 5% interest today to equal $50,000 in 3
years’ time.
The present value (PV) of $50,000 in 3 years based on 5% interest is:
$43,191.88 (PV = $50,000 ÷ (1 + 0.05)3)
45.Agastya approaches an insurance agent to discuss investment opportunities
using mutual funds. Agastya asks the agent to list out the various benefits of
investing in mutual funds. Which of the following explanations is the agent
likely to provide Agastya?
 Investors will be provided with an annual report on costs and fees and an
annual report on performance. This disclosure is intended to ensure investors
thoroughly and accurately understand their fund investment. Mutual funds
are not intended to be a short-term investment and investors must be
prepared to hold units for a long period of time to achieve desired returns.
The fees, such as MER, can erode returns significantly over time. Tax
complexities that arise in non-registered accounts require investors to
monitor fund activity.
46.Jocelyn is 45 years old and switching jobs. Based on the advice of her
financial advisor, she has transferred her pension fund balance of $180,000
to a Locked-In Retirement Account (LIRA) held at an insurance company. She
plans to retire at 70 and would like advice on LIRA investments.
Jocelyn is planning to retire when she turns 70. That leaves a time horizon of
25 years for her investments. Therefore, the financial advisor must consider
investments suitable for a long-term horizon.
47.Jaya is single and 60-years old. She a Canadian citizen and has been residing
in Canada for the last 30 years. Jaya started working when she was 35 years
old and retired a few months ago. Jaya has made contributions to the Canada
Pension Plan (CPP) from the beginning of her employment. Which of the
following is true about the retirement pensions Jaya is eligible to receive?
Jaya can start receiving the CPP retirement pension right away, but her
pension will be reduced by 36%. The standard age to begin receiving the
pension is 65The penalty for the early pension is 0.6% per month or 7.2% per
year (0.60 × 12 months). If a pensioner begins the pension five years early,
his pension would be reduced by 36% (7.2% × 5 years). Jaya is not eligible to
receive an old age security (OAS) pension until age 65. The GIS Allowance is
available to those whose married or common-law spouse receives the OAS
and is eligible for GIS.
48.Evelyn is building a portfolio of investments and purchases some preferred
shares. Evelyn wants to understand what features differentiate preferred
shares from common shares. Identify the statement that best describes how
preferred shares differ from common shares.
Stock is issued in two forms: preferred stock (or shares) and common stock
(or shares). Dividend payments must be paid to preferred stockholders before
they are paid to common stockholders. Preferred stocks also do not usually
give voting rights to stock owners, and therefore a preferred stock owner has
no say in the management or operation of the company. Common stock
owners have voting rights that allow them to express their wishes regarding
the company at the annual general meeting.
49. Travis is almost 65 and will be retiring very soon. He is a member
of his company’s Defined Contribution Pension Plan (DCPP). He has
been looking at pension vehicles and has made up his mind to go for
an annuity. His children are well settled and he does not have to leave
them an inheritance. He estimates his and his wife’s life expectancy at
20 years.
Which annuity will give Travis the highest monthly income and last as
long as he expects to live?
Since Travis does not need to leave behind an inheritance, he does not
require an annuity with a guaranteed period. A guaranteed period will reduce
 the monthly payments. A joint and last survivor life annuity pays the
annuitant (Travis) income for his lifetime and the selected percentage to the
surviving spouse. A 60% joint and last survivor annuity will pay more monthly
income than a 100% joint and last survivor annuity
50.Who among the following individuals is currently eligible to receive the old
age security (OAS) pension?
Alexandra is currently eligible to receive the old age security (OAS) pension.
Old Age Security (OAS) is a monthly retirement pension available for
qualifying Canadians who are 65 and meet the requirements for legal status
and residence in Canada.
51. Gordon, aged 69, and Wendy, aged 60, are both retired. Their
modest retirement expenses are fully covered by Gordon’s large
retirement pension, leaving them with extra money to save. Gordon
wants to defer paying taxes on revenue that he does not need. He still
has unused RRSP contribution room accumulated from previous years,
so he is contributing to Wendy’s spousal RRSP.
Assuming that Gordon has sufficient RRSP contribution room going
forward, until when can he continue to contribute to Wendy’s spousal
RRSP?
An RRSP contract can accept deposits until the end of the calendar year in
which the contract owner turns 71. When a spousal RRSP is set up, the owner
and annuitant of the contract is the person who benefits from deposits to the
contract. In this case, Wendy is the owner of the spousal RRSP, so Gordon can
continue to make RRSP contributions to her spousal RRSP until December 31
of the year when Wendy turns 71, as long as Gordon has sufficient
contribution room.
52.Steve purchases an accumulation annuity from an insurance company by
depositing $150,000. He also receives $2,300 monthly from a payout annuity
that he purchased from the same insurance company last year.
Unfortunately, the insurance company becomes bankrupt. What will be the
amount of Assuris coverage for Steve’s accumulation and payout annuities?
Steve will receive $100,000 Assuris coverage for the accumulation annuity
and $2,000 for the payout annuity. When a promised benefit for a payout
annuity is more than $2,000 per month, the annuitant receives Assuris
protection for the greater of $2,000 per month or 85% of the promised
benefit. Assuris protects an accumulation annuity up to 100% of the contract
value up to $100,000. Therefore, if an annuity value is less than $100,000,
the policy owner receives all of his deposit value. If the annuity value is
greater than $100,000, the policy owner receives $100,000.
53.Walden and his brother, Hadley, meet with an agent to discuss investment
options, specifically exchange-traded funds (ETFs) and mutual funds. Walden
decides to invest in mutual funds and Hadley opts to invest in ETFs. Which of
the following is true about their costs associated with these investments?
Like mutual funds, an MER is also charged against ETF shares, however the
MER is significantly lower than the MER of mutual funds or segregated funds.
Also, like mutual funds, a trading expense ratio (TER) is charged within the
funds themselves for transaction costs. Active ETFs incur the highest TERs
because more trading by management results in a higher total trading cost.
No sales load is involved in ETFs.
54.Etana would like to make sure that, in the event of her death, her daughter
Natalola is financially taken care of. Natalola’s father is not around. Her
stepfather Marcus would take care of her, but he would need financial
support. Etana was told that life insurance is very expensive, so she has her
RRSP invested in segregated funds. Her main goal is to preserve her principal
and, as her investment grows, use resets to secure her capital. Etana’s only
concern is that her segregated policy might not grow enough to cover
Natalola’s financial needs. What is one advantage that a segregated fund has
over life insurance?
It is quite possible that the market value of the segregated fund could grow to
more than the benefit paid under an insurance policy. A is a disadvantage, B
may not be true, and D is not true.
55. Marcus is meeting with his client, Shaq, to review his segregated
fund portfolio. Shaq is now in his 80s and Marcus has been his advisor
for over 20 years. Five years ago, Shaq decided that he would like to
take as little risk as possible and is currently invested in income and
dividend funds. Since then, Shaq’s health has been deteriorating and
has informed Marcus that he would like to move all his investment into
industry-specific funds that are high risk and focus on developing
markets.
What is Marcus’s next step?
Only five years ago, Shaq said that he did not want to take any additional
investment risks. Since Marcus has known Shaq for a long time, he realizes
that Shaq may not be making a rational or practical decision about his
investments. It is important for advisors to be aware that as clients get older,
their ability to make investment decisions may become more difficult. They
need to be able to guide them based on their knowledge of the client.
56.Marcin is in his late 70s and meets with his insurance agent, Anton, with
whom he had purchased several insurance products. Marcin’s health is
declining and he informs Anton that he would like to name him as his power
of attorney. How should Anton respond to Marcin’s request?
An agent should decline being named as an attorney and must exercise
caution when confronted with dealing with an attorney for property. The
attorney has many powers for dealing with the individual’s property including
switching and selling investments. Agents should be aware of the limitations
on the attorney’s powers, including a restriction on changing life insurance
beneficiaries, except in B.C. Financial exploitation by attorneys is a major
problem; POA fraud is a criminal offence.
57.Tanish wishes to purchase a segregated fund that primarily provides income,
but also provides some growth. He asks his advisor, Sahil, to recommend a
type of fund that would be suitable for this objective. What would Sahil
recommend?
Balanced funds are also known as balanced growth or balanced income
funds. A balanced growth fund emphasizes stocks. A balanced income fund
emphasizes bonds. A balanced income fund would invest in more bonds than
equities, providing mostly income, but some growth. A balanced growth fund
would primarily provide growth with some income, while a small-cap fund
would provide only growth and a money market fund would provide minimal
income and no growth. Tanish should choose the balanced income fund.
 58. Rita has the following investments:
 Stocks - $160,000 (she trades actively and often invests in penny
stocks)
 Registered Retirement Savings Plan (RRSP) - $300,000 (invested in
equity mutual funds and exchange-traded funds)
 Home - $300,000
 Chequing account - $20,000
 TFSA - $55,000
She has an outstanding mortgage of $50,000 and a car loan of $8,000.
Based on the information provided, what is Rita's risk tolerance?
Rita is an experienced investor who trades frequently. She invests in penny
stocks, which are at the riskier end of the spectrum. She has assets of $835,000
(160,000 + 300,000 + 300,000 + 20,000 + 50,000) and debts of only $58,000
(50,000 + 8000). She has a high-risk tolerance.
59. Dorothy is 65 years old and in excellent health. She has no surviving
family members, but would like to leave her estate to her favourite charity
when she passes away. It is important to her that this donation be done
privately. Her financial advisor has suggested a strategy using an annuity and
a life insurance policy to amplify her gift and ensure privacy. What is the most
cost-effective and appropriate product recommendation for Dorothy for this
type of strategy?
The strategy of combining a life insurance policy and an annuity to amplify a
gift upon the death of an insured is called "insured life annuity" or "back-to-
back annuity". This strategy combines the use of a life-only annuity with a
guaranteed life insurance policy (usually term-to-100 or whole life). It also
ensures that the benefit is paid out privately at the death of the insured. First,
Dorothy should determine the amount that she will leave to charity, and then
purchase a permanent life insurance policy for that amount. Next, she should
take out an annuity in the amount that will, at a minimum, pay the monthly
premiums on the permanent life insurance policy. For this strategy to work,
only a permanent life insurance policy and a life annuity should be used. The
combination of term-100 and single life annuity is the only appropriate
product recommendation for Dorothy.
60. Aurellia has been employed by Home Auto Insurance Co. for the past
22 years as a claims adjuster. With little money to spare, she has invested
consistently in GICs and Canada Savings Bonds almost exclusively. At an
investment and insurance seminar, she learns about Individual Variable
Insurance Contracts (IVICs) and wants to try a low-risk IVIC investment fund.

Which of the following funds would best suit Aurellia?

A mortgage fund is the best choice for Aurellia: she is a very cautious
investor, and it has the lowest risk. The emerging markets fund is risky
because it is financing companies in their beginning stages like start-ups.
Both the industry and geographically specific funds are higher risk because
there is less diversification with specific funds.

61.Faiz visits his client, Kacy, who wishes to invest $20,000 in segregates funds.
Kacy wants to know if there are any risks associated with investing in
segregated funds. Which of the following information will Faiz provide Kacy?
 Fundamentally, the risks of a segregated fund result from how the fund
invests the deposits it receives from investors. Each fund is highly diversified
within its category. Each investment within each fund has its own individual
risk. The risk of individual investments is averaged out to produce the overall
risk for the fund itself.
62. Evelyn has the following investments:
 Registered Retirement Income Fund (RRIF) - $600,000 invested in
Guaranteed Investment Certificates (GICs)
 Home - $400,000
 Cottage - $280,000
 Savings account - $50,000
 She has an outstanding mortgage of $35,000.
Which of the following can be deduced from Evelyn's investments?
Evelyn has a low-risk tolerance because she holds all her investments in GICs. We
cannot conclude that she has an extravagant lifestyle from the data provided. We
do not know about her retirement plans and goals, so we cannot conclude that she
has saved adequately for her retirement. We do not know her family situation and
her estate planning details, thus we cannot conclude that she does not need life
insurance.
63. Nadia is meeting with her clients to implement the segregated
funds recommendation that she made to them last week. During their
last appointment, she gathered their financial information, and based
on the information that her clients shared, she made a
recommendation. Nadia has explained the benefits of segregated
funds as well as the risks. She is now meeting with them to complete
their application and get their signatures.
Which step has Nadia forgotten to go through with her clients?
Nadia needs to provide her clients with the fund facts either in person or via
email. The clients have to also acknowledge that they have received them
before they sign the application.
64.Devin has recently purchased a segregated bond fund. Over dinner, he tells
his brother Manish about the purchase. Manish asks about the type of bond
fund that Devin bought. Devin says that he does not know the type of bond
fund, but that he noted that the average duration of the fund was 7.9 years
when he read the fund facts document. What type of bond fund did Devin
buy?
Fixed-income funds may be categorized according to the duration of the
bonds held by the fund. For instance, the bonds in a short-term bond fund
mature in less than 3.5 years. Bonds in a medium-term fund mature between
3.5 and 9 years, and bonds in a long-term bond fund mature in 9 years or
longer. Devin owns a medium-term fund as the duration of the fund is 7.9
years.
65.Florence has non-registered funds. These funds were invested in an
accumulation annuity for three years and earned interest in the amounts of
$400, $475, and $525. She then transferred the funds to a prescribed annuity
and started receiving payments immediately. Identify the statement that best
describes the tax treatment of Florence’s annuity.
Accumulation annuities are subject to accrual taxation annually during the
accumulation phase, and therefore Florence paid tax on the interest that was
 accumulated each year. Prescribed annuities level out the amount of interest
over the life of the contract, so the taxable amount is level.
66.Tony is in a tight financial situation: his business is not earning any income
and he had to lay off his employees. The creditors of his sole proprietorship
are threatening him with legal action if he does not pay them soon. Tony is
considering declaring bankruptcy.
Which of the following assets is MOST likely to be seized by a bankruptcy
trustee to pay Tony’s creditors?
Registered Retirement Savings Plan (RRSP) accounts and segregated funds
with a properly named beneficiary are protected from seizure in the event of
a bankruptcy. The only account that does not fall into these categories is the
non-registered account holding a mutual fund. This account can be seized if
Tony files for bankruptcy.
67.Norma is covered under her employer’s group pension plan which allows her
to decide on how to invest her contributions. As a plan member, she has
several investment options. The amount of retirement income is not
guaranteed and is dependent on investment performance. Norma is most
likely to be covered under a:
A member of a DCPP decides how to invest contributions. The retirement
pension from a DCPP is a result of amount of the contributions, when
contributions are made and investment performance. There are no
guarantees as to how much will be received as a pension.
68.Ann is a physician and is the owner of Ann MD Professional Corporation. The
corporation has money to invest. Ann, as the only shareholder, decides to
invest the corporation’s money in a non-registered segregated fund contract.
If she dies, she wants her husband, Wesley, to benefit from the investment. In
this situation, who should the owner of the contract be?
Since the money belongs to the corporation, it will own the segregated fund
contract. However, the corporation cannot be the annuitant since the
annuitant must be an individual in order to properly manage the death
benefit guarantee. Ann will be the annuitant, and if she dies, her husband
Wesley will be the beneficiary.
69. Rhonda is in the process of setting up a spousal Registered
Retirement Savings Plan (RRSP) to hold segregated fund investments.
Her husband, John, is named as the contributor.
Which of the following is true?
When a spousal RRSP is set up, the owner and the annuitant is the person
who benefits from the deposits to the plan. The person who contributes does
not have ownership rights. The owner names the beneficiary of the account.
70. Florence, who was the mayor of a small city in Ontario until last
year’s election, is opening a new non-registered segregated fund
account with Adam, her life insurance agent and friend. She will invest
$150,000 that she currently holds in a savings account at her credit
union. She has accumulated that amount over the years by being a
disciplined saver, but never bothered to invest it. Adam completes the
application and reviews the information with Florence before she signs
the document. He also verifies Florence’s original driver’s licence,
which expires next year, to confirm her identity.
 Under the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act, what else must Adam do to properly complete the
transaction?
Florence is opening an account and she is investing more than $100,000.
Hence, Adam must determine and confirm if Florence is a politically exposed
foreign person (PEFP), a domestic politically exposed person (PEP), the head
of an international organization (HIO) or a family member or close associate
of one of these people. Since Florence was the mayor of a Canadian city,
holding office in a Canadian municipal government within the last 5 years,
she is a PEP and Adam must confirm this fact in the application.
Since the transaction itself is not suspicious, there is no need to report to
FINTRAC.
When the identification document being verified is a photo identification that
meets all the requirements, there is no need to ask for a second document.
71. Walden and his brother, Hadley, meet with an agent to discuss
investment options, specifically exchange-traded funds (ETFs) and mutual
funds. Walden decides to invest in mutual funds and Hadley opts to invest in
ETFs. Which of the following is true about their costs associated with these
investments?
Like mutual funds, an MER is also charged against ETF shares, however the
MER is significantly lower than the MER of mutual funds or segregated funds.
Also, like mutual funds, a trading expense ratio (TER) is charged within the
funds themselves for transaction costs. Active ETFs incur the highest TERs
because more trading by management results in a higher total trading cost.
No sales load is involved in ETFs.
72. Vicki is creating an investor profile for her new client, Ceara, and
asks her several questions to better understand her situation. Vicki
asks about Ceara’s current assets, savings, income, investment goals
and whether she has access to any programs to save for retirement.
Which question below will help Vicki get a complete snapshot of
Ceara’s investor profile?
When creating Ceara’s investor profile, it is important that Vicki find
out all of Ceara’s liabilities and debts. While the amount of Ceara’s
mortgage is important, it could be only a part of her current liabilities;
Vicki could be missing out on part of the information that she needs.
73. Sylvia and her husband Mark have just retired at 65 and moved
to a retirement community in Nova Scotia. They are talking with their
advisor about tax strategies during retirement. Mark is expected to
make more retirement income than Sylvia from his RRIF and DPSP,
which they plan to use income splitting for income tax purposes. They
have also heard about assigning their Canada Pension Plan Benefits.
What will their advisor tell them about this tax strategy?
Income splitting for those 65 and older:
Up to 50% of the annual income received from a lifetime annuity,
registered pension plan, RRSP annuity, registered retirement income
fund (RRIF) or deferred profit-sharing plan (DPSP) annuity can be
 allocated to a spouse. The splitting for tax purposes is done via the tax
return.
Canada Pension Plan (CPP) benefits are assigned.
CPP can be shared between spouses who were contributors, or
between spouses when only one was a contributor. This is called an
assignment. Québec Pension Plan (QPP) sharing is also available for
couples who are married or in a civil union or living in a common-law
relationship of at least three years’ duration.
74. Armena invested $50,000 in an equity segregated fund
yesterday with 75% guarantee. She has second thoughts and decides
to wait until the equity markets become less volatile. She phones her
agent today and rescinds the contract. Today, the fund is worth
$40,000, but the next valuation date is not until this coming Friday. On
the valuation day, the segregated fund is worth $45,000. How much
will Armena receive back?
An investor may cancel or rescind the segregated fund contract in
writing within the specific time limitation set by the insurer providing
the contract. Two days is the usual length of time permitted. The
investor receives the lesser of the amount of premium paid or value of
fund units on that date if it is a valuation date. If it is not a valuation
date, then the value on the next valuation date applies. Armena will
receive the lesser of the amount that she paid or the value on
valuation date. She paid $50,000, but the market value is only
$45,000, so she will receive $45,000.
75. Jathursan purchased a segregated fund 10 years ago with a
$50,000 inheritance. The fund has a 75% guarantee. The value of the
fund is now $35,000. Jathursan chooses to renew the contract. What
will be the value of his new contract?
At the ten-year maturity of the contract, its value may be taken as
cash or in the form of an annuity, or renewed for another period. When
renewed, a new guarantee period begins. The new maturity date
depends on the age of the annuitant when the contract is renewed.
The initial contribution to the renewal contract is the total market value
or the guarantee if the market value is lower. Jathursan will receive the
guaranteed amount of $37,500 ($50,000 × 75%).
76. Debbie owns a segregated fund contract with a 100% maturity
and death benefit guarantee, in which she invested $50,000.
Immediately afterwards, the insurer goes insolvent.
How much will Assuris provide as the guarantee amount?
Assuris provides a 100% guarantee if the guaranteed amount is
$60,000 or less. For guaranteed amounts greater than $60,000,
Assuris provides a guarantee that is equal to the greater of 85% of the
guaranteed amount or up to $60,000.
77. Nazia has received an inheritance of $100,000 from her aunt.
She wishes to save a portion of the inheritance towards a down
payment for a house. Nazia wants to put down $50,000 in three years.
 If Nazia can get a rate of return of 5%, how much does she need to
invest today?
Rationale:
PV = FV ÷ (1 + interest rate)n
PV = $50,000 ÷ (1 + 0.05)3
PV = $50,000 ÷ 1.16
PV = $43,103
78. Earl wishes to purchase a life annuity using funds from his
locked-in retirement account (LIRA). He is married to Rose and they
have a son, Adam. It will be a joint and last survivor annuity with no
guarantee period. Which of the following is Earl NOT required to do
while completing his application?
Earl will not be naming a beneficiary to the annuity because it is a life
annuity with no guarantee period.
The owner and annuitant must be the same person if the annuity is
registered or funded with registered savings. Two annuitants must be
named in a joint annuity: the annuitant and the joint annuitant. A
beneficiary must be named in the application only when there is a
guarantee period. When no guarantee period exists, a beneficiary is
not named. When some, or all, of the premium is derived from a
locked-in pension, all or part of the death benefit may become payable
to the spouse instead of the beneficiary. In this case, the spouse’s
information must be provided unless the spouse has waived her rights
to the benefit in a spousal waiver form.
79.The owners of ABC Manufacturing Company would like to set up a group
retirement savings plan for their valued employees. In order to remain a
competitive employer, they would like to set up a plan where they are the
sole sponsor of the plan, to take pressure off any employee in the company
who stays longer than two years to also contribute. They want the employees
to stay at the company as long as possible and to feel rewarded when the
company does well. They meet with their financial advisor to discuss an
appropriate group savings plan for their needs. Which is an appropriate
product to recommend?
When there is a lone sponsor for a group plan, it is referred to as non-
contributory. A DPSP is the only option listed above that that cannot take
employee contributions. Furthermore, the contributions are directly tied to
the profits of the company. DBPP, DCPP and GRRSP can be made non-
contributory if designed that way from initiation.
80.Chung is interested in investing in segregated funds. He understands that the
fees are higher than that of other fund investments and wants to understand
the benefits that differentiate segregated funds from other fund investments.
Identify the benefit that is unique to segregated funds.
Segregated funds offer some unique advantages compared to other forms of
investment. They also have many features in common with other fund-type
investments.
Unique advantage of segregated funds:
  Tax benefit received when capital losses are incurred.
Some advantages segregated funds share with other fund investments:
 Vast amount of information available on funds, both before and after
purchase;
 Ease of switching from one fund to another;
 Ability to create an income stream from account value.

81.Swetha is employed and is 58-years old. She has been contributing to the
Canada Pension Plan (CPP) for the last 20 years. She is unsure if she should
retire at 60 or continue working until age 70. How is the timing of Swetha’s
retirement likely to impact her CPP payments?
If Swetha waits until age 70 to retire, she will receive a 42% increase in the
pension amount received. The pension can be enhanced by waiting. The
standard age to begin receiving the pension is 65. It can begin as early as
age 60. When the pension begins early, the amount paid is reduced by the
number of months the pension begins before age 65. The penalty for the
early pension is 0.6% per month or 7.2% per year (0.60 × 12 months). If a
pensioner begins the pension five years early, her pension would be reduced
by 36% (7.2% × 5 years).
82.Matthew has $16,380 of RRSP carry forward room plus $9,600 of contribution
room this year. He contributed $20,000 to his RRSP and $8,500 to his wife’s
spousal RRSP this year. Matthew was faced with an unexpected expense, and
had to withdraw $5,000 from his RRSP. Based on these transactions, identify
the statement that best describes the net result of Matthew’s RRSP
contribution room.
An individual may have multiple RRSP statements because there is no
limit to the number of RRSP accounts a person may have. However,
annual contributions to all accounts, including a person’s own RRSP
and a spousal RRSP, are limited to the annual maximum, plus the
available deduction limit, which includes the carry-forward of unused
deductions from previous years. An over-contribution of $2,000 over
and above this amount is permitted before penalties are incurred.
Matthew has contributed a total of $28,500 ($20,000 + $8,500) while
his contribution room was $27,980 ($16,380 + $9,600 + $2000).
Matthew hence has overcontributed by $520 ($28,500 − $27,980).
83. Cecilia purchases an old house for $500,000 with plans to renovate
and resell for a higher price. She spends around $60,000 on renovations and
lists the house back on market. She is confident that she could sell it for at
least $700,000 as the going rate for renovated houses in that area is around
$700,000. Unfortunately, a news article published about high lead content in
water pipes of old houses drove buyers away from old properties. Cecilia
ended up selling the house for $600,000, hardly making any profit after
commissions. This scenario shows that:
There are no guarantees provided to real estate investors. A capital gain (or
capital loss) may be generated if the property increases in market value (or
loses market value) at the time of sale.
84. Theo is 60 years old and is planning to retire this year. He will start
receiving his retirement pension after he turns 65. He has $120,000 in
 savings, which he would like to invest in a way that provides him with
guaranteed monthly income until his pension payments begins. Which of the
following is a suitable recommendatiocen for Theo?
A 5-year term annuity is a suitable recommendation for Theo to provide him
with temporary income unit his pension payments begin in 5 years.
A term annuity provides an income to an annuitant for the term of time
stated in the contract. The payment period may be as short as a few years or
may last for decades. A term annuity is useful to bridge income between two
dates, such as between the time when an employee takes an early retirement
and the time when he starts to receive his pension.
85. Sai is an investor who is working to improve health care facilities in a suburb
and makes investments in socially responsible funds. He also invests some of
his income in fixed-income bond funds. Which of the following statements
about each of his investments is true?
Some funds are created to appeal to specific investor wants and respond to
investor needs. They are called specialty funds. Specialty fund categories
such as socially responsible funds fill important investment objectives for
their investors. Socially responsible funds investment is not risk-free and
socially responsible funds are a form of specialty funds, not growth funds.
Investments in bond funds are less risky than socially responsible funds
investment.
86.Adam is a newly licenced insurance agent. He is meeting a few investors who
want to invest in segregated funds and annuities. His manager hands him a
rider election form. For which of the following investments should Adam
provide the investor with a rider election form?
The rider election is provided only to those contract owners investing in
guaranteed minimum withdrawal benefits (GMWB). Just as the segregated
fund contract addresses investment risk from the outset, the rider also
addresses the impact of excess withdrawals from a GMWB because they can
significantly reduce the value of the contract. The contract owner may not
receive his expected amount in payments in the future if excess withdrawals
have been made.
87.While purchasing an annuity contract, Hannah wants to know if the contract
can be surrendered. Her agent is likely to respond that an annuity contract
CANNOT be surrendered when it is:
Any annuity funded by the transfer of locked-in funds from a registered
pension plan, a locked-in retirement account (LIRA), or a life income fund (LIF)
cannot be surrendered. A term annuity may be surrendered for its commuted
value. Surrender of a life annuity may be possible when annuity payments
have not started. An accumulation annuity may be surrendered at any time
and its cash value is received by the policy owner.
88.Martin recently passed away. He had a segregated fund with a 75% maturity
benefit, MER of 4.1%, and a 100% death benefit. He invested eight years ago
in some risky funds hoping to get a big payout when the market went up. He
named his son, Adam, as the beneficiary. Which of the following is most likely
to affect the amount of death benefit paid to Adam?
The death benefit paid to Adam will only be affected by a market value that is
higher than the guaranteed amount.
The amount paid to the beneficiary as the death benefit is based on the
amount deposited to the contract, its market value at the time of death and
 the death benefit guarantee under the contract. The beneficiary receives the
greater of the market value or the death benefit guarantee.
The maturity guarantee does not apply in this situation.
89. Kamal, who just retired at age 63, meets with her advisor to
calculate her retirement income. She is concerned about the
government retirement pension income available to her. Kamal came
to Canada when she was 24 years old and worked until her retirement
as a teacher.
Which of the following statements about Kamal’s retirement benefits is
TRUE?
The GIS benefit is only available beginning at age 65, so Kamal will not meet
the requirements. At 65, she will have to meet an annual income test to
qualify.
 Kamal will be eligible to receive OAS after age 65 as she has lived in
Canada for more than 20 years after age 18.
 Kamal’s CPP will be reduced because she retired before age 65.
 The allowance is only available between ages 60 and 64.
90. Below is a fictitious list of Canadian residents who have lived in Canada
for more than 10 years and belong to the low-income category. In the context
of GIS, identify the person who is eligible to receive the Allowance benefit.
Riya is eligible to receive the Allowance benefit. The Allowance is available to
those 60 to 64 years old and whose married or common-law spouse receives
the OAS pension and is eligible for GIS.
91. Jerry, single and aged 67, is retiring from his employer and needs to
move his funds from his employer’s Defined Contribution Pension Plan so he
can start receiving an income. Jerry would like to minimize market risk, but
also wants to maximize the ongoing income amount. Which of the following is
best suited to Jerry’s objectives?
The T-90 annuity removes all market risk and, given that there is a defined
end date, the payment from a T-90 annuity will be greater than the life
annuity.
92. Hamid and Kaif are colleagues who are both 60-years old. Hamid
moved to Canada when he was 50 and had been employed since then.
He is a permanent resident in Canada. He plans to retire at 65 and
move to his home country. Kaif is a Canadian citizen who has been
living and working in Canada for the last 12 years and he plans to
retire in a year and hopes to settle in Canada. Which of the following
statements about the old age security (OAS) pension eligibility of
Hamid and Kaif is true?

a) While Kaif will start receiving the OAS pension at age 65, Hamid will not
receive the OAS pension if he moves to his home country at age 65.
b) Both Hamid and Kaif are eligible to receive the OAS pension for life,
regardless of where they live, as they are both employed in Canada for more
than 10 years.
c) Kaif will be eligible to receive the OAS pension only if he continues to work
until age 65.
d) Hamid will be eligible to receive the OAS pension while in his home
country if he becomes a Canadian Citizen before retirement.
While Kaif will start receiving the OAS pension at age 65, Hamid will not be
able to receive the OAS pensions if he moves to his home country at age 65.
If living outside Canada, an applicant must have resided in Canada for at
least 20 years after turning age 18 to be eligible to receive the pension. Kaif
who lives in Canada will receive the OAS benefits as the minimum residency
requirement is 10 years.
93. Judy is retiring and will be transferring her Registered Pension Plan so
she can start receiving an income. She is not risk averse when it comes to
investing in the markets. She is primarily concerned about inflation risk,
interest rate risk, and longevity risk. She has other sources of income and can
tolerate fluctuations in her ongoing income amount. Which of the following is
most likely to mitigate these risks?
The Variable income annuity will provide a life annuity with the ability
to participate in the markets. By investing in equities, the inflation and
interest rate risk is mitigated. The life annuity mitigates the longevity
risk.
Indexed income annuity, LIF, and RRIF invested in segregated funds
will not mitigate all the risks that Judy is concerned about.
94. Tran is an agent. She is aware that she must monitor the client. Which
of the following circumstances would affect the contract that her client,
Edison, owns?
The agent needs to inform the client that he must notify the agent or insurer
of changes to his personal situation that might affect the contract in place.
Such a change may be the need to change the beneficiary. The agent should
also periodically check that all information, such as the client’s address of
residence, is up to date. Only the change to the beneficiary would affect the
contract. The POA would only affect the client if the client became unable to
provide directions for the contract.
95. Earl wishes to purchase a life annuity using funds from his locked-in
retirement account (LIRA). He is married to Rose and they have a son, Adam.
It will be a joint and last survivor annuity with no guarantee period. Which of
the following is Earl NOT required to do while completing his application?
Earl will not be naming a beneficiary to the annuity because it is a life annuity
with no guarantee period.

The owner and annuitant must be the same person if the annuity is
registered or funded with registered savings. Two annuitants must be named
in a joint annuity: the annuitant and the joint annuitant. A beneficiary must be
named in the application only when there is a guarantee period. When no
guarantee period exists, a beneficiary is not named. When some, or all, of the
premium is derived from a locked-in pension, all or part of the death benefit
may become payable to the spouse instead of the beneficiary. In this case,
the spouse’s information must be provided unless the spouse has waived her
rights to the benefit in a spousal waiver form.
96. Lee has been a member of a deferred profit-sharing plan (DPSP)
offered by his employer for the past five years. His sister, Meilin, is employed
and a member of a group registered retirement savings plan (GRRSP). Which
of the following statements accurately highlights the similarities between
Lee’s and Meilin’s savings plans?
Savings plans are made available to employees from employers as deferred
profit sharing plans (DPSPs) and group registered retirement savings plan
(GRRSPs). Savings in these plans are not locked-in. They are not governed by
pension standards legislation. A DPSP is offered by companies to share a
portion of their business profits with employees who are plan members. In
DPSP, contributions are made only by the employer. In GRRSP, contributions
are made by the employee and can be made by the employer.
97. Cameron came to Canada 20 years ago, when he was 45 and has been
living here ever since. Over the past 20 years, he has contributed to the
Canada Pension Plan and has also contributed the maximum to his RRSP
account. Cameron wants to know what government benefits he will be
entitled to when he retires.
Which of the following statements regarding his eligibility for old age security
(OAS) is true?
Old Age Security (OAS) is a monthly retirement pension available for
qualifying Canadians who are 65 and meet the requirements for legal status
and residence in Canada. You must be a legal resident of Canada for 10 years
(after age 18) to receive the OAS pension.
98. Cameron recommends Fund A to his client, Jenny, who wishes to invest
in segregated funds but has no investment experience. Jenny agrees to his
recommendation and requests Cameron to proceed with the application.
Cameron is yet to provide Jenny with the Fund Facts and he should do so:
Fund Facts are part of the information folder and are delivered to a
prospective investor before the application for the contract is signed. They
can be delivered in person or electronically via email or through an online
site. The client must acknowledge that he has received the information folder
in writing or in conversation with the agent. Providing Fund Facts is
mandatory as part of the disclosure process that accompanies a sale.
99. Sandra, an insurance agent, is meeting a new client, Edith, who wants
to invest in a segregated fund contract. After discussing Edith’s needs,
Sandra begins by creating an investor profile and requires Edith to provide
her with a few documents to gain information about her personal assets.
Which of the following provides Sandra with information about Edith’s assets?
Income tax return is one the documents that provides information about an
investor’s personal assets. Personal income is reported on the annual income
tax return. Mortgage statements, line of credit statements, and credit card
statements provide information about an investor’s personal liabilities.
100. Morgan is retiring next month at 65 years old. He has over
$400,000 accumulated in a Defined Contribution Pension Plan (DCPP)
offered by his employer. Morgan has sufficient savings to take care of
his expenses until he turns 72 years old. He also plans to generate
income through his new home business as a consultant. He figures that
he will not have to use his retirement funds immediately.
In this case, Morgan’s should:
 Morgan needs use of the funds from the year he turns 72. Transferring the
funds to a LIF will commence payments from the next year, which is not
desirable. He cannot transfer funds from a DCPP to a RRIF. An immediate
annuity will commence payments immediately. Transferring the funds to a
LIRA, a locked-in holding account, is the best option. Funds can be kept in a
LIRA until the end of the year the annuitant turns 71. At this stage, the
annuitant can decide to transfer the funds to a LIF or use the funds to buy a
pension annuity.
101. Esther invests $145,000 in a segregated fund contract and names her
daughter, Lilly, as the beneficiary. The contract provides 75% maturity and
100% death benefit guarantees. A year later, her contract is reset when the
market value is $160,000. A few days later, Esther withdraws $30,000 to pay
for an unexpected expense. Two years later, Esther dies when the market
value of her contract is $140,000. Assuming no other resets were made, how
much death benefit will be paid to Lilly?
Lilly will receive $140,000, which is the market value of the contract at the
time of Esther’s death. The market value of $140,000 is higher than the
death benefit guarantee of $130,000 ($160,000 −$30,000 = $130,000). Even
though the reset increased the death benefit guarantee to $160,000, the
$30,000 withdrawal reduces the death benefit guarantee to $130,000.

The amount received at maturity or death can exceed the guaranteed

amount when the market value of the contract is higher than the guarantee.
However, if withdrawals are made from the contract, guarantees are adjusted
downwards in proportion to the account balance.
The timing of the maturity guarantee can also be affected when reset is used.
102. Juliana visits her insurance agent, Milan, to analyze her income needs
post retirement. Milan mentions that income tax is a major factor that affects
retirement income and is often overlooked. In order to get a clear
understanding of the income needed post retirement, spending should be
based on:
A major factor that can be easily overlooked when assessing how much
income is needed during retirement is the income tax that will be due on
amounts received. Therefore, spending should be based on net income, that
is the income remaining after tax.
103. Nasir is a life agent who recently sold segregated funds to several
clients. He is a successful agent and many of his clients are repeating
customers. Which of the following practices of Nasir is likely to have enabled
him succeed?
Keeping the lines of communication open between client and agent reinforces
the agent’s value to the client and can help to pave the way for additional
business or recommendations. The other options are unlikely to help him
succeed as an agent.
104. Vanessa received a bonus payment of $10,000 from her employer. She
is planning to retire in 5 years and wants to invest the bonus amount now to
use it after retirement. Assuming an interest rate of 4%, how much will
Vanessa have at the end of 5 years?
Vanessa will have $12,166.53 available for her retirement needs in 5 years if
she invests $10,000 today at 4% interest.
Calculated as: FV = $10,000 × (1 + 0.04)5 = $12,166.53
105. Zachary approaches an agent to open a segregated funds account.
Zachary provides a driver’s license for photo identification upon the agent’s
request. The agent notices that the photo of the person in the driver’s license
in not Zachary. In this case, how should the agent proceed with the
application process?
The agent should complete a form for third party determination. The agent
must be completely confident that the person appearing in the identification
papers is the same person making the application. If there is any suspicion
that the applicant is acting for a third party, then a form for third party
determination must be completed. Without reasonable grounds, the agent
need not report this transaction to FINTRAC with a simple suspicion. Not
everyone acting on behalf of a third party has a power of attorney document.
A police clearance certificate is not required to represent a third party.
106. Lena, age 32, is a young professional. She earns $95,000 a year, has
no dependents, and owns a condo with no mortgage. She is a conservative
investor and is interested in purchasing a segregated bond fund. She would
like to earn a higher return than that provided by a regular bond fund. What
bond fund would you recommend for her?
Lena can afford to take some risk as she has no dependents, no liabilities,
and a fairly high income. A high-yield bond, also known as junk bond, carries
more risk than a regular bond fund, but may also provide a higher return.
107. Tony is in a tight financial situation: his business is not earning any
income and he had to lay off his employees. The creditors of his sole
proprietorship are threatening him with legal action if he does not pay them
soon. Tony is considering declaring bankruptcy.

Which of the following assets is MOST likely to be seized by a bankruptcy

trustee to pay Tony’s creditors?
Registered Retirement Savings Plan (RRSP) accounts and segregated funds
with a properly named beneficiary are protected from seizure in the event of
a bankruptcy. The only account that does not fall into these categories is the
non-registered account holding a mutual fund. This account can be seized if
Tony files for bankruptcy.
108. Kenn is a newly hired employee of a large manufacturing firm. He
learns that, upon completing probation, he will be automatically covered
under a group plan. The plan does not allow employee contributions and only
the sponsor can make contributions. Which of the following plans is Kenn
most likely covered under?
Kenn is most likely covered under a deferred profit sharing plan (DPSP). When
the sponsor alone contributes to a plan, the plan is non-contributory. A DPSP
is non-contributory.
109. Lena wishes to purchase a segregated fund that invests in Canadian
equities. Her advisor, Manish, suggests the S&P/TSX Composite Index Fund,
which invests in the same securities in the same weight as the index. Lena
thinks this is a good idea because it means that the investment would be
risk-free as it would just mirror the index. She believes that her return would
be identical to the index. What should Manish explain to her?
An index fund is a mirror of an index, such as the S&P/TSX Composite Index,
that invests in the same stocks that are listed on the index. Therefore, if the
index rises, the index fund will also rise. Its results will be slightly less than
 that of the actual index because of the fees that are charged to the fund. This
form of investing is known as passive investing because the investment
manager mimics the index chosen for a particular fund and maintains the
same securities in the same weight. Lena’s return would be slightly lower
than the return of the index. The make up of the S&P/TSX Composite Index is
public knowledge.
110. Hansa works with a life agent, Max, and successfully completes a
segregated funds contract application. She receives her contract and an
electronic confirmation. What is Max expected to do after contract
confirmation?
Sales activity for a segregated fund contract does not end with the
confirmation of purchase. A wise agent recognizes the confirmation as just
one step along the path of providing exemplary customer service. The agent
should follow-up with the client once the sales process is completed to see
whether he is satisfied with the product and to answer any questions that
may have arisen.
111. Yvette, aged 56, just retired after working for 30 years as a school
teacher. The retirement pension that she receives, which is indexed to
inflation, is sufficient to cover her fixed expenses. She will also receive CPP
and OAS benefits when she reaches the qualifying age. Over the years,
Yvette has accumulated savings that she wishes to use for discretionary
expenses. She wants to receive monthly payments now to complement her
employer pension and is also interested in potentially increasing the amount
of payments. Since these payments will be used to cover discretionary
expenses, she is not worried about the possibility of receiving lower
payments from time to time. She also prefers a low-cost option.
As the name suggests, a variable income annuity will have payments
that can increase with rising markets and decrease with a declining
market. Since Yvette is starting retirement, her fixed expenses are
covered by her employer pension. Later, she will be receiving CPP and
OAS benefits that, like her pension, will be indexed to inflation, thus
covering the cost of living increases that will apply to her fixed
expenses. Therefore, she is in a position where she can take some risk
with her personal savings to cover her discretionary expenses. Add to
that her interest in potentially increasing the payments, the variable
income annuity would be the best fit for Yvette.
Yvette prefers a low-cost option, so the indexed annuity would not be
the best option because there is a significant price premium for the
indexing feature.
112. Gianni has a diversified portfolio of bonds. He is risk-averse and his
primary objective is to manage the risk of his bond portfolio. How will Gianni
be apprised of any risks associated with his bonds?
Credit rating, coupon rate, term-to-maturity, and the issuer are reflective of
risk and are used to build a diversified portfolio. However, investors are
apprised of their risk by the credit rating given by bond rating agencies.
113. Aisha is 59 years old and is planning to retire next year. She has some
money set aside in her bank account for her grandson’s higher education in
five years. She has not invested before and wishes to invest this amount so
that any profit can be used for her grandson’s other expenses. Her agent
 recommends a guaranteed investment. All of the following is a reason behind
the agent’s recommendation, EXCEPT:
Guaranteed investments are safe investments. They have less risk than
investments that do not provide a guarantee. They appeal to investors who
are not risk takers. For the most part, their returns are lower than
investments that are not guaranteed.
114. Mohini, aged 72, has a current tax rate of 52% and his wife Minander,
aged 60, has a current tax rate of 30%. Minander does not have a job, but
Mohini has been making spousal RRSP contributions in her name for many
years. Mohini and Minander are meeting with you, their financial advisor, to
discuss their retirement savings and strategy. Mohini would like to continue to
save $30,000 per year in the most tax-effective way. Neither Mohini nor
Minander have any room left in their tax-free savings accounts (TFSAs), but
they have not made any other contributions this year. The RRSP limit for this
year is $27,230. How would you advise them to invest?
Mohini has passed the age of 71, so he can no longer make contributions into
his RRSP; However, he can still make contributions into a spousal RRSP in
Minander's name because his spouse is only 60 years old. Since the RRSP
contribution limit for this year is $27,230, they should make the maximum
deposit allowed into Minander's RRSP. Since their TFSAs are maxed out, it is
an appropriate recommendation to deposit the remaining $2,770 into a non-
registered savings account.
115. Sally has the following assets:
 House: $350,000
 Defined Contribution Pension Plan (DCPP) in a variety of funds:
$200,000
 Balanced segregated fund in a Registered Retirement Savings Plan
(RRSP): $60,000
 Non-redeemable 5-year insurance Guaranteed Investment Certificate
(GIC): $40,000
 Balanced segregated fund in a Registered Education Savings Plan
(RESP): $35,000

Which need is NOT fulfilled by Sally’s assets?

Money for an emergency fund should be liquid with very low volatility and should
not be in an investment vehicle that has tax consequences upon withdrawal.
Sally’s assets do not meet these criteria. The pension plan is locked in, and like
the RRSP, would have tax consequences if the money were withdrawn. An RESP
is specifically meant for post-secondary education. While the value of Sally’s
house and GIC has low volatility, neither asset is liquid.
116. Joy and Adam are a couple and both have invested in segregated
funds. Joy has invested in a group segregated fund contract, whereas
Adam has invested in an individual segregated fund contract. Which of
the following is an advantage that Joy has over Adam’s segregated
fund investment?
 a) Joy will pay a lower management expense ratio (MER) under the
group contract compared to the MER paid by Adam under the
individual contract.
b) Joy’s plan offers 100% maturity and death benefit guarantees at no
additional costs, whereas Adam’s plan offers such guarantees for
additional costs.
c) Joy’s plan resets automatically when the market value improves,
whereas Adam’s plan requires him to submit a request for reset.
d) Joy’s plan offers group plan special rates, whereas Adam’s plan does
not offer such special rates.
The MER on group-provided segregated funds is generally lower than the MER
paid by individual investors. This is due to the primary disadvantage of group
segregated funds; they do not offer a maturity or death benefit guarantee nor
group plan special rates.
117. Joshni and her spouse, Richard, are looking to do some tax-effective
retirement planning. Joshni is the primary income earner in their household.
This year, to-date, Joshni and Richard have respectively $18,000 and $15,000
left in their contribution room for registered retirement savings plan (RRSP).
Their financial advisor suggests that Joshni move income from herself, over to
her husband, to fund a spousal RRSP and to fund hers with any excess. Joshni
choses to contribute $12,000 into a spousal RRSP for Richard. How much
contribution room remains in Joshni’s RRSP afterwards?
Contributions to a spousal RRSP are based on the contribution room of the
contributor, so when Joshni deposited $12,000 into Richard's RRSP, she
reduced her $18,000 limit for her own RRSP by that amount. This leaves her
with $6,000 of contribution room.
118. Antoinette has just completed the documentation for a new segregated
fund contract and is preparing to send the package to the client. What can
Antoinette do to ensure proof of the delivery?
The contract must be delivered to the investor in person or through
registered mail for the purchase to be completed and the contract issued. It
includes other specified documents like the information folder, Fund Facts,
and contract confirmation. If a delivery receipt is part of the package of
documents, it must be completed, signed, and witnessed before it is returned
to the issuing insurer. Antoinette can include a delivery receipt that will be
completed, signed, and witnessed before it is returned to the issuing insurer.
119. Zoe is planning to invest $100,000 in segregated funds and has
some doubts regarding thier taxation. As per her agent’s
recommendation, she consults a tax professional, Aaron, for
clarifications. Which of the following information provided by Aaron is
true?

a) Premiums paid into certain registered account for a segregated fund

purchase are tax-deductible.
b) Premiums paid into a non-registered account for a segregated fund
purchase are tax-deductible.
 c) Taxation is similar for registered and non-registered accounts for
withdrawals and the guarantees.
d) In the case of funds held in RRSP, no tax is declared or paid when a
withdrawal is made.
Deposits or premiums paid into a non-registered account or a TFSA for a
segregated fund purchase are not tax-deductible. However, they are tax-
deductible when paid into a registered account, such as an RRSP or RRIF
however not an RESP or RDSP. Taxation differs significantly between the two
accounts both for withdrawals and guarantees. The TFSA is an exception in
that no tax is declared or paid when a withdrawal is made.
120. Joseph, age 60 and his spouse, Emily, age 57 are meeting with
their financial advisor to get a better idea of their savings and the
amount of income they might be able to expect in retirement. They
plan to retire in ten years, but the rates are competitive now. Both
Emily and Joseph agree that having some guaranteed income to
depend on for their lifetime would make them feel more comfortable.
Emily is a spendthrift, so they would like any annuity income to
continue if Joseph predeceases her. What is the most appropriate type
of annuity to recommend for Joseph and Emily if they allocate
$1,000,000 toward the purchase on an annuity?

a) $1,000,000 deferred joint and last life annuity

b) Two separate $500,000 immediate single life annuities
c) $1,000,000 immediate joint life annuity
d) $1,000,000 deferred term certain joint annuity
Joseph and Emily are going to retire in ten years and want income for life
during their retirement, so they should purchase a deferred life annuity
product. They want an annuity that will continue to pay out after the death of
the first co-annuitant, which is most likely to be Joseph, so the joint and last
annuity is an appropriate recommendation. Considering these factors, a
deferred joint and last life annuity is the best option for Emily and Joseph. An
immediate joint annuity would start distributing income now, which is not
ideal, so it should not be considered. A term certain joint annuity would
neither give income for both of their lives nor for life.
121. Rob and Jessie are newly married. They live in a rented
basement. They intend to buy a home in four years when they have
saved enough to make a down payment. Rob and Jessie do not plan to
have any children. They would like to buy a vacation property in
Florida when they are in their early 50s. The couple plans to retire at
age 65 and would like their funds to last them until the younger of
them is 90 years old.

How many time horizons do Rob and Jessie need to include in their
plans?
a) Four time horizons
b) Six time horizons
 c) Two time horizons
d) Five time horizons
The four-time horizons are:
1. Save for the down payment of their home
2. Save to buy the vacation property in Florida
3. Save for retirement when they turn 65
4. After retirement at age 65, plan their lives until the younger partner turns
90
122. Lea is young, single, and recently employed. She does not have
many expenses and hence decides to open a savings account where
she can easily deposit and withdraw cash. Which of the following is a
disadvantage of a savings account that she should be aware of?

a) The interest earned in a savings account is taxed at the highest rate

charged to investments.
b) There is often a minimum amount that should be maintained to
keep a savings account open.
c) The savings account is not suitable for accumulating funds in small
increments.
d) The funds accumulated in a savings account cannot be redirected
into other investments.
The interest earned in a savings account is taxed at the highest rate charged
to investments. This is a disadvantage compared to investments that earn
dividends or receive a capital gain/loss. However, the savings account is a
valuable short-term vehicle in which to build savings in even small
increments. Those savings can then be redirected into other investments.
There is often no minimum amount needed to open an account or keep one
open.
123. Kiran invests $50,000 in a segregated fund contract. Ten years
later, she receives $90,000 at contract maturity. What is the rate of
return of her investment?

a) 80%
b) 40%
c) 60%
d) 70%
Kiran invests $50,000, but receives $90,000 at contract maturity. The
$40,000 profit ($90,000 – $50,000) is an 80% rate of return ($40,000 ÷
$50,000). The return is often expressed as a percentage of the amount
invested. In those cases, it is called “rate of return.” It can be a positive
number, such as 10%, or a negative number, such as –10%.
124. Dorothy and Louise were joint annuitants on a last survivor, death of
second annuitant, no guarantee period, $1,000,000 annuity. Louise passed
 away, five years before Dorothy. Upon the death of Dorothy, only $900,000
was paid out in annuity payments. Who is the appropriate claimant for the
balance?
An annuity contract with no guarantee period does not qualify for a claim.
125. Niran is planning to invest in segregated funds but is unsure
whether to invest in a non-registered or a registered account. He
approaches an agent to understand the difference between the two
forms of accounts. Which of the following explanations is the agent
likely to provide Niran?
Unlike registered accounts:

a) non-registered accounts can be used as collateral for securing a loan.

b) there are certain age restrictions for opening a non-registered account.
c) non-registered accounts are categorized as locked-in and non-locked-in.
d) ownership of the contract cannot be transferred in non-registered
accounts.
Unlike registered accounts, non-registered accounts can be used as collateral
for securing a loan. There are no age restrictions for opening a non-registered
account. Registered accounts are categorized as locked-in and non-locked-in.
Ownership of the contract can be transferred in non-registered accounts.
126. Following is a list of investors who invested in segregated funds
with 75% guarantees. Who is most likely to benefit from the downside
protection offered by the investment?

a) Austin, who invested $15,000 ten years ago and the value of his
contract at maturity now is $9,000.
b) Betty, who invested $20,000 five years ago and the value of her
contract at surrender now is $14,000.
c) Mia, who invested $15,000 ten years ago and the value of her
contract at maturity now is $25,000.
d) Zion, who invested $10,000 seven years ago and the value of his
contract at surrender now is $15,000.
Austin, who invested $15,000 ten years ago, is most likely to benefit from the
downside protection as the value of his contract now has reduced to $9,000
at maturity. The maturity guarantee applies and he will receive $11,250. The
maturity guarantee does not apply to Betty and Zion because they are
surrendering their contracts before maturity. Mia is unlikely to benefit from
the downside protection because the value of her contract is more than the
maturity guarantee. She is most likely to benefit from the unlimited upside
potential.
The maturity guarantee gives the policy owner the peace of mind of knowing
that, no matter how the fund performs, the sum he will receive at maturity
will be at least 75% of the amount he invested. This provides what is known
as downside protection. It limits investment risk by establishing a minimum
contract value payable at maturity.