Question 1

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

Accepted Answer

Number of units through cancellation of units

Answer

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

Answer

Number of units or fixed monetary amount through cancellation of units

Answer

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

Question 2

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

Accepted Answer

Policyholders can take loans against their variable life up to the entire withdrawal value of their policy

Answer

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

Answer

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

Answer

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

Question 3

The investment returns under variable life insurance policy _______________

I. Are not guaranteed

II. Are assured

III. Are linked to the performance to of the investment fund managed by the life insurance company

IV. Fluctuate according to the rise and fall of market prices

Accepted Answer

I, III and IV

Answer

I, II and IV

Answer

II, III and IV

Answer

I, II and III

Question 4

Which of the following statements is TRUE?

I. The policy value of variable life policies is determined by the offer price at the time of valuation

II. The policy value of endowment policies is the cash value plus any accumulated dividends less any outstanding loans due at the time of the surrender

III. The life company needs to maintain a separate account for variable life policies distinct from the general account

Accepted Answer

II & III

Answer

I & II

Answer

I & III

Answer

I, II & III

Question 5

Which of the following statements is FALSE?

Accepted Answer

Misrepresentation is a specific form of twisting

Answer

Rebating is to offer a prospect a special inducement to purchase a policy

Answer

Twisting is a specific form of misrepresentation

Answer

Switching is a facility allowing the policyholders to switch to another variable life funds offered by the company

Question 6

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

I. Offer price is used to determine the number of units to be credited to the account

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

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

Accepted Answer

II & III

Answer

I, II & III

Answer

I & II

Answer

I & III

Question 7

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

Accepted Answer

Fixed income securities

Answer

Variable life policies

Answer

Equities

Answer

Warrants

Question 8

What are the disadvantages of investing in common shares?

I. Dividends are paid more than fixed rates

II. Investors are exposed to market and specific risks

III. Shares can become worthless if company becomes insolvent

Accepted Answer

II & III

Answer

I & II

Answer

I, II & III

Answer

I& III

Question 9

Which of the following statements about the difference between variable life policies and endowment policiesare FALSE?

I. The policy values of variable life policies directly reflect the performance of the fund of the life company

II. The premiums and benefits of the endowment policies are described at the inception of the policy whereas variable life are flexible as the are account driven

III. The benefits and risks of variable life and endowment policies directly accrue to the policyholders

Accepted Answer

II & III

Answer

I & II

Answer

I & III

Answer

I, II & III

Question 10

Which of the following statements about twisting is FALSE?

Accepted Answer

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

Answer

Twisting is a special form of misrepresentation

Answer

It includes misleading or incomplete comparison of policies

Answer

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

Question 11

Mr. Juan dela Cruz is currently earning Php 30,000.00 per month. He is 35 years old and he has a reasonable amount of savings. He has a moderate level of risk tolerance. What kind of policy would you recommend for him to buy?

Accepted Answer

Participating whole life

Answer

Variable life policies

Answer

Annuities

Answer

Participating Endowment

Question 12

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

I. The variable life funds offer policyholders an access to pooled or diversified portfolios

II. The variable life policyholders can vary his premium payments, take premium holidays, add single premium top – ups and change the level of the sum assured easily

III. The variable life policyholder can have access to a pool of qualified and trained professional fundmanagers

Accepted Answer

I & II

Answer

II & III

Answer

I & III

Answer

I, II & III

Question 13

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

I. Short term securities

II. Property

III. Cash

IV. Equities

Accepted Answer

II, IV, I, III

Answer

II, I, IV, III

Answer

IV, II, III, I

Answer

III, I, IV, II

Question 14

A unit trust is

Accepted Answer

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

Answer

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

Answer

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

Answer

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

Question 15

Under variable life insurance policies ______________________

I. There is no guaranteed minimum sum assured for the purpose of declaring dividends

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

III. Each of the policy owner’s premium will be used to purchase units the number of which is dependent on the selling price of each unit

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

Accepted Answer

III & IV

Answer

II &III

Answer

I & IV

Answer

II & IV

Question 16

The benefits of investing in variable life funds include ___________________

I. Policy owners have access to pooled or diversified portfolios of investment

II. Policy owners can easily change the level of the premium payments as the product design of variable life policies have clear structures which cater separately for investment and insurance protection

III. Policy owners can gain access to variable life funds managed by professional investment managers with proven track records

IV. Policy owners can buy a variable life insurance policy only with a high initial investment

Accepted Answer

I, II & III

Answer

I&#44; II & IV

Answer

I, III, & IV

Question 17

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

Accepted Answer

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

Answer

The policy benefits are payable only on death or disability

Answer

The policy benefits will depend on the long – term performance of the life company

Answer

The policy benefits are guaranteed

Question 18

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

Accepted Answer

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

Answer

Because the policyholder expects higher returns

Answer

Because the insurer does not guarantee any return

Answer

Because the agent may give the wrong recommendations

Question 19

Which of the following statements about rebating are TRUE?

I. Rebating is prohibited under the Insurance Code

II. Rebating deals with offering the prospect a special inducement to purchase a policy

III. Rebating will enhance the sales performance and uphold the prestige of an agent.

Accepted Answer

I & II

Answer

II & III

Answer

I & III

Question 20

Which one of the following statements is FALSE?

Accepted Answer

Variable life insurance policies offer investors policies with values andindirectly linked to the investment performance of the life company

Answer

Life company will carry out a valuation of its funds yearly and any surplus may be allocated to participating policyholder as cash dividends

Answer

The investment element of Variable life policies varies according to underlying assets of the portfolio

Answer

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

Question 21

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

Accepted Answer

Policy owners may buy additional units of the variable life fund and these units will be allocated to new variable life insurance policies

Answer

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

Answer

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

Answer

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

Question 22

The characteristics of a variable life insurance include ________________:

I. Its withdrawal value and protection benefits are determined by the investment performance of the underlying assets.

II. Its protection costs are generally met by implicit charges

III. Its commission and company expenses are met by a variety of explicit charges with normally 6 months notice given by the life companies prior to any change

IV. Its withdrawal v

Accepted Answer

I, III & IV

Answer

I, II & III

Answer

II, III & IV

Answer

I&#44; II & IV

Question 23

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

I. There is no fixed term in a single premium variable life policy and therefore, they are technically whole life insurance

II. Top – ups or single premium injections are allowed in these plans

III. Policyholders have the flexibility of varying the level cover

Accepted Answer

I & II

Answer

II & III

Answer

I & III

Answer

I, II & III

Question 24

Investing in bonds offer the following EXCEPT

Accepted Answer

It enables the investor an opportunity for capital appreciation

Answer

Must be issued with a minimum death benefit

Answer

Must be issued with a maximum withdrawal value

Answer

It allows the investor a chance for capital preservation

Question 25

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

I. The withdrawal value is not guaranteed

II. The volatility of the returns depends on the investment strategy of the fund

III. The variable life policyholder has direct control over the investment decisions of the variable life fund

Accepted Answer

I & II

Answer

I, II & III

Answer

I & III

Answer

II & III

Question 26

Single premium variable life insurance policy:

Accepted Answer

Must be issued with a minimum death benefit

Answer

Has no death benefit

Answer

Must be issued with a maximum withdrawal value

Answer

Has no withdrawal value

Question 27

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

I. Variable policies generally have a longer exposure to equity investment than with participating and other traditional policies

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

III. The commissions and company expenses are met by a variety of explicit charges, some of which are variable

Accepted Answer

I & III

Answer

I & II

Answer

II & III

Answer

I&#44; II III

Question 28

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

Accepted Answer

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

Answer

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

Answer

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

Answer

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

Question 29

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

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

II. Policy owners can easily take premium holidays and add single premium to Top – ups

III . Variable life insurance policies offer the potential for higher returns

IV . Traditional participating policies aim to produce a steady return by smoothing out market fluctuation

Accepted Answer

I, II & III

Answer

I&#44; II & IV

Answer

I, III & IV

Answer

All of the above

Question 30

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

I. Variable life insurance policies are less likely to offer more choices in terms of the type of investment funds

II. The investment elements of variable life insurance policies is made known to the policy owner at the outset and is invested in a separately identifiable fund which is made up of units of investment

III. Variable life insurance policies offer the potential for higher returns

IV. Traditional participating policies aim to produce a steady return by smoothing out market fluctuation

Accepted Answer

II, III, IV

Answer

I&#44; II&#44; III

Answer

I&#44; II & IV

Answer

I, III & IV

Question 31

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

Accepted Answer

For the purpose of financial planning by the policy owners

Answer

For the purpose of sales planning by the fund managers

Answer

For the purpose of profit planning by the life policies

Answer

For the purpose of assets planning by the trustee

Question 32

The following statement about surrender value under traditional participating life insurance products areTRUE?

Accepted Answer

The amount of surrender value is usually higher than the amount under non – participating policies and it varies with the age of the assured, being lower at older ages

Answer

Cash value is paid when yearly renewable term insurance policy is surrendered

Answer

In the case of participating policies, the net cash surrender value includes the surrender value of the paid– up addition up to the date of surrender

Answer

When a participating insurance policy is surrendered, the surrender value is calculated by multiplying the bid price with the number of units

Question 33

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

Accepted Answer

Policy owners who invest in variable life funds with high equity investment face higher risk but can expect to achieve higher return than the traditional life insurance product over the long term

Answer

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

Answer

Policy owners who are risk averse should not purchase life insurance policies with high protectionand guaranteed cash and maturity values

Answer

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

Question 34

What should be the withdrawal values after a year?

Offer Price = Php. 16.00

Bid-Offer Spread = 4.5%

Number of units bought = 25,000

Policy Fee = 1,800

Admin and Mortality Charge = 8,750

Top-up Fee = 700

Admin for Top-up = 2000

Sum assured is 190% of single premium or the value of units, whichever is higher.

ASSUMPTIONS:

1. Charges and fees are deducted after the single premium has been invested into the account.

2. The growth rate of the unit price and bid-offer spread is maintained at 8% and 4.5% respectively.

Accepted Answer

Php. 401,107.58

Answer

Php. 412,500.00

Answer

Php. 432,000.00

Answer

Php. 420,069.20

Question 35

The protection cost under a variable life insurance policy ___________________.

I. Are met by flat initial charges for regular premium plans

II. Are generally covered by cancellation of units in the fund

III. Are generally met by explicit charges stipulated openly in the policy terms

IV. Vary with age of policy owner and level of cover

Accepted Answer

II, III, & IV

Answer

I, II, & IV

Answer

I, III & IV

Answer

I, II, & III

Question 36

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

Accepted Answer

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

Answer

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

Answer

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

Answer

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

Question 37

What are the advantages of investing in preferred shares?

I. It gives shareholders the right to a fixed dividend

II. Has the priority over company assets during a dissolution

III. They enjoy benefit of capital appreciation

Accepted Answer

I, II, & III

Answer

I & II

Answer

II & III

Answer

I & III

Question 38

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

I. Are not directly linked to the company’s investment performance

II. Have already been smoothened by the life company

III. Do not have the highs and lows of investment return as in good investments years of life company

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

Accepted Answer

II, III, & IV

Answer

I, III, & IV

Answer

I, II, & III

Answer

I&#44; II & IV

Question 39

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

I. The giving of freebies to the customers

II. Extensive investment training by the company

III. The use of sales plan, where sales goals, strategies, and objectives are coordinated with the market analysis, segmentation and training

IV. The giving of monetary assistance and discount to the customers

Accepted Answer

II&#44; & III

Answer

II, III, & IV

Answer

I & III

Answer

II&#44; & IV

Question 40

Which of the statements is true about CASH?

Accepted Answer

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

Answer

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

Answer

It has a high yield potential

Answer

Investment in cash decrease when interest rates rise

Question 41

Under a regular premium variable whole life plan _______________________

I. Premium top-ups and holidays, subject to the company’s administrative rules are usuallyallowed

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

III. Withdrawals after the payment of a few years premium are usually allowed

IV. A single premium contribution is made to the policy which uses the premium to purchase units in a variable life fund to provide a certain level of life cover

Accepted Answer

I, II, & III

Answer

II, III & IV

Answer

I, III & IV

Answer

I, II, & IV

Question 42

Which of the following statements about investment objectives is false?

Accepted Answer

People invest money in fixed deposits to produce high and guaranteed returns

Answer

Investment in commodities has no regular income

Answer

People invest money to provide funds for higher education for their children

Answer

People invest money to enhance a comfortable standard of living

Question 43

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

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

II. The withdrawal values and protection benefits are determined by the investment

III. The net cash values of the policies are the gross cash values shown in the policy that includes dividends up to the date of surrender less and indebtedness including interest

Accepted Answer

I&#44; & II

Answer

II

Answer

I, II, & III

Answer

I

Question 44

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

I. The risk of not losing some or all of the person’s initial investment

II. The risk of rate of return on the investment not matching up to the individual’s expectation

III. The risk of rate of return on the investment matching up to the individual’s expectation

IV. The risk of losing some or all of a person’s initial investment

Accepted Answer

II & IV

Answer

I & III

Answer

III & IV

Answer

I & II

Question 45

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

Accepted Answer

Managing the portfolio of investment and administering the buying and selling of shares in the unit trust itself

Answer

Ensuring that the fund manager adhere to the provision of the trust deeds

Answer

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

Answer

Acting generally to protect the unit-holders

Question 46

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

Accepted Answer

The administrative expenses of setting up the variable life insurance policy

Answer

The handling charges by professional investment managers

Answer

The price of each unit bought under the variable life insurance policy

Answer

The mortality costs of the variable life insurance policy

Question 47

The selling price under a variable life insurance policy is:

Accepted Answer

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

Answer

A fixed amount throughout the life of the policy

Answer

Also known as the bid price

Answer

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

Question 48

Diversification in investment involves___________________:

Accepted Answer

Reducing the risks of investment by putting one fund under management into several categories of investment

Answer

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

Answer

Putting all the funds under management into one category of investment

Answer

Spreading the risk of investment by not putting the fund into several categories of investment

Question 49

Variable life funds can be invested in any financial instruments including cash funds, bond funds, equityfunds, property funds, specialized funds, and diversified funds. Equity funds______:

Accepted Answer

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

Answer

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

Answer

Invest in shares of stocks and during market recession, such as assets are usually the last to depreciate

Answer

Invest in shares of stocks and the magnitude of the change in unit prices will only depend on thequantity of the equities held

Question 50

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

I. Variable life products allow policyholders to vary the premium payments unlikeparticipating products.

II. Variable life products can take the form of whole life or endowment policies with Participating products.

III. Variable life products allow policyholders to pay future single premiums from timeto time to add more units to his account unlike participating products

Accepted Answer

I, II, and III

Answer

I

Answer

II and III

Answer

I and III

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