Part 4 Flashcards
(35 cards)
Judith has invested in an RRSP for many years. When she retired at 65, she converted her RRSP to a life annuity with a 20-year guarantee period and designated her daughter Melanie as beneficiary. Judith died recently at age 86. Melanie now contacts a life insurance agent in order to claim the amounts owed to her under Judith’s annuity. What should the agent tell Melanie about her claim?
A. Melanie can collect a monthly annuity payment for 20 years
B. Melanie can collect a monthly annuity payment until she turns 65
C. Melanie can collect the residual value of the annuity in a lump-sum payment
D. Melanie cannot make a claim.
D. Melanie cannot make a claim.
Tatiana works for a company that offers a DCPP. Contributions are made to group segregated funds. Tatiana’s nephew has started his own business and Tatiana has guaranteed his business loans up to $50,000. What are the two key benefits to Tatiana of contributing to this DCPP?
A. Maturity and death benefit guarantee
B. Maturity guarantee and lower MERs than individual segregated funds
C. Death benefit guarantee and creditor protection.
D. Creditor protection and lower MERs than individual segregated funds
D. Creditor protection and lower MERs than individual segregated funds
Insurance agent Denis has just completed an in-depth analysis of his client Michel’s situation. They agree that an investment in a segregated fund would meet Michel’s savings needs. Michel signed the application form completed by Denis and gave him a cheque for the deposit. Denis then handed Michel the Fund Facts and information folder. Denis sent the application along with the cheque to the insurer. What can be concluded about Denis obligations during the sales process?
A. Denis fulfilled his obligations, because he sent the application and cheque to the insurer
B. Denis fulfilled his obligations, because he handed Michel the information folder and Fund Facts.
C. Denis did not fulfill his obligations, because he should have asked Michel to confirm in writing that he received the information folder and Fund Facts.
D. Denis did not fulfill his obligations, because he should have reviewed the information folder and Fund Facts with Michel before he signed the application form
B. Denis fulfilled his obligations, because he handed Michel the information folder and Fund Facts.
Life insurance agent Simon meets with Catherine, a long-standing client. She wants to change the beneficiary on the $100,000 annuity contract she purchased from him. Simon prepares and has Catherine sign the proper form for this. Which of the following requirements must Simon meet to complete the change of beneficiary?
A. Confirm whether Catherine is a politically exposed foreign person.
B. Confirm Catherines identity using a document with a unique identifier number.
C. Provide Catherine with the Fund Facts.
D. Send the form to the insurer immediately.
D. Send the form to the insurer immediately.
Julie is a stay-at-home single parent with an eight-year-old son, Justin, who has severe intellectual disabilities. Julie’s mother, Lucille, who died recently, used to help Julie financially, especially for Justin’s special needs. She wanted this assistance to continue after her death. To this end, she designated Justin as beneficiary of her RRSP now worth about $100,000. Julie would like this amount to be transferred to a
plan that would eventually provide Justin with an annual income, which she would administer. She would like a plan that is eligible for government grants. To which plan should Julie transfer the funds?
A. A GRRSP.
B. An RESP.
C. An RDSP.
D. A TFSA.
C. An RDSP.
A company’s management team wants to establish a new group plan to ensure employee retention. To better identify the employees’ needs, management has sent them a survey describing various types of plans and asking them to mark their preference. Paul, one of the employees, needs cash and would like to be able to withdraw funds from the plan in the short term. Which one of the following should Paul mark as his preferred group plan?
A. AGRRSP.
B. A group TFSA.
C. A DPSP.
D. A PRPP.
B. A group TFSA.
Philip is applying for a segregated fund contract. He wonders what fees he will have to pay. He does not foresee the need to make a withdrawal during the term of the contract since he has other, more liquid, investments. He also wants to see his money go to work for him immediately without reductions or penalties. Which type of fees would Philip be charged?
A. Management expense.
B. Deposit tax.
C. Surrender fees
D. Penaltie
A. Management expense.
Claude, 62, is in excellent health and plans to retire in a year. A widower, he has one daughter, Roxanne, and two grandchildren, Eliot and Simon. Claude plans to leave his home and most of his assets to Roxanne but would also like to leave $100,000 to each grandchild. He currently has $300,000 in savings and investments. However, Claude is worried that if he sets aside the $200,000 to guarantee his grandchildren’s inheritance, he will have to considerably lower his standard of living. He is looking for a solution that will allow him to take full advantage of his savings and at the same time ensure that he can leave the desired amount to his grandchildren. He asks his life insurance agent for advice. What strategy could Claude’s agent suggest?
A. Purchase $200,000 of Term-20 life insurance on his own life and use part of the benefits from a 20-year term certain annuity to pay the premiums.
B. Purchase $200,000 of Term-100 life insurance on his own life and use part of the befits from a life
annuity to pay the premiums.
C. Purchase $200,000 of Term-20 life insurance on his own life and use part of the benefits from a
life annuity with a 20-year guarantee period to pay the premiums
D. Purchase $200,000 of Term-100 life insurance on his own life and use part of the benefits from an accumulation annuity to pay the premium
D. Purchase $200,000 of Term-100 life insurance on his own life and use part of the benefits from an accumulation annuity to pay the premium
Annie is the shareholder-manager of a very profitable company. She wants to set up a pension plan for its 208 employees. Those employees put in a lot of hours at work, have little investment knowledge, and wish to spend as little time as possible in taking care of their retirement savings. Furthermore, Annie has
faith in the company’s ability to finance any unexpected shortfall that arises with the new plan. Which pension plan, from among the following, could be most suitable in this situation?
A. GRRSP.
B. DPSP.
C. DBPP.
D. DCPP.
A. GRRSP.
Gabrielle was killed in a road accident. She was a single mother with a four-year-old son, William. In her will, Gabrielle named her sister executor of her estate and guardian of her son William, who is the sole heir. Gabrielle had also named William as beneficiary of her RRSP. Gabrielle’s financial situation at the time of her death was as follows:
• Assets
o House: $350,000
o Vehicle: $25,000
o RRSP: $45,000
o TFSA: $10,000
o Chequing account: $12,000 o Life insurance: $250,000
• Liabilities
o Residential mortgage (100% insured): $180,000 o Credit cards: $800
o Car loan: $10,000
Which of these assets should be transferred to a term annuity-to-age-18?
A. The life insurance benefit
B. The chequing account.
C. The TFSA.
D. The RRSP.
D. The RRSP.
Vitaly inherited $300,000. His family lawyer refers him to an insurance agent. Vitaly is in excellent health and longevity runs in his family. He requires annual income, but he has no interest in learning about
investing. He agrees with the insurance agent’s recommendation that he buy an annuity. What type of annuity contract would be suitable for Vitaly?
A. An impaired annuity.
B. A prescribed annuity.
C. An accumulation annuity.
D. An accrual annuity.
B. A prescribed annuity.
Mel is considering a segregated fund portfolio as opposed to a stock portfolio or mutual funds primarily because of the potential benefits of creditor protection. He is an active trader who is willing to take risks and plans to withdraw his profits from time to time. He asks his insurance agent, Tamara, if she has any comments about his strategy.
What should Tamara tell him?
A. Transfer from one segregated fund to another can change the policy’s guarantee
B. The first 10% of withdrawals from an IVIC will not reduce the maturity guarantee
C. Switches within an IVIC can trigger a tax liability. D. Active trading may nullify creditor protection
A. Transfer from one segregated fund to another can change the policy’s guarantee
All her life, Jill has accumulated stocks, bonds and guaranteed investment certificates. Now, one year from retirement, she would like a portfolio that is easier to manage. She would like to have a single product (preferably a segregated fund, for the peace of mind provided by the maturity and death benefit guarantees) that would reflect the widest possible range of investment categories. Which one of the following segregated funds would suit Jill?
A. A growth fund.
B. An industry-specific fund.
C. An index fund.
D. A fund of funds.
C. An index fund.
Upon her husband’s death, Jeanne takes out a term annuity to age 90, providing her with a monthly income of $1.000. She has also inherited a four-unit rental building with an annual net rental income of $1,500. Jeanne lives in one of these units. The building cost $150,000 to buy and its current value is $300,000. She has no other investments and receives a surviving spouse’s pension. What is Jeanne’s biggest financial risk?
A. Liquidity risk.
B. Market risk.
C. Credit risk.
D. Industry risk
A. Liquidity risk.
Life insurance agent Nestor meets with Alice, a new client, to review her investor profile. One of the key elements identified during the meeting is that Alice has a very high income year after year. Taking this into account, which one of the following investment characteristics should Nestor prioritise for Alice’s savings?
A. Lower risk investments.
B. Investments with higher return potential
C. Tax-advantaged investments.
D. Investments that provide creditor protection.
C. Tax-advantaged investments.
Denis is saving to buy a car in three years. He considers himself a cautious investor and is proud of the total amount saved to date despite his modest income What kind of investment, from among the following, could be suitable for him?
A. Guaranteed investment certificates.
B. Stocks
C. Mutual funds.
D. Exchange-traded funds
A. Guaranteed investment certificates.
Mira has an investment portfolio which consists of Government of Canada bonds with maturities of 3 to 10 years. What risks should Mira be concerned about?
A. Liquidity risk and inflation risk.
B. Interest rate risk and inflation risk
C. Industry risk and interest rate risk.
D. Industry risk and liquidity risk.
A. Liquidity risk and inflation risk.
Mira has an investment portfolio which consists of Government of Canada bonds with maturities of 3 to 10 years. What risks should Mira be concerned about?
A. Liquidity risk and inflation risk.
B. Interest rate risk and inflation risk
C. Industry risk and interest rate risk.
D. Industry risk and liquidity risk.
A. Liquidity risk and inflation risk
Renaud has had an RRSP ever since he entered the job market. He has always contributed large amounts to it, without ever reaching his annual contribution limit. Now with two young children, his primary
goal is to cover the cost of their university education in the future. Given this new goal, which type of account would be best for Renaud to add to his investment portfolio?
A. An RESP.
B. An RDSP
C. ATFSA.
D. None, because an RRSP is the appropriate savings vehicle.
A. An RESP.
Arthur’s assets include his home with a market value of $744,000, savings worth $41,000, and a whole life insurance policy with a death benefit of $300,000 and cash value of $196,000. His liabilities include a reverse mortgage of $150,000 and $2,090 income tax owing from the previous year when he sold some investments. What is Arthur’s net worth?
A. $1,082,910
B. $932,910
C. $828,910
D. $678,910
C. $828,910
Marie Claude, age 50, would like to retire at 60 but is not sure whether it will be feasible. She is divorced with two daughters aged 20 and 22. She has been contributing to a defined contribution pension plan (DCPP through her employer for 25 years. When she watches the news, she worries about the unstable political climate and the impact it could have on her financial situation. Her financial situation is as follows:
• Annual employment income: $70,000 Assets:
• Condo: $225,000
• Vehicle: $17,000
• DCPP, consisting of the following: $190,000
o Fixed-rate GIC (maturing in 3 years): $40,000
o Fixed-rate GIC (maturing in 5 years): $50,000
o Index-linked GIC (maturing in 6 months): $70,000 o Balanced mutual funds: $30,000
• RRSP (Canadian bond segregated fund): $50,000
• Cash: $1,000 Liabilities
• Mortgage: $60,000
• Lines of credit: $1,500
• Credit cards: $300
• Car loan: $10,000
Based on this information, what can be said about Marie-Claude?
A. She will know the income from her DCPP in advance.
B. She has a high-risk tolerance.
C. Her investment allocation is not consistent with her investor profile.
D. She has a low risk tolerance.
D. She has a low risk tolerance.
Jacinthe meets her new insurance agent, Pierre, for the first time. She hands him the information he requested on her self-directed RSP so he can study her current financial situation and make recommendations based on her stated goals. Which of the following should Pierre use to evaluate Jacinthe’s investment knowledge and experience before making a recommendation?
A. Her RRSP statements.
B. The pension plan statement from her employe
C. Her RRSP contribution amounts,
D. Her RRSP withdrawals for the year.
A. Her RRSP statements.
Manon has worked for the same employer for 35 years. She has had a GRRSP all this time. Now at the age of 65, Manon is taking a well-deserved retirement. She will need money from her GRRSP to maintain her lifestyle; however, if possible, she would like to continue benefiting from the tax deferral on the savings to which she does not require immediate access. Which one of the following options would best suit Manon’s needs?
a) Cash in her GRRSP in full.
b) Transfer the balance of her GRRSP into a LIRA.
c) Transfer the balance of her GRRSP into a LIF.
d) Transfer the balance of her GRRSP into a group RRIF.
d) Transfer the balance of her GRRSP into a group RRIF.
Gilles consults a financial advisor about his son, who has just turned 25. Gilles wishes to give him a significant amount of money, but would like this gift to extend over 15 years. He is also seeking some form of guarantee about this gift, should his son die before the 15-year payment period ends. The advisor tells Gilles that an annuity would meet his needs. What type of annuity would be most suitable?
a) An accumulation annuity,
b) A joint life annuity.
c) A joint and last survivor annuity.
d) A term annuity.
d) A term annuity.
