Reference no: EM132914918

Questions -

Q1. What is the optimal portfolio as per the Markowitz model?

a) A portfolio on the lowest indifference curve.

b) A portfolio on the top indifference curve.

c) A portfolio on an indifference curve below the point of tangency with the efficient frontier.

d) A portfolio on the indifference curve at the point of tangency with the efficient frontier.

Q2. Five years ago, Huang purchased a term-100 life insurance contract. His coverage includes: a death benefit of $850,000, monthly premiums of $350 payable on the 15th of each month and a two-year suicide clause. Three years ago in November, financial problems forced Huang to let his policy lapse. However, in August of last year, he resolved his problems and successfully reinstated his policy. This year, Huang once again experienced financial difficulties and he missed the premium payment due in May. If he commits suicide on June 13th of this year, how much will Huang's beneficiary receive as a death benefit from this contract?

a) $0

b) $845,800

c) $849,650

d) $850,000

Q3. Nguyen, a 42-year old high school teacher, purchased an individual disability insurance contract. If the contract stipulates that Nguyen's disability premiums can only be changed if the premiums for all teachers, as a risk class, are changed, what type of disability coverage does Nguyen own?

a) renewable

b) guaranteed renewable

c) cancellable

d) guaranteed non-cancellable

Q4. Shirley purchased a participating whole life insurance policy. This year, Shirley paid $3,375 in premiums and she received a $495 policy dividend; the net cost of pure insurance is $865. Assume in 15 years, Shirley disposes of the policy for an amount equal to its cash surrender value of $59,115 and at that time, its adjusted cost basis (ACB) is $36,420. What statement is true?

a) The current ACB of Shirley's policy is $2,510.

b) The current ACB of Shirley's policy is $3,005.

c) When Shirley eventually disposes of the policy, she will have taxable income of $22,695.

d) When Shirley eventually disposes of the policy, she will have taxable income of $11,347.50.

Q5. Tanya is 63 years old and her husband Lars is 64 years old; they have been married for 28 years. The couple has just retired and they are about to start collecting their Canada Pension Plan (CPP) retirement benefits. They both worked for 32 years. Tanya is eligible for CPP benefits of $525 per month; Lars is eligible for a CPP pension of $695 per month. If they apply to assign their CPP pensions, how much will Tanya receive each month?

a) $571

b) $599

c) $610

e) $621

Q6. Michelle is eligible to receive an annual Old Age Security (OAS) benefit of $6,942.36. If the OAS clawback threshold is $74,788, Michelle's net income is $81,963 and her combined marginal tax rate is 42%, how much will Michelle receive in OAS benefits after tax?

a) $1,076.25

b) $3,402.34

c) $4,122.58

d) $5,866.11

Q7. What statement regarding locked-in retirement accounts (LIRAs), life income funds (LIFs), locked-in retirement income funds (LRIFs) and annuities is correct?

a) An annuitant under a matured RRSP can rollover his or her plan assets to a LIRA on a tax-deferred basis. Following this, minimum annual withdrawals must be made from the LIRA.

b) LIFs are subject to minimum and maximum withdrawal limits; LRIFs are only subject to minimum withdrawal limits.

c) When converting the assets in a LIF to an annuity, a married annuitant must do so on a joint and last survivor basis unless the annuitant's spouse signs a waiver.

d) With a prescribed annuity, annuity payments are periodically adjusted to keep pace with changes in the Consumer Price Index.