Life Insurance Policy Mock Exam: Quiz!

50 Questions | Total Attempts: 155

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Life Insurance Policy Mock Exam: Quiz!

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Questions and Answers
  • 1. 
    1. A structured Investment-linked Life Insurance policy has the following features: Issuer = Company A Credit Rating of issuer = AA+ Tenure = 2 years Structure of the product Annual payout plan Maturity value = 100% of the initial amount of single premium Payout = 1% of the initial amount of single premium per annum Early redemption clause = Yes, if the underlying outperforms the benchmark by 20% at the end of any trading day. Which one of the following risk will be of LEAST concern to an investor based on the above- mentioned information?
    • A. 

      Credit risk

    • B. 

      Market risk

    • C. 

      Liquidity risk

    • D. 

      Leverage risk

  • 2. 
    2. Which one of the following about participation products is True?
    • A. 

      Participation products participate in the price performance of the underlying assets and offer full upside potential with full downside protection.

    • B. 

      Participation products are legally secured debentures.

    • C. 

      They are commonly marketed under the name of 'certificates' or 'notes'.

    • D. 

      Derivatives contracts and bonds are used for both the principal and return

  • 3. 
    3. Which of the following regulatory instrument(s) must a structured Investment-linked Life Insurance policies comply with?
    • A. 

      Insurance Act

    • B. 

      Companies Financial Act

    • C. 

      Deposit Insurance Scheme

    • D. 

      All of the above

  • 4. 
    4. The forward price of a barrel of oil is S$150. The current spot price is S$120. The cost of carry is therefore equal to a:
    • A. 

      Premium of S$30

    • B. 

      Premium of S$50

    • C. 

      Discount of S$30

    • D. 

      Discount of S$50

  • 5. 
    5. The sub-fund's operating expenses to the daily average Net Asset Value is :
    • A. 

      Turnover ratio

    • B. 

      Expense Ratio

    • C. 

      Soft dollar

    • D. 

      Bid / offer spread

  • 6. 
    6. Which one of the following statements relating to structured Investment-linked Life Insurance policies (ILPs) is TRUE?
    • A. 

      All structured ILPs are homogenous in nature

    • B. 

      A structured ILP is designed purely as a protection product

    • C. 

      The buyer of a structured ILP is not exposed to any form of risk

    • D. 

      The structured ILP's sub-funds are valued less frequently compared to other ILP sub-funds

  • 7. 
    7 Which one of the following statements about portfolio rebalancing is TRUE?
    • A. 

      Portfolio rebalancing is adopted in all portfolio bonds

    • B. 

      Portfolio rebalancing maintains the desired level of risk exposure

    • C. 

      Fund managers use portfolio rebalancing to increase risk exposure

    • D. 

      The return of the portfolio will improve after rebalancing

  • 8. 
    8. Structured products are:
    • A. 

      A. Secured debt securities of the issuer

    • B. 

      Created by combining traditional investments with financial derivatives

    • C. 

      C. Entitled to share the issuer's profits

    • D. 

      Equity securities that give higher return as compared to traditional products

  • 9. 
    9. Structured Investment-linked Life Insurance policy is less than traditional Investment-linked Life Insurance policy.
    • A. 

      Liquid

    • B. 

      Risky

    • C. 

      complex

    • D. 

      Regulated

  • 10. 
    10. Structured deposits are issued by:
    • A. 

      Banks

    • B. 

      Lloyds' syndicates

    • C. 

      Insurance companies

    • D. 

      Stock broking houses

  • 11. 
    11. A structured Investment-linked Insurance policy (ILP) has the following features: Issuer = Insurer A Underlying Asset = Basket of 6 stocks Tenure = 2 years Maturity Value = Initial capital amount + Guaranteed 1% of the capital Bonus payout = 2% of the initial capital every year if the price of all 6 stocks has increased by 10% on maturity as compared to the price on the start date of the investment. Assume that an investor invests S$50,000 in this structured ILP Calculate the total amount that the investor will receive at the end of the 2 years under the WORST possible market performance scenario.
    • A. 

      S$50.000

    • B. 

      S$50,500

    • C. 

      S$52,000

    • D. 

      S$52,500

  • 12. 
    12. John expects the Gold market to have big movement in the near future but unsure which direction. He can apply the following strategy to capture the market:
    • A. 

      Selling Naked Puts

    • B. 

      Short Call

    • C. 

      Bear Straddle

    • D. 

      Bull Straddle

  • 13. 
    13. The counterparty to the derivative contract default, it may cause:
    • A. 

      Total loss of principal amount of the investment

    • B. 

      Early redemption of the investment

    • C. 

      Lesser redemption amount for the investment

    • D. 

      All of the above

  • 14. 
    14. An investor placed $100,000 in Australia (AUD) investment when AUD was S$1.40. The AUD has since depreciated against the S$ and is now worth only S$1.20. On the other hand, the AUD investment has appreciated by 10% in AUD terms. What is the investor's nest gain / loss on the investment, as measured in S$?
    • A. 

      Gain of 10%

    • B. 

      Gain of 6%

    • C. 

      Loss of 10%

    • D. 

      Loss of 6%

  • 15. 
    15. Which of the following option strategies would be MOST appropriate if Sally is bullish about a stock but does not want to own it?
    • A. 

      Long a stock

    • B. 

      Long a call

    • C. 

      Short a stock

    • D. 

      Short a call

  • 16. 
    16. Performance participation structured products:
    • A. 

      Are secured debt instruments

    • B. 

      Carry lower degrees of investment risk

    • C. 

      Share in the profits of the participating funds

    • D. 

      Typically offer unlimited upside potential with no downside protection

  • 17. 
    17. Derivatives are financial instruments that are generally used for:
    • A. 

      Manage risks

    • B. 

      Betting of the price movement of the underlying assets.

    • C. 

      Hedging against unwanted price movements

    • D. 

      Serve all the above functions

  • 18. 
    18. John decides to invest S$100,000 in the following investment: Prosperity Fund issued by Smarty Bank and distributed by Brilliant Bank. This fund seeks yearly investment returns, (before fees and expenses) that correspond to 150% of the returns of the yearly performance of the Japan Index fund. What is / are the risk(s) that the above investor is subject to?
    • A. 

      Market risk

    • B. 

      Liquidity risk

    • C. 

      Credit risk of Smarty Bank

    • D. 

      All of the above

  • 19. 
    19. Jane, a Singaporean, invests in an exchange-traded portfolio fund issued by AAA+ rating bank, denominated in US$. Which ONE of the following risks should Jane be most concerned?
    • A. 

      Issuer risk

    • B. 

      Counterparty risk

    • C. 

      Liquidity risk

    • D. 

      Foreign exchange risk

  • 20. 
    20. Which ONE of the following methods may be used to mitigate counterparty default risk?
    • A. 

      Investing only in listed companies

    • B. 

      Using non-publicly traded securities

    • C. 

      Asking for collateral from the counterparty

    • D. 

      Dealing in the same foreign currency

  • 21. 
    21. Which of the following statements regarding derivatives is FALSE?
    • A. 

      Derivatives come in many different varieties

    • B. 

      Holders of derivative contracts own the underlying assets

    • C. 

      Derivative contracts are an integral part of structured products

    • D. 

      The underlying assets of derivative contracts can be non-financial

  • 22. 
    22. Portfolio bonds are:
    • A. 

      Less complex and risky as compared to Investment-linked Life Insurance policies

    • B. 

      Lifestyles policies

    • C. 

      Conventional bonds

    • D. 

      Portfolios of investments with no insurance element

  • 23. 
    23. Those investments that carry a low probability of loss of principal while offering a high probability of potential returns can be said to be:
    • A. 

      Rare gems

    • B. 

      Bold investments

    • C. 

      Safe Instruments

    • D. 

      Unworthy investments

  • 24. 
    24. What is a portfolio of investments with an insurance element called?
    • A. 

      Option

    • B. 

      Hedge fund

    • C. 

      Portfolio bond

    • D. 

      Structured deposit

  • 25. 
    25. Investors may wish to invest in structured products as they:
    • A. 

      Are highly liquid assets

    • B. 

      Carry low investment risk

    • C. 

      Are simple products to understand

    • D. 

      Provide access to investment markets that are otherwise closed to them