SF Flashcards

Question

A client who has a DBPP with her current employer is getting a job with a different employer and would like to know what she can do about her DBPP. Given this scenario, which of the following is NOT an option for her? A)transfer the commuted value, DBPP to LIRA B)transfer the pension monies to her new employers pension plan C) transfer the pension money to her RRSP D) leave the pension monies with her current employer

Answer 1

Transfer the pension money to her RRSP you cannot transfer DBPP funds directly to an RRSP you cannot transfer DBPP funds directly to an RRSP

Answer 2

Potential to increase the pension credit per couple from $2000-$4000

Answer 3

Earnings based on capital gains, dividend, income, interest

Answer 4

Canadian bond fund, balanced fund, dividend fund

Answer 5

Zero dollars The question is asking for the value of the guarantee at maturity. Since the fund account value exceeds the guarantee($150,000) there is no value to the guarantee. If the market value is greater than the guarantee value, the policy owner receives the market value. The fund value and market value both refer to the current value of the investments in the segregated fund, based on how the assets are performing. If the market value is higher than the guarantee, the investor receives the market value at maturity. If the market value is lower, the guarantee (usually a percentage of the initial investment) kicks in to protect the investor.

Answer 6

By transferring the ownership of the account on his stuff to the charity, Chris will be able to claim up to 100% of his net income and not be liable for any capital gains tax on the account

Answer 7

Mainly focusses on growth Segregated income funds are designed to generate regular income, not high growth. They usually include: Government and corporate bonds ✅ Preferred shares and dividend-paying stocks ✅ And they’re generally low risk and stable ✅

Answer 8

$4,250 (REMIC says) 3.1.5 When a promised benefit for a payout annuity is more than $5000 per month, the annuitant receives Assuris protection for the greater of $5000 per month or 90% of the promised benefit. EX: if a benefit is $4,250/month, the annuitant would continue to receive that much.

Answer 9

Five-year immediate term an annuity

Answer 10

$2868 The MVA will be the difference between the value Mr. Domingo would have received if interest rates stayed at 5% and the value he actually receives at the end of 4 years (which reflects the 6% rates). MVA = Amount Mr. Domingo receives at 6% - Amount he would receive at 5%. In this case, the MVA = $303,877 (market value at 6%) - $303,877 (value at 5% with the MVA applied), which results in a $2,868 adjustment fee to account for the interest rate change. PV = FV ÷ (1 + interest rate)n PV= 319070 / (1 + 6%)1 PV= 319070 / (1+.06)1 PV= 319070 / (1.06)1 PV= 319070 / 1.06 PV= 301009.433962 PV = $301,009 (rounded off)

Answer 11

Deposits are not deductible, beneficiaries withdrawals are not taxable. 4.7.4.3

Answer 12

A writer is an *optional add-on* to an insurance policy that provides *extra benefits* or *customized coverage* for an additional cost

Answer 13

A $280,000 tax-free Janet’s segregated fund had a 75% maturity guarantee, meaning she would receive at least $150,000. She received $100,000 in allocations, bringing the total fund value to $280,000 at maturity. Since the market value ($280,000) is greater than the guarantee ($150,000), Janet receives the full $280,000. There’s no tax because the fund value doesn't exceed her adjusted cost base (ACB) of $300,000 (original investment + allocations).

Answer 14

The balance and a pension plan can be transferred to a LIRA, locked in RRSP, LIF, LRIF, or to the pension fund of a new employer. The fund can also be used to get a pension annuity. Transferring to a LIRA or a locked in, RRSP will not pay out any income immediately. The funds cannot be transferred to an RRSP. The only option that begins providing income from the next year is for the person to transfer their funds to an LIF.

Answer 15

$37,500 because that is half of their original investment. If a policy owner surrenders a contract before maturity, they get: Market value of units (which may be higher or lower than the original value) No guarantee on value at surrender Negative sales charges may apply if surrendered early

Answer 16

Yes, the ensure will deposit it into her account The fund guarantee was $150,000 (100%) at maturity. When Haley’s contract matured, the account value is $140,000 or $10,000 short of the guaranteed amount. When she renewed her contract on maturity, the insurer will deposit the top of guarantee of $10,000 into her account. .

Answer 17

US equity exchange traded fund NETF is based on an index or sector. A US equity ETF will closely mirror the US equity index (S&P 500) at a minimal cost, compared to mutual funds and segregated funds. Since chorizo has investment experience in a long-term time horizon, it is unlikely she will be willing to pay the extra fees associated with a segregated fund guarantees.

Answer 18

Canadian dividend fund non-registered account, which means he will pay tax on any income the investments earn. Dividends from Canadian corporations are taxed at a lower rate than interest, income and foreign dividends. As such, the Canadian dividend fund is the most tax efficient fund among the listed options.

Answer 19

If the employer becomes in solvent, it can be forced to fund the pension plan If an employer with a Defined Benefit Pension Plan (DBPP) becomes insolvent (goes bankrupt), it may not have enough money to fully fund pension promises, and there's no absolute guarantee that it will be forced to make up the shortfall. So C is incorrect, making it the right choice for what is not a feature of a DBPP.

Answer 20

The greater of $5000 or 90% of the promised benefit

Answer 21

Define benefit pension plan - Employer guarantees a fixed retirement income based on salary and years of service. The DBPP is considered the gold standard of retirement pensions. It pays an income on retirement that is known in advance, last for life, has a provision for the spouse when the employee dies, and is often index to increases in the cost of living. Therefore, it makes a reliable contribution to retirement income needs.

Answer 22

Define contribution pension plan. The DCPP will ensure that investments made in the plan or for retirement because of the locked in provision. As well, the contribution of the employer will be consistent since it is a fixed percentage of employee salaries. Furthermore, the employers contributions will not trigger additional payroll taxes as they would with a GRRSP. Finally, the company can request that employees contribute to the plan, which is not possible with the DPSP.

Answer 23

There are usually more investment options in a group plan. AGRRSP is identical to an individual registered retirement savings plan, except offered on a group basis. Doing so enables members to pay lower fees on their group plan then they would pay on an individual plan. However, there may be fewer investment choices in the GRRSP. A GRRSP also offers the benefit of being a payroll savings plan in which a member can enjoy the long-term advantages of regular savings . Because the plan is an RRSP, RRSP features such as the homebuyers plan or a lifelong learning plan may be available to plan members with a GRRSP

Answer 24

100% of interest + 50% of capital gains. Ex: - an investor has $50,000 in capital(OG investment (not taxed)) - The investment earned $5000 in interest(earnings made from investment (taxable income)) - They also sold and asset + made a $10,000 capital gain(profit from selling an investment (only 50% taxable) Taxable C.G : 10,000 x 0.5 (above) = $5,000 Total taxable income: $5,000(interest) + $5,000 (taxable capital gain) = $10,000 taxable income

Answer 25

FV= PV X (1 + interest rate as decimal) exponent of # of years: 25,000 x (1.04) ^15 =45,023.588

Answer 26

Samantha needed funds to cover medical emergency for her ageing parent. Sudden substantial RRSP withdrawals are often prompted by unexpected and urgent financial needs, such as medical emergency.

Answer 27

Assessing Liam‘s risk tolerance comprehensively. Before recommending high growth equity segregated funds, which can carry higher risk, it is essential to evaluate the client’s risk tolerance thoroughly. This step ensures that the investment aligns with Liam‘s comfort level and financial situation, minimizing the potential for mismatched financial strategies and unforeseen losses .

Answer 28

They should utilize pension income splitting to reduce tax liabilities. Pension income splitting allows, Linda to share up to 50% of her eligible pension income with Tom. This strategy can lower their combined tax burden, especially since Tom is still working and likely has a lower pension income, while Linda’s pension income could be taxable at a higher rate without splitting

Answer 29

The range of investment options available to GHI employees in the current plan. Offering a diverse range of investment options, ensures that the plan can meet the needs of both younger employees, who may prefer higher growth options, and seasoned employees nearing retirement, who might prioritize more conservative, stable investments. This aligns well with GH eyes goals of enhancing employees satisfaction , and retention.

Answer 30

She is exposed to inflation risk Since Karen’s investments in five year GIC’s and a fixed annuity provides stable, fixed returns, they may not keep up with inflation overtime. This could erode her purchasing power, especially if inflation rates rise, making inflation risk of critical consideration for your fixed income strategy .

Answer 31

Interest, income, and capital gain income In a non-registered account, a balance segregated fund – compromising both equity (stocks) and fixed income (bonds) investments – generates returns taxed as they are earned within the fund. The income types Emily is likely to encounter include interest income from the fixed income portion of the fund and capital gains from the sale of stocks within the equity portion. These are taxable each year, as reported by the fund manager, with interest income tax at the investors marginal rate and capital gains, receiving a preferential tax treatment, with only 50% of the gain taxable at the marginal rate.

Answer 32

The maturity guarantee A kid advantage of segregated funds is the maturity guarantee, which helps protect the investors capital by guaranteeing a minimum payout at the contracts, maturity date (often at least 75% or up to 100% of the original investment). This is valuable for retirees like Anna, who are focussed on capital preservation a made potential market downturns, as it limits the amount of loss she might experience if the market declines over the term of the contract.

Answer 33

A group LIRA and a group RRIF Adding a group locked in retirement account and a group registered retirement income fund allow employees to convert their defined contribution savings into retirement income, providing more flexibility in managing income during retirement

Answer 34

A savings account A savings account would best align with Sarah‘s needs, as it provides simplicity and easy access to cash for short term needs. Unlike other options, a savings account offers, high liquidity, and low risk, making an ideal for a new business owner who may need quick access to funds

Answer 35

$80,000 Since Laura invested in segregated funds with a death benefit guarantee, her nephew will receive the greater of the market value or the death benefit guarantee amount. Assuming the death benefit guarantee is 100% of her original investment, her nephew would receive the full $80,000 despite the current market turn down.

Answer 36

Sophia must be both the policyholder and the annuitant In an individual variable insurance contract (IVIC) with segregated funds, the policyholder, and the annuitant are typically the same person to ensure the insurance benefits, such as maturity and death guarantees, applied directly to the investor

Answer 37

If she sold equities two years prior at a gain, she could offset that gain Capital losses can be carried backward up to three years to offset previous capital gains.

Answer 38

Name IT IS REGISTERED UNDER. The ANNUITY

Answer 39

OWNER controls… ANNUITANT is…

Answer 40

funds CANNOT … through a SPOUSAL RRSP

Answer 41

Matias must be the life annuity owner; Lucie must be the annuitant. Matias owns the RRSP, so he MUST be the owner of the annuity. He can however set lucie as the annuitant, meaning the annuity will pay out for her life

Answer 42

B) Purchase a GLWB (Guaranteed Lifetime Withdrawal Benefit) plan in their two RRSPs. A GLWB plan (a segregated fund with a guaranteed withdrawal benefit) offers: Guaranteed retirement income for life (like an annuity). Growth potential if markets perform well. Flexibility—they can access additional cash if needed. Capital protection (no losses)

Answer 43

$31,875 Assuris is a protection organization that covers policyholders if an insurer goes bankrupt. Assuris guarantees the greater of: 85% of the guaranteed benefits or $60,000, whichever is lower. Applying Assuris Coverage: The guaranteed benefit in Jennifer’s contract is $37,500. Assuris covers 85% of $37,500 = $31,875. Since this is below $60,000, this is the amount she is guaranteed to receive.

Answer 44

Credit Risk because he has $100,000 in high-yield bonds, which are vulnerable to default by the issuing companies. A) Liquidity Risk ❌ Liquidity risk means not being able to access money when needed. GICs are redeemable, meaning he can cash them out early (though possibly with a penalty). His segregated fund is market-based, meaning he can sell it. The bonds are locked for 10 years, but this alone doesn't mean liquidity is his biggest risk. B) Market Risk ❌ Market risk applies mainly to stocks and funds that fluctuate. His international equity segregated fund is exposed to market risk, but it’s only $20,000—a small part of his portfolio. This is not his biggest risk. D) Industry Risk ❌ Industry risk means that one industry might suffer a downturn, affecting investments in that sector. Réginald’s investments are diversified across private company bonds and an international equity fund, so he is not overly exposed to one industry.

Answer 45

A) Sell the shares in the RRSP needed to buy an immediate five-year term annuity. An immediate five-year term annuity would provide guaranteed income for the next 5 years. He can use his RRSP investments (blue-chip shares) to buy it. It matches his need—income from 60 to 65—after which his DBPP starts. This is the most reliable option for predictable income.

Answer 46

A) Gerald’s estate, because he was the irrevocable beneficiary. ❌ Incorrect—Gerald’s beneficiary designation expired when he died before Fiona. The irrevocable status does not transfer to his estate. B) Ivy, because she is the contingent beneficiary on the contract. ✅ Best Answer Correct—Since Gerald died before Fiona, Ivy (the contingent beneficiary) now becomes the primary beneficiary and receives the proceeds. C) Andrew, because Fiona has a legal financial duty to her former spouse. ❌ Incorrect—Andrew was only the beneficiary of a separate life insurance policy, not this IVIC. Fiona had no legal duty to leave this money to her ex-husband. D) Fiona’s estate, because Fiona failed to update the beneficiary designations after Gerald’s death. ❌ Incorrect—Even though Fiona did not update the contract, she had already named a contingent beneficiary (Ivy). The estate would only receive the money if no contingent beneficiary was listed.

Answer 47

The pension plan can be terminated if the employer/company goes bankrupt. ✅ Best Answer Correct—If a company goes bankrupt, it may no longer be able to fund the pension plan, leading to termination. Regulators may step in to ensure employees receive at least part of their benefits. This is a common and valid reason for terminating a DBPP.

Answer 48

D) $148,000 ✅ Best Answer Correct—Since she renews at full value, her new segregated fund value is $148,000

Answer 49

Understanding Term Certain Annuities: Term certain annuity = Pays income for a fixed period (not for life). If the annuitant dies before the term ends, payments go to a beneficiary. You cannot name a co-annuitant on a term certain annuity because it is based on one person's life and a fixed term. ✅C) List Vivienne as primary beneficiary and Hailey as contingent beneficiary. This ensures: If Phillip dies before the annuity term ends, Vivienne receives the remaining payments (primary beneficiary). If Vivienne dies before him, Hailey will receive the payments (contingent beneficiary).

Answer 50

Understanding Beneficiary Changes in Segregated Funds: Irrevocable beneficiaries have strong legal rights—the policy owner cannot change, remove, or add other beneficiaries without their consent. Since Sam is irrevocable, Becky must get Sam’s consent before making any changes. Chad, as the successor holder, may also have rights over the account, meaning his consent may be required too. Xena’s consent is NOT required because she is being added, not removed or changed. B) Chad's and Sam's. ✅ Best Answer Correct—Since Sam is irrevocable, his consent is required. Since Chad is the successor holder, his consent may also be needed for changes to the policy.

Answer 51

B) By providing a signature, Jim can authorize the fund transfer, but Mathilde herself will need to sign the documents for the RRIF conversion. ✅

Answer 52

A) Contribute to her employer's GRRSP through payroll deductions. ✅ Best Answer Why? Payroll deductions automatically set aside money before she spends it, making saving easier. Employer GRRSPs may offer lower fees and potential employer matching, helping her save faster. RRSP contributions reduce taxable income, which helps her manage taxes. This aligns with her long-term goal of saving for a condo and retirement.

Answer 53

B) Begin regular contributions to a TFSA. ✅ Best option. Why? Tax-free growth and tax-free withdrawals make a TFSA ideal for long-term savings. She can invest in growth-oriented assets (like stocks or equity funds) while keeping flexibility. When it’s time to buy the cottage, she can withdraw funds without tax penalties. Unlike RRSPs, TFSA withdrawals don’t count as taxable income, so they won’t affect her taxes when she cashes out.

Answer 54

$1,100 Tax Savings=Total Tax Before Splitting−Total Tax After Splitting Total Tax=Income×Average Tax Rate Step 1: Calculate Taxes Before Splitting Ben's tax before split: $60,000 × 25% = $15,000 Pam's tax before split: $38,000 × 15% = $5,700 Total tax paid before split: $15,000 + $5,700 = $20,700 Step 2: Calculate Taxes After Splitting New tax for Ben: $49,000 × 20% = $9,800 New tax for Pam: $49,000 × 20% = $9,800 Total tax paid after split: $9,800 + $9,800 = $19,600 Step 3: Calculate Tax Savings Old total tax: $20,700 New total tax: $19,600 Tax savings: $20,700 - $19,600 = $1,100

Answer 55

a) Dividends paid by Canadian public companies and capital gains from trades of shares of foreign public companies. Why? Dividends from Canadian Public Companies Eligible for the dividend tax credit, which reduces the overall tax burden on this type of income. Even though Ralph's marginal tax rate is high, the credit makes dividends more tax-efficient than interest income. Capital Gains from Foreign Public Companies Capital gains are taxed at only 50% of the gain, making them more tax-efficient than interest income, which is taxed at 100% of the earned amount. While foreign dividends do not receive the Canadian dividend tax credit, capital gains from foreign shares are still taxed more favorably than interest.

Answer 56

c) A redeemable guaranteed investment certificate (GIC). Why? Liquidity – Anthony wants to be able to cash in his investment at any time without fees or penalties. Redeemable GICs allow early withdrawal without penalty (unlike non-redeemable GICs, which lock in funds for a fixed term). Capital Guarantee – GICs guarantee the original investment amount at all times, which matches Anthony's desire for zero risk to his capital. No Market Volatility – Unlike segregated funds (IVICs) or market-linked GICs, a redeemable GIC does not fluctuate with the market, so Anthony’s principal is fully protected. Why Not the Other Options? (a) & (b) IVICs (Segregated Funds) – Even with a 100% maturity guarantee, Anthony's capital is not protected at all times, only at maturity (which could be 10+ years away). These funds also have management fees and potential penalties for early withdrawal. (d) Market-Linked GIC – While it guarantees the principal at maturity, Anthony wants his capital guaranteed at all times, not just at the end of the term.

Answer 57

A group TFSA. Why? Liquidity & Flexibility – A group TFSA allows employees to withdraw funds at any time without penalties or tax consequences, which aligns with Paul’s need for short-term access to cash. No Tax on Withdrawals – Unlike RRSPs or pension plans, TFSA withdrawals are tax-free and do not count as income. Recontribution Room – Any amount withdrawn from a TFSA is added back to the contribution room in the following year, allowing Paul to reinvest later if needed.

Answer 58

Convert the DBPP to a DCPP, letting plan members choose from limited investment options. Why? Reduced Employer Liability – A Defined Contribution Pension Plan (DCPP) shifts the investment risk from the employer to the employees. This is important for XYZ, given its fluctuating profits and concerns about meeting future pension obligations. Stable Costs – Unlike a Defined Benefit Pension Plan (DBPP), which requires XYZ to guarantee payouts regardless of financial conditions, a DCPP only requires the company to contribute a fixed amount—making it more predictable and manageable. Flexibility for Employees – Employees still get retirement benefits, but they bear the investment risk and can choose from limited investment options provided by the company.

Answer 59

a) A deferred payout 10-year term annuity. Explanation: Deferred – Julia's payments begin in three years, meaning the annuity has a deferral period before payouts start. Payout – Once the annuity starts making payments, it provides income for a fixed period (10 years). 10-year term – The annuity is structured to pay out for 10 years only, not for Julia's lifetime.

Answer 60

c) James will directly receive the residual value of the annuity, and he will not pay any tax. Explanation: Sam purchased a term annuity and named Mary as the annuitant (the person receiving the payments). He also named James as the beneficiary (the person who receives any remaining value if Mary dies before the end of the payout period). Mary passed away after four years of receiving payments, leaving a residual balance of $233,000 in the annuity. Because James is the beneficiary, he will receive the remaining capital balance directly. Since this is a term annuity, the money he gets is a mix of: Taxable income (spread out over the years) Return of capital (the money he originally put in) So when the annuity ends, the money that's left isn’t taxed again — because it’s just his own money being returned to him, not new income. 🔑 Key Point: Only the income part is taxed. The original money Sam invested (capital) is not taxed again.

Answer 61

a) Death benefit guarantee. Segregated funds come with a death benefit guarantee, which ensures that upon the annuitant’s death, the beneficiary or estate receives at least a minimum guaranteed percentage of the initial investment—usually 75% or 100% of the original deposit, depending on the contract terms. Brett initially invested $100,000. The current market value at the time of his death was $68,000. However, his estate received $75,000, which means his contract likely had a 75% death benefit guarantee (75% of $100,000 = $75,000).

Answer 62

B) The maturity guarantee. Explanation: Miles wants to take some investment risks but is also nervous about losing it all. Segregated funds offer a maturity guarantee (typically 75% or 100%) that ensures he will receive at least a minimum percentage of his original investment if he holds the fund until the maturity date (often 10 or more years).

Answer 63

A blue-chip preferred share equity mutual fund and fixed-income mutual fund portfolio with 100% maturity and death benefit guarantees.

Answer 64

B) $2,500 Explanation: Yamina’s segregated fund contract has a 75% maturity guarantee and a 100% death benefit guarantee. Since the contract has matured (not a death claim), we apply the maturity guarantee: Initial Investment: $2,500 Market Value at Maturity: $2,250 Maturity Guarantee (75% of initial investment): 75% × $2,500 = $1,875 Since the market value ($2,250) is higher than $1,875, Yamina would receive the higher amount. Final Payout: $2,500, since the maturity guarantee ensures she gets at least her original investment amount if the market value is lower.

Answer 65

B) Dollar cost averaging. Explanation: Keith is new to investing and likely lacks the experience to time the market effectively. Dollar cost averaging (DCA) is a strategy where an investor invests a fixed amount at regular intervals, rather than investing the full amount all at once. This approach helps: Reduce the impact of market volatility – By spreading out investments, Keith avoids investing all his money at a market peak. Lower the risk of making poor timing decisions – Since Keith is inexperienced, this approach protects him from making emotional investment decisions. Encourage disciplined investing – It builds good financial habits and reduces the temptation to chase market trends.

Answer 66

B) Immediately switch her IVIC holdings from the current equity fund to a money-market fund, avoiding disposition fees and taxes. Explanation: Nicole is facing job insecurity due to potential layoffs in her industry. Since she has little available cash and her TFSA investments are illiquid, she may need a more accessible cash reserve in case she loses her job. Her segregated equity fund within a non-registered IVIC has grown due to a strong stock market, but equity funds can be volatile. If the market drops while she is unemployed, she may have to sell at a loss. By switching to a money-market fund, she: Preserves her investment value (avoiding potential market downturns). Avoids immediate tax consequences that would arise from cashing out. Ensures liquidity if she needs emergency funds during unemployment.

Answer 67

(B) Liquidity risk. Explanation: Cory’s assets are mostly illiquid, meaning they cannot be easily converted into cash without significant loss or delay.

Answer 68

B) Interest rate risk and inflation risk. Explanation: Mira's portfolio consists of Government of Canada bonds with maturities of 3 to 10 years. Bonds, especially government bonds, are considered safe investments, but they are still exposed to interest rate risk and inflation risk. 1. Interest Rate Risk: Bond prices move inversely to interest rates. If interest rates rise, the value of Mira’s bonds will decrease because newer bonds will offer higher yields, making her lower-yielding bonds less attractive. Since her bonds have maturities of 3 to 10 years, they are more sensitive to interest rate changes than short-term bonds. 2. Inflation Risk: Government bonds pay fixed interest payments, but inflation erodes the purchasing power of these payments over time. If inflation rises, the real value of the bond’s fixed interest declines, making it a less attractive investment.

Answer 69

D) 0.2% the first year and -0.3% the second year. First Year Calculation: Nominal return: 1.8% Inflation rate: 1.6% 1.8%−1.6%= 0.2% Second Year Calculation: Nominal return: 1.9% Inflation rate: 2.2% 1.9%−2.2%=−0.3%

Answer 70

C) Put the $5,000 in a spousal RRSP for Angie, with John as the contributing spouse. Why? John earns significantly more than Angie ($80,000 vs. $40,000). A spousal RRSP allows the higher-income spouse (John) to contribute to the RRSP of the lower-income spouse (Angie) while still receiving the tax deduction for himself. This strategy helps with income splitting in retirement, reducing their overall tax burden when they withdraw funds later. Since Angie earns less, she will likely be in a lower tax bracket in retirement, meaning withdrawals will be taxed at a lower rate than if John withdrew from his own RRSP.

Answer 71

C) They lack diversification. Why? Mathieu’s only investments are in Canadian and international equity mutual funds, meaning he has 100% exposure to stocks. A well-diversified portfolio should have a mix of equities, fixed income (bonds, GICs), and cash equivalents to balance risk and returns. Given his modest income, financial responsibilities, and limited investment knowledge, he might benefit from a more balanced portfolio that includes less volatile assets to reduce risk.

Answer 72

A) Her RRSP statements. Why? RRSP statements provide detailed information about Jacinthe’s investment choices, including: The types of assets she holds (e.g., stocks, bonds, mutual funds). The risk level of her investments. Her trading activity, which can indicate her level of experience. By reviewing these statements, Pierre can assess whether Jacinthe understands diversification, risk, and investment strategies.

Answer 73

D) Jade can adopt a more aggressive approach for her savings, since she will have time to make up for potential losses. Why? Long investment horizon (27 years) allows Jade to take on higher risk because: She has time to recover from market downturns. She can benefit from higher long-term returns associated with equities and growth-focused investments. Younger investors with long time horizons can typically afford to take more risks early and gradually shift to more conservative investments as retirement approaches.

Answer 74

B) $148,819$. To determine the minimum RRSP account balance Davy needs now to reach $200,000 in 10 years with an average return of 3% per year, we use the future value formula: FV = Future Value = $200,000 PV = Present Value (what we are solving for) r = Annual interest rate (3% or 0.03) t = Number of years (10) Rearrange the formula to solve for PV: PV = FV/(1+r)t

Answer 75

A line of credit is a flexible loan from a bank that lets you borrow up to a set limit, repay it, and borrow again as needed. You only pay interest on the amount you use.

Answer 76

Length of time an investor plans to hold an investment before needing the funds

Answer 77

Future value of an investment: FV=PV X (1+r)n n: number of periods (years)

Answer 78

Present value(discounting future value) PV=FV/(1+r)n

Answer 79

PV X (1+r) ^ n - 1 ———————— r

Answer 80

DB= max(market value,Guaranteed amount) X Max( promised percentage)

Answer 81

MER= total fund expenses/average fund value X100%

Answer 82

NAV= total market value of fund/ number of units outstanding

Answer 83

Tax payable= withdrawal amount X marginal tax rate

Answer 84

Real rate of return = 1+nominal rate/ 1+inflation rate - 1 Nominal rate is the stated return BEFORE inflation Inflation rate is the percentage increase in prices over time

Answer 85

b) She has low risk tolerance. Grace has low risk tolerance since all her money is invested in GICs and a savings account. Moreover, she only has a small loan on her properties, demonstrating that Grace does not like to take risks and prefers to pay off her debts rather than invest her money.

Answer 86

c) No, because group segregated funds don't offer a guaranteed death benefit. Group segregated funds don't offer a guaranteed death benefit and Marc-André's priority need is the safety of his capital when he dies. To guarantee his capital, Marc-André could invest in individual segregated funds or guaranteed investments. He could also purchase life insurance.

Answer 87

c)$53,131 FV=CV(aka PV) X (1+interest rate)n Based on an inflation rate of 3%, Jack's annual expenses of $72,000 (CV) will be equivalent to $88,551 (FV) in 7 years (n), or $72,000 x (1 + 3%) = $88,551. Then, we factor in a decrease in expenses of 40% upon retirement, or $88,551 x 40% = $35,421. The result is $88,551 - $35,421 = $53,131, which corresponds to Jack's annual expenses in the first year of retirement.

Answer 88

b)Maturity guarantee The maturity guarantee ensures that the segregated fund contract owner will receive at least 75% of the amount initially invested on a given date (generally speaking after a10-year period). The maturity guarantee is one of the advantages of segregated funds. It will help allay Mike's concerns since he has already experienced significant losses in the past.

Answer 89

b) Joint and last survivor life annuity - 50% The joint and last survivor life annuity pays the annuitant (Francis) income for his lifetime and the selected percentage to the surviving spouse (50%). The percentage paid to the last survivor decreases the amount received by the annuitant.

Answer 90

a) DCPP, PRPP, GRRSP The DCPP, PRPP and GRRSP are contributory plans, with employers contributing the amount they want. There is no set pension income for members, and the sponsor is not responsible for any shortfalls.

Answer 91

c) 40% of his funds in an annuity with 60% of his funds in a balanced fund Investing 40% of his funds in an annuity meets the need for income throughout his lifetime, while investing 60% in a balanced fund provides the growth potential of equity and the security of a fixed income. This investment choice reflects Glenn's needs.

Answer 92

a)1, 3, 5 The investor must provide the information to fill out the applicant's part (1). The social insurance number is required in order to issue the slips used for tax returns (3). The contract owner names the beneficiary of the contract (5).

Answer 93

b)The maturity date of the contract and guarantees will advance 10 years and he will pay tax on the capital gain. Switches between funds may act as a reset that changes both the maturity date of the contract and contract guarantees. As the amount switched is higher than the adjusted cost base (ACB) of his units, Jean-Philippe will have to pay income tax on the capital gain.

Answer 94

c) The person with power of attorney will claim the invested amount less the partial withdrawal. The person with the power of attorney is the one who makes the claim. Since the market value is lower than the guaranteed value, the guaranteed value less the withdrawal will be paid out.

Answer 95

Balanced funds

Answer 96

Segregated funds

Answer 97

CIPF Canadian Investor Protection Fund

Answer 98

There is an upper limit established as to how much the beneficiary might receive if market conditions are favourable and unit values are high at the time of death

Answer 99

The insurer

Answer 100

The more paid

Answer 101

Those who have children

Answer 102

Financial institution used for funding

Answer 103

Decrease over time

Answer 104

Information folder

Answer 105

The financial institution

Answer 106

Mutual funds are managed by INVESTMENT COMPANIES, are LIQUID , and have no GUARANTEE - value depends on market performance Focus on growth

Answer 107

Segregated funds are offered by INSURANCE COMPANIES, guarantee a percentage(75%-100%) of your investment @ maturity or death, bypass probate, and are less LIQUID than mutual funds

Answer 108

1 - reinsurance rate

Answer 109

P X r/ 1-(1+r)^-n P= Principal (amount invested) r= Monthly interest rate (annual rate/12) n= Number of months (yearsx12)

Answer 110

Current Value - Maturity Value(aka FV)/ (1+New interest rate) ^ time remaining

Answer 111

1. Find the Maturity or Future value= $ it was purchased for x interest rate ^ years it matures in. 2. Discount it to Present value using no new rate= Maturity value / NEW rate^ remaining years(difference between the years given. 3. Subtract from Current value= MVA= $ investment has grown to - $PV

Answer 112

1. Money market funds 2. Bond funds 3. Income funds 4. Balanced funds 5. Dividend funds 6. Equity funds

Answer 113

If rates go up divide If rates go down multiply

Answer 114

= total fund expenses/total fund assets X 100

Answer 115

CIPF (Canadian Investor Protection Fund) - provides protection for investors in the event that a member firm becomes insolvent. FSCO (Financial Services Commission of Ontario) regulates financial services in Ontario, but it does not directly protect individual stock investors. • Assuris provides protection for policyholders of life insurance companies, not for stock investors. • CDIC (Canada Deposit Insurance Corporation) protects deposits at member banks, not stock investments.

Answer 116

PV X 1 - (1+r) ^ -n ————————- r

Answer 117

Equities - higher risk investments but better growth

Answer 118

Fixed income/ Debt When you buy a bond, you're lending money to a company or government (debt). In return, they promise to pay you regular interest (like fixed income) and give your money back at maturity More safe (than stocks)

Answer 119

Asset Class

Answer 120

Diversification- allows for optimal growth

Answer 121

Liquid: able to cash in/ sell quickly

Answer 122

Real estate

Answer 123

Time horizon - retirement - new home - post secondary - new business

Answer 124

Inflation risk (also interest) The cost of living is going at a faster rate than what you’re getting from your investment Safer investments pose this risk. Because they’re safer their money is safer-usually not getting the best return- so you might be falling behind when it comes to things like cost of living

Answer 125

IVIC Individual Variable Insurance Contract Individual – It’s for one person. Variable – Value can go up or down with the market. Insurance Contract – It’s sold by insurance companies and includes guarantees (like death and maturity benefits). 🧠 Key Tip: A seg fund is an investment + insurance in one contract = IVIC

Answer 126

Medical underwriting or proof of insurability

Answer 127

Lowest. BUT also low return

Answer 128

Low. Bond funds usually have a certain percentage that is in fixed income securities- which makes it safer. Because it’s safer - not the greatest return

Answer 129

Higher levels of risk. These are known as growth funds. Usually invest in stocks, publicly traded companies

Answer 130

Moderate risk (lower risk) Based on stability of bonds. Usually pay a regular interest. Have the possibility for capital appreciation: You buy low, and the investment grows in value — that growth is your capital appreciation.

Answer 131

Balanced risk Someone who’s in the middle- want growth but don’t want to take on high risk. Invest in both stocks and bonds

Answer 132

71 years old

Answer 133

Accumulation Annuity

Answer 134

Immediate: payments start right away Deferred: payments don’t start right away. Maybe you need them in 5 years, etc.

Answer 135

-Income security- lifetime income- someone retiring/retired- gives new income. - spousal income- provides surviving spouse with income. - temporary income- term annuity- give temporary income for the time needed - creditor protection- great feature for self employed/business owners - able to name beneficiaries- provides creditor protection

Answer 136

Shortened life- need something to show there’s a reason why someone has a shortened life- disease/ illness They’d be able to get higher payment, lower premium

Answer 137

Lump sum- money inherited Transfer from a registered account- RRSP, RRIF,etc. - they can transfer the funds to be used to payout the annuity- *registered accounts are pre tax dollars- taxed* Payments- starting young- could use an accumulation annuity- pay over time- once enough funds gathered maybe they want it to be used to fund retirement. - after tax payments- not taxed

Answer 138

Level- same payment every month Indexed- increase by a certain percentage up to a cap- if someone is worried about inflation, purchasing power

Answer 139

Locked Interest Rate – Rate is fixed, even if market rates go up. Inflation Risk – Payments don’t rise, so your money may lose value over time. Loss of Capital – If you die early, the insurance company keeps what’s left (unless you name a beneficiary). No Withdrawals – Once it starts, you can’t take money out or stop payments.

Answer 140

GIS Guaranteed income Supplement

Answer 141

RRSP Non RRSP uses. Meant for retirement but can be used for first time home buyers. $25,000 out of RRSP for home.

Answer 142

Segregated Fund The client wants insurance protection ➡️ Segregated funds are insurance products. The client also wants to benefit from capital market growth ➡️ Seg funds invest in mutual fund–like portfolios (stocks, bonds, etc.). It’s for the long term ➡️ Seg funds have maturity guarantees (usually 75–100% after 10 years)

Answer 143

GRRSPs generally vest immediately, meaning Olivia owns the employer’s contributions as soon as they are made, and there is no waiting period.

Answer 144

c. Equity segregated fund that has a 100% death and maturity guarantee Equity segregated funds are stocks but come with guarantees. This means the couple can invest in the stock market but still be protected, getting their money back no matter what happens. Since they are very conservative investors, they want safety, and the guarantee makes this the best option for them.

Answer 145

A) Mutual fund values grow by increases in unit value, not by new units being added. The value of each unit rises as the underlying investments grow. Segregated funds can grow by both unit value increases and by adding new units (allocations), which represent reinvested income or growth within the fund. So, A is the incorrect statement because both mutual funds and segregated funds can grow through increases in unit value. The key difference is that segregated funds can also add new units through income or capital gains allocations.