Investment Instruments and Policy Value Quiz

Play an AI-generated podcast conversation about this lesson

What is the purpose of the margin between the bid and offer price in a variable life policy?

To cover the management's cost of the policy (correct)

To determine the number of units credited to the account

To calculate the policy value based on the bid price

To provide a steady stream of income to the policyholder

How is the policy value of a variable life policy calculated?

As the cash value plus any accumulated dividends

Using the bid price of units allocated into the policy (correct)

By the number of units credited to the account

Based on the offer price at the time of valuation

Which of the following is a disadvantage of investing in common shares?

Lack of protection for the principal investment

Inability to receive a steady stream of income

Exposure to volatility in the equity markets

All of the above (correct)

What is the purpose of rebating in the context of insurance policies?

To offer a special inducement to purchase a policy Signup and view all the answers

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

The life company needs to maintain a separate account for variable life policies distinct from the general account Signup and view all the answers

Which of the following is the most suitable investment instrument for an investor interested in protecting their principal and receiving a steady stream of income?

Fixed income securities Signup and view all the answers

What is a key characteristic of a flexible premium policy with returns that vary with the underlying value of investments?

Returns tied to investment performance Signup and view all the answers

Which of the following does NOT contribute to the specific risk of an investment?

Expected market growth rate Signup and view all the answers

Which of the following is NOT an advantage of investing in bonds?

Chance for high capital appreciation Signup and view all the answers

Rank the following investment instruments in terms of risk, from least risky to most risky.

I > III > II > IV Signup and view all the answers

According to the disclaimer, what is one restriction on sharing the questionnaire and answer key prepared for general information purposes?

Cannot be published or reproduced without consent Signup and view all the answers

Why is it important for variable life insurance policies to be tied to the underlying investment performance?

To align policy benefits with market conditions Signup and view all the answers

In a risk-return graph, where do equity funds typically fall?

At the top end Signup and view all the answers

Which investment option generally offers higher returns with lower risk?

Balanced funds Signup and view all the answers

Where do cash funds typically sit on a risk-return graph?

At the bottom end Signup and view all the answers

Which type of fund is usually associated with the lowest risk?

Bond funds Signup and view all the answers

What does a risk-return graph show about the relationship between risk and return?

Higher return always comes with lower risk Signup and view all the answers

Which type of fund is likely to have the highest risk in terms of investment?

Equity funds Signup and view all the answers

Investment Instruments and Policy Value Quiz

Choose a study mode

Podcast

Questions and Answers