PCE Sample Exam_3

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1. The price of an agricultural property depends on the following factors:

I. The locationII. The mortgage loan amount of the propertyIII. The value of buildingIV. The quality and profitability of crops

A. I, II and IIIB. I, II and IVC. I, III and IVD. II, III and IV

2. Investment-linked Permanent Health Insurance

I. provide disability incomeII. contain cash valueIII. no cash valueIV. price is more competitive when compared to traditional with-profit life

insurance product

A. I, II, IIIB. I, II, IVC. I, III,IVD. II, III,IV

3. What is defined as “the management process for identifying, anticipating andsatisfying customers requirement profitably”?

A. InvestmentB. Investment-linkedC. MarketingD. Marketing investment

4. For single premium Investment-linked life insurance policy, the death benefit iseither one of the following, depending on the company’s policy:

I. The minimum sum assured or the value of the units, whichever is higher.II. The minimum sum assured plus the value of the units.III. The sum assured (chosen by the life assured) or the value of the units

whichever is higher.IV. The sum assured (chosen by the life assured) plus the value of the units.

A. I, IIB. I, IIIC. I, IVD. II,IV

5. What is the second stage in the process of providing advice to customer?

A. Conducting the fact-findB. Assessing and satisfying customer’s needsC. After-sales servicesD. Making recommendation to the customer

6. Under traditional with-profit life insurance policy

I. the life fund maintains a reserve to help level out the short term fluctuationin value of the life fund’s investment

II. not maintaining a reserve could mean that the policyowner receive the fullvalue in a year of high investment gains.

III. not maintaining a reserve could mean that the policyowner suffer in a yearof poor investment conditions

IV. not maintaining a reserve could mean that the full impact of the changes ininvestment conditions will be directly borne by the policyowner

A. I,II,IIIB. I,II,IVC. I,III,IVD. II,III,IV

7. Which one of the following statements about Investment Trust is true?

A. The unit price is recalculated once a weekB. The unit price will be quoted every month in at least one national Bahasa

Melayu newspaper and one national English language newspaperC. The price reflect the value of the underlying investmentD. The unit price will not fluctuate in line with stock market prices

8. Switches between funds may:

I. be offered free of chargeII. be offered free of charge for a limited number of switches within a given

period and charges imposed for subsequent switchesIII. incur a specific charge for each and every switchIV. incur a specific charge by monthly basis


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9. A cash contract

I. calls for future deliveryII. is used by those who need a commodity nowIII. cannot be cancelled unless both parties to the contract agreedIV. calls for immediate delivery


10. The 4 basic forms of life insurance cover include

A. whole life insurance, endowment insurance, mortgage insurance, keyperson insurance

B. whole life insurance, endowment insurance, term insurance, annuitiesC. term insurance, annuities, medical insurance, health insuranceD. whole life insurance, endowment insurance, term insurance, personal

accident insurance

11. The Enhanced Investment Scheme (EIS) by the Central Provident Fund (CPF) in1993 which contributed to the expansion in Singapore of the life insuranceindustry including Investment-link life insurance business enables

A. all CPF members who retain at least the required minimum sum in theirCPF accounts invest in a new scheme known as the Investment Scheme(IS)

B. all CPF members be provided with a prospectus that among othersdiscloses the identity and nature of the insurer's business, how thepremiums are going to be invested, financial information of the insurer,chargeable fees and expenses and rights of policyowners

C. CPF members who have cash of at least S$50,000 in their ordinary accountto invest 80% of the excess in the ordinary account above S$50,000 in oneor more of the eligible investment instruments

D. all CPF members to invest in all types of life insurance policies except forendowment policies

12. What are the advantages of unit trust?

I. It allows small private investors who do not have sufficient funds toreceive the benefit of a diversified range and spread of investments

II. It allows small private investors who do not have sufficient time to receivethe benefit of professional investment management

III. Extra cost or charges which must be paid for switching from one fund toanother

IV. It could generate income in the form of dividends, interest and capitalgains


13. In times of volatile stock market the policyowner may want to switch all or part ofhis investment

A. in cash fund to equity fundB. in managed fund to property fundC. in equity fund to cash fund in order to protect the capital value if he thinks

the stock market will crashD. in balanced fund to equity fund

14. The total relief allowable for all insurance premium on the life of individual onhis/her spouse and on contribution to approve provident funds (e.g. to EPF) in abasis year is

A. RM3,500B. RM3,500 plus RM2,000 for children education and medical policiesC. RM5,000D. RM5,000 plus RM2,000 for children education and medical policies

15. Which one of the following statements which describe the rates of the tax andrelief of Investment-linked life insurance is true?

A. Reviewed biannually by Finance Minister and proposed for that yearB. Reviewed every quarterly by Bank NegaraC. Disposal of units in an Investment-linked life insurance should attract tax

as they are capital receiptsD. Proposed by Finance Minister in the budget for the year and then

incorporated in the Finance Act for that year

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16. Investors purchasing put option will be hoping that

A. the share price will rise when option is exercised, the premium and thefixed price will be less than the value of the share

B. the share price will fall when option is exercised, the premium and thefixed price will be less than the value of the share

C. the share price will rise when option is exercised, the premium and thefixed price will be more than the values of the share

D. the share price will fall when option is exercised, the premium and thefixed price will be more than the values of the share

17. Under the single pricing method, Joo Eng pays a premium of RM4,000 for hissingle premium Investment-linked life insurance policy. The price per unit isRM1.00. The life office deduct a charge of 5%. The number of units that JooEng can buy is

A. 4,200B. 4,000C. 3,800D. 380

18. Under the dual pricing method, Mei Lin pays a premium of RM4,000 for hersingle premium Investment-linked life insurance policy. The offer price isRM1.00 per unit. The bid-offer spread was 5%. There was an increase in thevalue of the offer price to RM1.20 per unit. The bid price and amount that MeiLin will receive if she cash the policy will be

A. RM0.05 and RM2,400B. RM0.50 and RM2,400C. RM0.114 and RM4,560D. RM1.14 and RM4,560

19. The formula for the circulation of Return on Gross Premium (RGP) is:

A. Ending Value of InvestmentBeginning Value of Investment

B. Beginning Value of InvestmentEnding Value of Investment

C. Offer PriceBid Price

D. Dual PricingSingle Pricing

20. Under the single pricing method of his single premium Investment-linked lifeinsurance policy, John allocated RM4,000 to buy units. The number of units thatJohn held was 3,800. After 10 years, the unit price was RM1.97. The mortalitycharge was 1% and the policy fee was RM100. The Ending value of Investment,return on Gross premium and Annual Yield is

A. RM7,311.14/1.828 and 0.062 or 6.2%B. RM7,701.20/1.925 and 0.118 0r 11.8%C. RM7,486.00/1.871 and 0.087 or 8.7%D. RM7,311.14/1.924 and 0.118 or 11.8%

21. Under the single pricing method of single premium Investment-linked insurancepolicy, the amount of money an Investment-linked life insurance policyowner willget when withdrawals are made is

A. the number of units withdrawn multiplied by the unit price or in the case ofa fixed monetary amount, the number of units that will be cancelled willequal to the amount withdrawn divided by the unit price

B. the number of units withdrawn divided by the unit price or in the case of afixed monetary amount, the number of units that will be cancelled willequal to the amount withdrawn multiplied by the unit price

C. the number of units withdrawn divided by the unit price and deductmortality charge and policy fee or in the case of a fixed monetary amount,the number of units that will be cancelled will equal to the amountwithdrawn divided by the unit price

D. the number of units withdrawn divided by the unit price and deductmortality charge and policy fee or in the case of fixed monetary amount,the number of units that will be cancelled will equal to the amountwithdrawn multiplied by the unit price

22. The benefits of investing in Investment-linked life insurance include

I. Policyholders are relieved of the day to day administration of theirinvestment

II. The funds invested are managed by professional fund managerIII. Investment-linked funds do not offer the policyowner access to diversified

portfolio of investmentIV. Policyowner cannot easily change the level of his premium payment, take

premium holidays, add single premium top-ups, make withdrawals, andswitch his investment between funds

A. I,IIB. I,IVC. II,IIID. III,IV

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23. A major difference between traditional with-profit life insurance product andInvestment-linked life insurance policy is

A. Traditional with-profit life insurance policy can reduce in valueparticularly when the life fund is being transferred to policy reserve

B. Traditional with-profit life insurance policy can never reduce in value,provided that the life office is solvent

C. The value of traditional with-profit life insurance policy will fluctuategreatly depending on the investment performance of the life office

D. The value of Investment-linked life insurance policy can never fluctuateonce the units are added to the policyowner’s policy

24. A well-diversified Investment-linked fund has

A. many professional fund managers who take care of many fundsB. a better risk characteristic than a less-diversified fundC. a simple designed product which cater separately for investment and

insurance protectionD. provision of flexibility to change the level of premium payment and take

premium holidays

25. Section 7(2)(b) of the Insurance Act, 1996 defines `Investment-linked insurancebusiness’

A. To mean the effecting and carrying out of a contract of insurance onhuman life only where the benefits are, wholly or partly, to be determinedby reference to the value of, or the income from, human life of anydescription or by reference to fluctuations in, or in an index of, the value ofproperty of any description

B. To mean the effecting and carrying out of a contract of insurance onannuity only where the benefits are, wholly or partly, to be determined byreference to the value of, or by reference to fluctuation in, or in an indexof, the value of property of any description

C. To mean the effecting and carrying out of a contract of insurance onhuman life or annuity where the benefits are wholly or partly, to bedetermined by reference to the value of, or the income from, property ofany description or by reference to fluctuations on, or in an index of, thevalue of property of any description

D. To mean the effecting and carrying out of a contract of insurance onhuman life or annuity where the benefits are, wholly or partly, to bedetermined by reference to the value of, or the income from, human life ofany description or by reference to fluctuations in, or in an index of, thevalue of property of any description

26. The following statements about investment expertise in Investment-linked isFALSE

A. Investment-linked funds have professional fund managers who have theinvestment expertise to invest the fund to achieve high return over the longterm

B. Investment-linked funds have professional fund managers who have theinvestment expertise to invest the fund and always achieve high returnover the short term

C. An ordinary policyowner does not normally has good knowledge offinancial market to invest his money effectively

D. Investment-linked funds have professional fund managers to manage thefunds

27. Customers who have purchased policies from an organisations who are sales-oriented, usually ended buying policies which

I. they do not understandII. cannot meet their needsIII. can meet their needsIV. they surrender for its value or paid-up


28. Conducting the fact-finding requires an agent to obtain relevant information like

A. what is the sex of the customerB. what are the customer’s hobbiesC. what are the customer’s personal detailsD. what is the favorite fruit of the customer

29. What is the extra knowledge/requirement needed for an Investment-linked lifeinsurance agent?

A. All relevant knowledge about technical aspect of life insurance, coverageand scope

B. All aspects about life coverC. All aspects of life insurance and legal requirementD. The financial advice in order to fulfill the customer’s needs

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30. Ethics should include

I. behaving with complete integrity in an Insurance Agent’s professional lifeII. complying with Law and with the best principles and practices relating to

Financial AdviceIII. conducting in a Professional and Honorable Manner towards those with

whom Insurance Agent is in contact in Business LifeIV. observing and applying the relevant Codes of Good Practice

A. I,IIB. I,II,IIIC. I,III,IVD. All of the above

31. What are the three components of accessibility of fund?

I. If individual requires the fund in a short period of timeII. Cost or penalty of realising the investment before the maturity periodIII. Individual’s attitude towards riskIV. The initial cost in setting up or buying into the investment

A. I,II,IVB. II,III,IVC. I,II,IIID. I,III,IV

32. What are the key considerations in investment?

I. Fund for educationII. Improvement in their financial positionIII. Income for retirementIV. Depositors’ academic qualification

A. IB. I,IIC. I,II,IIID. All of the above

33. What if an investor has a small amount of free funds?

A. Certain types of investment are not accessible to the investorB. Most types of investment are not accessible to the investorC. All types of investment are accessible to the investorD. Only variable life insurance is accessible to the investor

34. What are the criteria of Investment-linked Permanent Health Insurance

I. Provides health coverage such as disability incomeII. Contains cash value unlike traditional health product that does not have

cash valueIII. No cash values like traditional health products

A. IB. IIC. I,IID. All of the above

35. The policyowner may cash out all his units or partially from his units. These twoprocesses are known as __________ respectively

A. withdrawal or surrenderB. surrender or withdrawalC. surrenderD. withdrawal

36. The phrase “Top-Up” in Investment-linked life insurance means:

A. The policyowners pay further premium to purchase additional units of theInvestment-linked fund which will be added to the existing units in thepolicyowner’s account

B. The life office maintain reserves to level out short term fluctuation in thevalue of Investment-linked fund

C. When the Investment-linked fund value increases, the value of the fundwill also increase

D. The policyowner can change his investment fund to another fund which hebelieves to have great opportunities for higher return

37. With dual pricing method, Ahmad has paid RM4,000 premium to buy his singlepremium Investment-linked policy. The offer price is RM1 and bid offer spreadis 5%. Assuming the unit price never change, what is the bid price and theamount that Ahmad will get if he cash in or claim the policy

A. 0.095 and RM3,800 respectivelyB. 0.95 and RM3,800 respectivelyC. 0.05 and RM2,000 respectivelyD. 0.50 and RM2,000 respectively

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38. Under single premium pricing method, Joo Hin bought a single-premiumInvestment-linked policy. He hold 3,800 units at RM1.00 unit price. With 1%mortality charge and policy fee of RM100, what is the cash value of his policy?

A. RM3,938B. RM3,800C. RM3,700D. RM3,662

39. If the offer price in an Investment-linked policy is RM2.50 and the premiumamount of RM250.00 is used to buy units it will buy

A. 0.01 unitB. 10 unitsC. 100 unitsD. 100 units less the unallocated premium

40. Investment-linked funds can be structured into 2 ways

A. Warrant units and right unitsB. Investment units and mortality unitsC. Accumulation units and distribution unitsD. Term units and annuity units

41. As the value of Investment-linked policy depends on the performance of financialinstrument in which the investment is invested

A. fund manager bears the risk and the policyowner bears the benefit of thepolicy

B. the life office bears the risk and policyowner bears the benefit of the policyC. the invested company bears the risk and life office bears the benefit of the

policyD. policyowner bears both risk and benefit of the policy

42. Currently, financial instrument which Investment-linked Funds are investedinclude

I. Cash fundII. Equity fundIII. Property fundIV. Balanced fund

A. IB. I,IIC. I,II,IIID. I,II,III,IV

43. The switching facility in Investment-linked fund allows

A. a life office to switch an Investment-linked life insurance policy to atraditional with profit endowment policy

B. a life office to switch a single premium Investment-linked whole lifeinsurance

C. a policyowner to switch part or all of his investment from one Investment-linked fund to another

D. policyowner to switch part or all of his investment from one life office’spolicy to another life office’s policy at the same premium

44. The performance of an investment depends on

I. a country’s economic factors and past experience of the invested companyII. the competencies and capability of the invested company management

teamIII. the number and spread of small-time investors choosing to investIV. the invested company’s level of cost and the life cycle of the investment


45. The factors that may influence the choice of deposits in a bank include

I. funds available for investmentII. the length of time the funds can be in the account fund availableIII. whether emergency withdrawal are likelyIV. the age of depositor


46. Among the advantages in investing in shares are

I. Investors are able to participate directly in the future of the investedcompany

II. Shares provide good dividends and capital appreciationIII. Shares are very liquid and can be traded in open marketIV. The value of the shares can never go beyond the price at which the share

bought

A. I,II,IIIB. II,III,IVC. I,II,IVD. I,III,IV

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47. Unit trust is essentially for

A. two-way arrangements between the investors and the fund managerB. two-way arrangements between the investors and the trusteeC. three-way arrangements among the investors, the trustee and the fund

managerD. three-way arrangements among the investors, the trustee and the super

anthority

48. What are the benefits available when investing in Investment-linked funds ?

I. the Investment-linked funds offer policyowners an access to a pooled ordiversified portfolio

II. the Investment-linked policyholder can vary his premium payments, takepremium holidays, add single premium top-ups and change the level ofsum assured easily

III. the Investment-linked policyholder can have access to a pool of qualifiedand trained professional fund managers

A. I & IIB. I & IIIC. II & IIID. I, II & III

49. Which of the following IS NOT the characteristics of the debenture stocks :

A. If the company defaults on the loan, the investor can take over the chargedproperties for sale

B. Debenture stocks pay a variable interest according to the base lending rateset by Bank Negara Malaysia

C. Trustees are appointed to supervise the company performs its obligationD. Corporate stocks are less secured compared to government Bonds

50. In United Kingdom, Abbey Life Company marketed one of the most successfultypes of Investment-linked life insurance known as _______________.

A. Investment-linked Individual Pension PlanB. Investment-linked Permanent Health InsuranceC. Investment-linked Dread Disease InsuranceD. Single Premium Investment-linked Whole Life Insurance Plan

51. Regular Premium Investment-linked Whole Life Insurance has one or more of thefollowing characteristics :

I. premium payment in a lump sumII. premium payment at a regular intervalIII. serves as investment and life protectionIV. no provision for top-ups

A. I, II & IIIB. I onlyC. II & IVD. II & III

52. The value of an Investment-linked insurance can be estimated depending on_________.

I. the value of each of the unitsII. the value of the invested sharesIII. the number of units the policy has accumulated to-dateIV. the number of shares the policyowner holds in hand

A. I & IIB. III & IVC. I & IIID. None of the above

53. Investment-linked life insurance products are known for its flexibility. Thefollowings are its flexible options EXCEPT :

A. Top-upsB. Withdrawal of unitsC. Take premium holidaysD. Fixed unit price

54. A policyowner invested RM5,000 in Single Premium Investment-linked lifeinsurance product. The unit price is RM1, the mortality charge is 1% and thepolicy fee is RM100. In Single Pricing Method, the cash value calculated is____________.

A. RM5,000B. RM4,850C. RM4,950D. RM4,900

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55. A policyowner invested RM5,000 in Single Premium Investment-linked lifeinsurance. The unit price is RM1, bid-offer spread is 5%, the mortality charge is1% and the policy fee is RM100. In the Dual Pricing Method, the cash valuecalculated is

A. RM4,700.50B. RM4,750.50C. RM4,650.50D. RM4,602.50

56. A policyowner bought a Single Premium Investment-linked life insurance productThe death cover is RM50,000. The life office implements the “unit value or deathcover” method of compensation. The policyowner passed away, after the policyhas been in force for two years and the units accumulated were 35,000 in hisinvestment. The unit price is RM1.25 while bid and offer spread of 5%. In “DualPricing Method”, the policy death benefit compensation will be________________.

A. RM41,562.50B. RM50,000C. RM91,562.50D. None of the above

57. Traditional Life Insurance policy has the following features EXCEPT:

A. A reserve to smoothen the fluctuations of the investmentB. Never reduce in value unless the life company becomes insolventC. Investors may choose a particular investment area which he believes can

offer a good return at that timeD. The value of the sum assured is guaranteed at inception

58. A range of investment choices is available to individual investors. Which of thefollowing investment choices are considered as liquid assets :

I. cashII. term depositIII. current accountIV. Malaysian Government Securities

A. II & IIIB. I & IIC. I, II & IIID. IV only

59. “Fixed Income Securities” are a group of investment vehicles in which theinvestor has lent money to the issuer. Which of the followings best describe“Fixed Income Securities”

I. It generates a fixed incomeII. It can be traded in Secondary MarketIII. It is guaranteed by Bank Negara MalaysiaIV. It may be in short or long term

A. I & IVB. I & IIC. I, II & IVD. II, III & IV

60. Government bonds are financial instruments used by government to borrowmoney from the public. The bonds usually generate low return and popularlysought by investors because _____________________.

I. The bonds are considered very safeII. The bonds can be converted to Government sharesIII. Trustees are appointed to supervise the paymentsIV. The bonds are very marketable

A. I, II & IIIB. II & IIIC. I & IVD. II, III & IV

61. The following statements are the benefits and advantages of Investment-linkedlife insurance EXCEPT:

A. The policyowner has access to a “pooled” or “diversified portfolio” ofinvestments

B. policyowner can easily change the level of premium payment and enjoypremium holiday

C. regardless of the share market condition, policyholders still get the samecash value as at inception

D. policyowner gains the benefit of a well diversified Investment-linked fundsmanaged by professional investment managers with proven track records

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62. Loan stocks offer higher interest rate compared to Government Bonds. Investorsstill have the preference towards government bonds as for loan stocks _________

A. If the company defaults, the investors has no security and may not recoverthe capital

B. It is not supervised by GovernmentC. The company may repay earlier if it wishesD. It cannot be converted into ordinary shares

63. Convertible stocks offer lower interest rate compared to other fixed incomesecurities such as loan stock. However, it is still popular among the investorsbecause _________.

A. The Government guarantees the performance of the company in interestpayment

B. A trustee is appointed to ensure the solvency of the companyC. Investors are given the privilege to redeem capital if the company defaultsD. It may be converted into ordinary share within a stated period

64. Shares of all major public companies are traded in KLSE. Which of thefollowings best describe “share” ?

I. It entitles the shareholders to decide on major issues and vote for directorsII. Investors owning the shares are the company shareholdersIII. The value of the shares is fixedIV. Shareholders investment are secured by government

A. I, II & IIIB. I & IIC. I, II & IVD. I, II, III & IV

65. Physical commodities and financial instruments are typically traded in cashmarkets. There are two types of cash markets i.e. market for immediate deliveryand market for deferred delivery. These are respectively referred to as___________ and ____________.

A. Future market, Forward marketB. Spot market, Future marketC. Forward market, Foreseeable future marketD. Spot market, Forward markets

66. Which of the following is/are TRUE descriptions of “shares” ?

Ordinary Shares

I. Dividend is not fixedII. May get higher dividend than

preference share if profit ismore than enough to coverpreference shares dividend

III. May not recover any capital ifcompany becomes insolvent

IV. It has market volatility risk

Preference shares

I. Dividend is fixedII. It would not receive more

dividend than what has alreadystated

III. Definite recovery of capitalduring insolvency

IV. It has no market volatility risk

A. I & IIB. I, III & IVC. I, II, III & IVD. none of the above

67. “Unit Trusts’’ are useful vehicles for small private investors. “Unit Trust” refersto

A. Some form of loyalty expressed by the public to the GovernmentB. A type of trust deed signed by an apartment unit ownerC. A pool of funds contributed by many investors held on trust by a trustee

and managed by a professional fund managerD. A trust signed between a remisier and a shareholder

68. One of the basic forms of life insurance cover is annuity. It may be described asthe opposite of insurance protection. Annuity refers to ________________

A. a contract between insurer and life annuitant whereby a stipulated sumshall be paid periodically for the duration of survival of the designated life

B. a type of life insurance whereby the policy proceeds is paid in a lump sumC. a type of life insurance whereby the policyholder is subject to underwriting

annuallyD. a type of life insurance whereby the premium gets certain percentage of

discount annually

69. The sum assured is payable only upon the death of the life assured within aspecified period ________________.

A. Endowment InsuranceB. Whole Life InsuranceC. Term/Temporary InsuranceD. Annuity

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70. The first Investment-linked life insurance contract in the U.K. introduced byLondon & Manchester Assurance Company Ltd in 1957 is __________________.

A. Whole Life plan for the self-employedB. Retirement Plan for the blue-collar groupC. Individual retirement annuity for the self-employedD. Dread Disease Investment-linked insurance for the potentially ill group of

public

71. In 1977, the first Whole Life Investment-linked life insurance product wasintroduced in U.K. It is known as __________________________.

A. London & Manchester Whole Life PlanB. Spectacular Whole Life PlanC. Hambro Whole Life PlanD. Skandia Whole Life Plan

72. Warrants are seldom issued on their own but are often issued free as sweetener toloan stock. Warrantholders have the option to subscribe the shares in thecompany:

I. at a pre-determined ratioII. at a pre-determined exercise priceIII. within a specified time periodIV. at a negotiable price

A. I & IIB. I, II & IIIC. I & IVD. I, II, III & IV

73. Section 7(2)(b) of Insurance Act 1996 defines “Investment-linked insurancebusiness” to mean ________________

I. as effecting & carrying out of an insurance contract on human lifeII. benefits are wholly or partially determined by the income from investmentIII. benefits are wholly guaranteed by the insurerIV. only guarantees payment under certain pre-determined circumstances

A. I & IIB. I, II & IVC. I & IVD. I, II, III & IV

74. Bank Negara Malaysia’s circular JPI: 1/1997 on “Specification of Assets for thePurpose of a Licensed Insurers Margin of Solvency” is not applicable to theInvestment-linked funds and subject to following restrictions:

I. Investments in securities in any one investee should not exceed 5% of thepaid up capital of the investee company

II. Investment in securities in any one investee should not exceed 5% of thetotal value of the assets of the fund

III. I & II above depends on whichever is lowerIV. Investments in loans or debentures to any one borrower or group of

borrows should not exceed 5% of the total value of the assets of the fund

A. I, II & IVB. III & IVC. II, III & IVD. None of the above combination

75. “Transparency” is one of the advantages of Investment-linked life insuranceproduct. The life office must ensure that the sales materials and policy formscontain the following information:

I. Objective of the fund and the mode of investment income must bedisclosed

II. Policyowner must be informed clearly that investment risk must be borneby policyowner

III. The basis and frequency of valuation of assets underlying the fundIV. A maximum amount of initial charge, management fee and etc. to be borne

by policyowner must be stated

A. I, II & IVB. I, II & IIIC. I, II, III & IVD. None of the above combination

76. Fund Performance Report of the Investment-linked policies forwarded to thepolicyowner must clearly include the following information :

I. A summary of the audited financial statement of the fundII. Trend analysis of the next 2 yearsIII. List down the potential composition of investmentsIV. Any charges levied against the fund during the year

A. I & IVB. II & IIIC. I, II & IIID. I & II

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77. The third and final stages of the processes in providing financial advice aremaking recommendations. When recommending to the customers, agents muststate clearly the following explanation on :A. the options available and the relative advantages and disadvantagesB. the potential income according to the agents viewC. the chances (in percentage) of meeting the goals of the customersD. the advantages and disadvantages of all the share counters in KLSE

78. Which of the following describes “Investment-linked life insurance”?

I. The policyowner premiums are used to purchase units of investments afterdeduction of all the life office expenses

II. The value of the units directly reflect the values of the underlying fundIII. The benefits are expressed in investment at their market value at the time

the benefits are paidIV. The policyowner may switch within the funds that they wish to invest

A. I, II & IIIB. I, II & IVC. II, III & IVD. All the above

79. The following Laws are governing the Investment-linked life insurance inMalaysia EXCEPT:A. Insurance Act 1996B. Companies Act 1965C. Income Tax Act 1967D. Companies Act 1956

80. Which of the following are NOT TRUE as regards the characteristics ofInvestment-linked life insurance Products :I. Policy value varies according to the value of the underlying assets of the

investmentII. Premium is fixed based on the chosen sum assured of the policy at

inceptionIII. Policyowner has the flexibility in changing the premium payments, taking

premium holidays and making top-upsIV. The Death Benefit is fixed at the inception of policy

A. I & IVB. II onlyC. II & IVD. I & III

81. En. Ahmad is a teacher and his wife is a Government Servant. They paidRM10,000 each as Investment-linked insurance premium annually. For tax reliefin the basis year, En. Ahmad and his wife can claim respectively the following :

I. A paid insurance premium up to RM10,000II. Partial sum on his wife’s insurance premium up to RM5,000III. Partial sum of the Ahmad’s insurance premium up to RM5,000IV. Both II & III above

A. I & IIB. I, II & IIIC. I, II, III & IVD. II, III & IV

82. The policyowner noted the possibilities of high return on Fund A compared toFund B and Fund C. However, he decides to invest 40% in Fund A, 30%respectively in Fund B and Fund C. The policyowner splits the investment capitalto several funds instead of putting 100% investment into Fund A after taking thefollowing into consideration :

A. He trusted all the 3 investment fund managers as they have proven trackrecords

B. Fund B & C investment returns are as attractive as Fund A and not sovolatile

C. Fund B & C investment portfolios are his favourite investments and thereturns are within his expectations

D. He is diversifying the risk of investment in order to reduce the possibilityof losing all his investment capital

83. Investment-linked Individual Pension Plan has the following features :

I. High allocation of the premiums to investments through accumulation offund until retirement

II. A “one-off” premium payment at inceptionIII. Provide life insurance cover and annuity payments to the policyownersIV. A guaranteed investment return

A. II & IVB. I & IIIC. III onlyD. None of the above

E & OE (1-June-2000) 12

84. The following statements are the main objectives of Insurance Act 1996EXCEPT:

I. The protection of public interestII. The promotion of fairness and equityIII. Encourage economic development of the countryIV. Fostering high level of professional competence

A. I, II & IIIB. I, II & IVC. I & IIID. None of the above combination

85. Term insurance __________________________.

A. provides for payment of the sum assured when the life assured survives aspecific period

B. is one that if the life assured survives the specified period, the policyceases and no return of the premium is given

C. is the most complex and expensive of all the life insuranceD. provides for surrender or cash values on early termination of the insurance

86. In U.S.A, the marketing of variable life product as early as 1976 was pioneered by______________.

A. Prudential Life Insurance CompanyB. Hambro Life Insurance CompanyC. Skandia Life Insurance CompanyD. Equitable Life Assurance society

87. Surrender charges under the investment-linked life insurance policy __________.

A. are deducted from the value of units at surrenderB. are deducted from the value of units at the commencement of the policiesC. are applicable to policies with no uniform allocationD. represent initial expenses which have already been incurred and recovered

88. The offer price under an Investment-linked life insurance policy is ____________

A. a fixed amount throughout the life of the policyB. also known as the bid priceC. the price at which units under the policy are bought back by the life officeD. the price at which units under the policy are offered for sale by the life

office

89. The fundamental differences between traditional with profit life insurance policiesand Investment-linked life insurance policies include _______________.

I. Investment-linked life insurance policies are less likely to offer morechoice in terms of the type of investment funds

II. the investment element of Investment-linked life insurance policies ismade known to the policyowner at the outset and is invested in aseparately identifiable fund which is made up units of investment

III. Investment-linked life insurance policies offer the potential for higherreturns

IV. traditional with profits life policies aim to produce a steady return bysmoothing out market fluctuation.

A. I, II & IIIB. I, II & IVC. I, III & IVD. II, III & IV

90. The switching facility under Investment-linked life insurance policies is veryuseful ______________.

A. for the purpose of assets planning by the trusteeB. for the purpose of profit planning by the life policiesC. for the purpose of financial planning by the policyownersD. for the purpose of sales planning by the fund managers

91. Investment-linked funds can be invested in any financial instruments includingcash funds, bond funds, property funds, specialised funds and balanced funds.Equity funds _______________.

A. invest in stocks and shares and the magnitude of the change in unit priceswill depend on the quantity only of the equities held

B. invest in stocks and shares and are inherently of lower risk in nature andthe prices of the stocks and shares are stable

C. invest in stocks and shares and investor who buy such assets usually aimfor capital appreciation

D. invest in stocks and shares and during market recession, such assets areusually the last to depreciate

E & OE (1-June-2000) 13

92. Under the dual pricing method of single premium policies, ________________.

A. the policyowner buys the units at the life office’s buying price and sells theunits at the life office’s selling price

B. the policyowner buys the units at the offer price and sells the units at thebid price

C. there is only one price quoted whether the policyowner is buying or sellinghis units

D. the bid price is always higher than the offer price

93. Investment-linked life insurance policyowners may make withdrawals in term of_____________.

A. number of units through cancellation of unitsB. fixed monetary amount only through reduction of the life cover sum

assuredC. number of units or fixed monetary amount through reduction of the life

cover sum assuredD. number of units or fixed monetary amount through cancellation of units

94. The number of units under a single pricing method single premium Investment-linked life insurance policy is 3,800 with a sum assured of RM5,000. The offerprice when the policyowner first pays his premium is RM1.00. The unit price atthe time of the policyowner’s death is RM1.22. Under the unit value plus sumassured type of death benefits, this will result in a death benefit of ____________.

A. RM9,636B. RM8,800C. RM5,000D. RM4,636

95. A market-oriented insurance company would undertake the following functions toidentify and satisfy the marketing strategy. Which of the following is the correctarrangements to qualify as a market-oriented insurance company :

A. Planning & control – product development – market identification –pricing–promotion – selection of distribution channel

B. Planning & control- market identification –product development –selection of distribution channel – pricing promotion

C. Planning & control – market identification – product development –pricing – selection of distribution channel – promotion

D. Planning & control – market identification – pricing – productdevelopment – selection of distribution channel

96. Traditional with-profit life insurance products, the allocation to policyowners inthe form of bonuses _____________________.

I. are not directly linked to the life offices investment performanceII. have already been smoothened by the life officesIII. do not have the peaks and troughs of investment return as in good

investment years of life offices, contributions have been made to reservesand vice versa

IV. are not fixed at the inception of the policy, but are greatly dependent on theinvestment performance of the life offices


97. The administrative fee, insurance charge, fund management fee and the like underan Investment-linked life insurance policy are ____________________.

A. usually guaranteedB. not subject to reviewC. subject to change by the life office after written notice is givenD. always up-front charges

98. The characteristics of an Investment-linked life insurance policy include _______.

I. its cash value and protection benefits are determined by the investmentperformance of the underlying assets

II. its protection costs are generally met by implicit chargesIII. its commissions and office expenses are met by a variety of explicit

charges with normally 6 months notice given by the life offices prior toany change

IV. its cash value is normally the value of units allocated to the policyownercalculated at the bid price

A. I, III & IVB. I, II & IIIC. I, II & IVD. II, III & IV

E & OE (1-June-2000) 14

99. Reversionary bonus under traditional with profit life insurance policies ________.

A. is paid at the time of death under the life policies or on maturity of thepolicies

B. can either be simple (base purely on the original sum assured ) orcompound (based on the sum insured less previous bonuses )

C. once allocated can, however, be removed or reduced when the life officecannot afford to sustain it

D. is usually expressed as a percentage of the sum assured and will vary inaccordance with the performance of the underlying assets of the unitiedfund

100. The duties of the trustee of unit trust do not include ______________

A. ensuring that the fund manager adhere to the provision of the trusts deedsB. acting generally to protect the unit-holdersC. holding the pool of money and assets in trust on behalf of the investorsD. managing the portfolio of investments and administering the buying and

selling of shares in the unit trust itself

101. The following statements about taxation are true, EXCEPT

A. capital gain is not taxableB. capital losses is not tax deductibleC. dividend income is not subjected to withholding tax according to the

prevailing corporate tax rateD. if personal tax rate is less than corporate tax rate, shareholder is entitle to

rebate on the portion of the dividend paid as tax

102. Different types of Investment vehicles enjoy or suffer a wide range of taxtreatment. The following financial instruments attract tax :

I. Government SecurityII. Rated corporate bondsIII. Bonds issued by a company listed in KLSEIV. Convertible Loan Stock

A. I & IIB. I, II & IIIC. IV onlyD. All the above

103. Which of the following statements about diversification in portfolio managementis FALSE?

A. diversification can completely eliminate the risk of investing in stocks in aportfolio

B. diversification helps to spread the portfolio risk by investing in differentcategories of investment in a portfolio

C. diversification can involve purchasing different types of stocks andinvesting in stocks of different countries

D. a diversified portfolio provides greater security to an investor having tosacrifice the return for the portfolio

104. Which of the following statements about fixed income securities are FALSE?

I. the interest rate is directly proportional to the price of the bondsII. the coupon rate is directly proportional to the price of the bondsIII. the longer the maturity period, the more volatile the price of the bonds will

be


105. What are the advantages of investing in preference shares?

I. it gives shareholder the right to a fixed dividendII. has priority over company assets during dissolutionIII. they enjoy benefit of capital appreciation

A. I, IIB. I, IIIC. II, IIID. I, II & III

106. For life insurance agent to provide effective financial advice when marketingInvestment-linked life insurance product, the following steps must be observed

I. Conducting the fact-findingII. Assess customer’s needsIII. Satisfy customer’s needsIV. Decide the best solution for the customer

A. I, III & IVB. I, II & IIIC. I, II & IVD. II, III & IV

E & OE (1-June-2000) 15

107. Investment Trusts ______________________.

I. Pool contributions from investors, and total fund is managed byprofessional fund managers, whose function is to buy and sell shares of thetrust to make investment profits.

II. Diversified fund to investors, and total fund is managed by investors,whose function is to buy and sell shares of the trust to make investmentprofits.

III. Makes investment much simpler, more accessible and more cost effectivefor small investors.

IV. Uses closed-end funds and do not have to dispose of assets if largenumbers of investors sell their shares.

A. I & IIB. I, III & IVC. II, III & IVD. All of the above

108. In Malaysia, unit trusts are authorised and supervised by ________________.

A. Clearing HouseB. Securities Act, 1933C. Securities CommissionD. Securities and Exchange Commission

109. Which one of the following fund is of the highest risk and highest return?

A. Cash FundB. Managed FundC. Equity FundD. Bonds Fund

110. The risks of investing in Investment-linked funds are

I. Value of units of an Investment-linked life insurance policy is notguaranteed.

II. Stock markets are volatile, the cash values or maturity values of anInvestment-linked insurance policy will rise or fall drastically.

III. greater risk of investment.IV. Policyowner is relieved of the day-to-day administration of his

investments, which can be complicated affair.

A. I, II & IIIB. II, III & IVC. I, III & IVD. All of the above

111. A person’s investment horizon will greatly depend on

I. Dependents of the investorII. Investment objectives of the investorIII. The age of the investorIV. The current financial condition of the investor

A. I & IIB. I, III & IVC. II, III & IVD. All the above

112. The ABC Company uses the Single Pricing method for its Single Premium policy.The offer price of each unit is RM2.50. If the premium amount used is RM5,000to buy units, calculate how many units can be purchased?

A. 1,000B. 2,200C. 2,100D. 2,000

113. Which of the followings are related to Investment-linked policy?

I. The value of the Investment-linked policy is linked to units in a specialunitised fund managed by the life office or to the units of an authorisedunit trust.

II. The unit values of Investment-linked policy directly reflect the values ofthe underlying funds and fluctuate according to the performance of theseinvestments.

III. The value of the Investment-linked policy is linked to units in a specialunitised fund managed by the policyowner or to the units of an authorisedunit trust.

IV. The premiums paid by the policyowner are used to purchase units in one ofthe insurance company’s investment funds.

A. I, II, IIIB. II, III, IVC. I, II, IVD. All of the above

114. _______ is market for deferred delivery.

A. Forward marketB. Future marketC. Primary marketD. Secondary market

E & OE (1-June-2000) 16

115. Mr. Jackie Chan wishes to deposit his fund in bank account, he needs to consider;

I. Funds available for investmentII. How long the funds can remain in the accountIII. Whether emergency withdrawals are likelyIV. Prevailing market conditions.

A. I & II B. I, III & IVC. II, III & IVD. All of the above

116. A “share option” refers to;

A. A financial instrument that gives the investor the right to buy or sell agiven number of shares of the underlying stock at a regular price at futuremarket.

B. A financial instrument that gives the investor the right to buy or sell agiven number of shares of the underlying stock at a fixed price within aspecified time period.

C. A financial instrument that gives the investor the option to buy or sell agiven number of share of the underlying stock at a regular price within aspecified time period.

D. A financial instrument that gives the investor the option to buy or sell agiven number of shares of the underlying stock at a fixed price at futuremarket.

Under the dual pricing method of the Single Premium Investment-linked life insurancepolicy, Elina invested RM5,000 to buy units. The number of units that Elina held were4,850 units. 15 years later, the unit price went up to RM1.85. The mortality charge is 1%and the policy fee is RM100. The bid-offer spread is 5 %. Based on the text, provideanswers for questions 117, 118 & 119.

117. The Ending value of the investment is: -

A. RM8,338.64B. RM8,438.67C. RM8,780.68D. RM8,782.77

118. The Return on Gross Premium is: -

A. RM1.76B. RM1.74C. RM1.67D. RM1.69

119. The Annual Yield is: -

A. (RM1.69)1/15 – 1B. (RM1.67)1/15 – 1C. (RM1.76)1/15 + 1D. (RM1.74)1/15 + 1

120. There are 2 types of death benefit offered by Investment-linked Life InsurancePolicies: -

I. Unit value or sum assured or cash bonusesII. Unit value plus sum assuredIII. Unit value or sum assuredIV. Cash Bonus plus sum assured

A. I & IIB. I, III & IVC. II, III, & IVD. II & III

121. Which of the following are NOT TRUE:

I. Investment-linked life insurance products guarantee a fixed rate of return.II. Investment-linked life insurance products are determined by reference to

the value of or the income from property of any description or by referenceto fluctuation, or in an index if, the value of property of any description.

III. Under Investment-linked life insurance products, the death benefit is afixed sum assured plus whatever bonuses accumulated up to the date ofdeath and less whatever outstanding policy loans and automatic premiumloans, inclusive of interests.

IV. Under Investment-linked life insurance products the amount payable doesnot depend on the investment performance of the company as it is fixed atthe inception of the policy.

A. I & IIB. I, III & IVC. II, III & IVD. II & III

122. Under Investment-linked life insurance policy, the life office must provide astatement of the investment performance of the fund for the past ________, whereavailable.

A. 3 yearsB. 1 yearsC. 5 yearsD. 10 years

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123. Under the business of Investment-linked insurance, which of the followings arenot involved in regulating this business.

I. Insurance Act 1996 and RegulationII. Legal provisions governing the common law of agencyIII. Companies Act, 1965IV. Contracts Act, 1950

A. I, II & IIIB. I, III & IVC. II, III & IV D. None of the above combinations

124. Mr. Boon wishes to sell off his coconut plantation. He needs to consider severalfactors while he is pricing his plantation. The factors are: -

I. The location of the landII. The cows and the workers at the plantationIII. The quality of land as reflected on the quality and profitability of the

coconuts it growsIV. The value of the buildings on the land

A. I & IIB. I, III & IVC. II, III & IVD. All of the above

125. Which of the following are the features of traditional with-profit life insuranceproducts?

I. Premium is determined and fixed at inception and is based on the sumassured and the expected bonuses payable.

II. “Profits” are added to the sum assured in the form of bonusesIII. Sum assured is chosen by the policyowner at inception and is stated in the

policy scheduleIV. Policyowners are allowed to “top-up” the sum assured at anytime.

A. I & IIB. II & IIIC. I, II, IIID. All of the above

126. The following statements about investment expertise in Investment-linked lifeinsurance is FALSE:

A. Investment-linked funds have professional fund managers who have theinvestment expertise to invest the fund to achieve high return over the longterm

B. Investment-linked funds have professional fund managers who have theinvestment expertise to invest the fund and always achieve high returnover the short term

C. An ordinary policyowner does not normally has good knowledge offinancial market to invest his money effectively

D. Investment-linked funds have professional fund managers to manage thefunds

127. When an agent misrepresents and induces the policyowner to discontinue aninsurance policy or to have an insurance policy made paid-up in order to purchasea new policy with another company or the same company, without clearlyinforming the policyowner of the differences between the two policies and thefinancial consequences of replacing the original policy, it is known as _________.

A. SwitchingB. ExplainingC. InvestingD. Twisting

128. Mr. Mark invested RM6,000 in Single Premium Investment-linked life insuranceof Assurance Berhad. The price of each unit is RM1.50, bid-offer spread is 5%,the mortality charge is 1% and the policy fee is RM100. Use the Dual Pricingmethod to calculate the cash value.

A. RM5,540B. RM5,843C. RM5,543D. RM5,840

129. How does the “accumulation units” method of Investment-linked life insuranceworks?

A. Income is ploughed back into the fund and the unit price will increase overthe long term

B. Income is distributed to policyowner as additional units; the number ofunits will increase over long term when unit price remains unchanged.

C. Income is ploughed back into the fund and the number of the units increaseover the long term

D. Income is distributed to the policyowner, both unit price and number ofunits increase over the long term.

E & OE (1-June-2000) 18

130. The followings are the examples of Unit Trusts:

I. Amanah Saham NationalII. Kuala Lumpur Mutual FundIII. Amanah Saham WawasanIV. Mayban Management Bhd

A. I, II, IIIB. I, II, IVC. II, III, IVD. I, III, IV

131. What is the extra knowledge/ requirement needed for an Investment-linked lifeinsurance agent?

A. All relevant knowledge about technical aspect of life insurance, coverageand scope

B. All aspects about life coverC. All aspects of life insurance and legal requirementD. The financial advice in order to fulfill the customer’s needs

132. People generally invest their money to provide :

I. an improvement in their financial positionII. a less comfortable standard of livingIII. income during retirementIV. funds for paying necessary expenses and taxes by the deceased’s family

A. I, II & IIIB. I, III & IVC. I, II & IVD. II, III & IV

133. What is/are the characteristics of warrants?

I. warrants give the holder the option to subscribe for ordinary shares at apre-determined conversion ratio

II. warrants give the holder the option to subscribe for ordinary shares at apre-determined exercised price

III. warrants are usually detached from the loan stock and traded separately insecurities market

IV. warrants are issued on their own

A. I onlyB. I, II & IIIC. I, III & IVD. I, II, III & IV

134. Diversification in investment involves _______________.

A. reducing the risks of investment by putting the fund under managementinto several categories of investment

B. reducing the risks of investment by putting all one’s egg in one basketC. putting all the funds under management into one category of investmentD. spreading the risks of investment by not putting the fund into several

categories investment

135. The investment returns under an Investment-linked life insurance policy _______.

I. are not guaranteedII. are fixed at policy inceptionIII. are linked to the performance of the investment fund managed by the life

officeIV. fluctuate according to the rise and fall of market price


136. Which of the following investment vehicles are mainly for capital appreciationpurpose?

A. corporate bonds and preference sharesB. preference shares and ordinary sharesC. corporate bonds and ordinary sharesD. ordinary shares and option

137. Under the Securities Exchange Act 1934 of US ___________________.

I. insurance agents and agency office employees dealing in variable lifeinsurance must register with the National Association of Securities Dealers

II. insurance companies or the sales company dealing in variable lifeinsurance must register as a broker-dealer

III. insurance agents and agency office employees dealing in variable lifeinsurance must pass an examination in securities business

IV. a prospectus disclosing the identity and nature of the insurer’s businessamong others must be provided by the insurers to potential client


E & OE (1-June-2000) 19

138. The term ‘Investment-linked’ in Malaysia shall be similar to the term ‘________’in the United Kingdom and to the term ‘_____________’ in the United States.

A. Unit-linked and Unit TrustB. Unit-linked and Variable LifeC. Unit Trust and Variable InvestmentD. Investment Trust and Variable Linked

139. Investing in bonds offers the following advantages EXCEPT

A. it is a place of temporary refuge when the investor foresee that the marketoutlook is uncertain

B. it offers protection to the principal and guaranteed steady stream of incomeC. it enables the investor an opportunity for capital gainD. it allows the investor a chance for capital preservation

140. Which of the following fixed income securities yield the highest return?

A. government bondsB. debenture stocksC. convertible bondsD. loan stocks

141. Spot market, a type of cash market is___________________.

A. market which quote prices referred to the current market price of an itemavailable for immediate delivery

B. market for deferred delivery of commoditiesC. market that are traceable only from the late 20th centuryD. to establish forward contracts featuring the contract price and future

delivery dates

142. The charge on the initial units under the Investment-linked life insurance policies_________.

I. will have higher annual management charges such as 6% per annumthroughout the term of the policy contract

II. means that their cash value of the initial units is much lower than their facevalue for the years

III. is much less commonly used these date than in the pastIV. bears lighter discontinuance charges


143. What are the disadvantages in investing in ordinary shares?

I. dividends repaid not more than the fixed rateII. investors are exposed to market and specific risksIII. shares can become worthless if company becomes insolvent

A. I, IIB. I, IIIC. II, IIID. I, II & III

144. Which of the following is the true statement about warrants or TransferableSubscriptions Rights (TSR)

A. Investors have to put in a large initial outlay to establish an exposure to theshares

B. on expiry, warrants which are not exercised lose their value completelyC. like ordinary shares, there is no chance for price recoveryD. by selling the warrants given to an investor in the first instance, the

investor cannot benefit from the capital gain

145. Which of the following investment instruments has both the advantages of capitalappreciation liquidity and inflation hedge?

A. cashB. bondC. futuresD. ordinary shares

146. Under a regular premium Investment-linked whole life insurance plan___________.

I. premium top-ups and holidays, subject to the life office’s administrativerules are usually allowed

II. life protection is the main objective of the plan with investment as anominal purpose

III. withdrawals and surrenders usually after the payment a few years premiumare allowed

IV. a “one-off” premium contribution is made to the policy which uses thepremium to purchase units in an Investment-linked fund and to providecertain level life cover


E & OE (1-June-2000) 20

147. Which of the following is/are the main characteristics of Investment-linked lifepolicies?

I. the policies can be used for investment, as source of regular savings andprotection

II. the cash values and protection benefits are determined by the investmentperformance of the underlying assets

III. the net cash values of the policies are the gross cash values shown in thepolicy that include reversionary bonus up to the date of the surrender, lessall indebtedness include interest.

A. IB. IIC. I & IID. I, II & III

148. The protection costs under an Investment-linked life insurance policy _________.

I. are met by a flat initial charge for regular premium plansII. are generally covered by cancellation of units in the fundIII. are generally met by explicit charges stipulated openly in the policy termsIV. vary with age of policyowner and level of cover


149. Which of the following statements about switching is/are NOT TRUE?

I. switching facility allows a policyholder the freedom to move part or all ofhis money from one fund to another

II. if the company offers only one fund to its policyholders, it will normallyinclude a switching facility

III. it is advisable for policyholders to switch funds from equity fund to cashfunds in times of volatile stock market

A. I & IIIB. IIC. IIID. II & III

150. The criteria for comparing traditional life insurance products with Investment-linked life insurance products include______________.

I. the life offices management expertiseII. the products investment returns and risksIII. the policies premium computationIV. death benefit provided under the policies

A. I, II & IIIB. I, II & IVC. I, III& IVD. II, III & IV

151. Policy fee payable by an Investment-linked life insurance policyowner is to cover_____.

A. the mortality costs of the Investment-linked life insurance policyB. the administrative expenses of setting up the Investment-linked life

insurance policyC. the handling charges by professional investment managersD. the price for each unit bought under the Investment-linked life insurance

policy

152. Which one of the following BEST describes the policy benefits of an Investment-linked policy?

A. the policy benefits are guaranteedB. the policy benefits are payable only on death or disabilityC. the policy benefits will depend on the long-term investment of the life

officeD. the policy benefits are directly linked to the investment performance of the

underlying assets

153. The risk/return profile of the following funds in the order of lower to higher levelof risks.

I. Bond fundsII. Cash fundsIII. Property fundsIV. Managed funds

A. I, II, III, IVB. II, I, III, IVC. II, III, I, IVD. III, II, I, IV

E & OE (1-June-2000) 21

154. Investing in properties can ____________________.

A. provide good capital appreciation and a poor flow of incomeB. be high risks investment especially if good repayment methods are

obtainedC. result in easy disposal of the properties during economic recessionD. result in free capital gain through proper mortgaging of the properties

155. Investment-linked funds can be invested in any financial instruments includingcash funds, bond funds, equity funds, property funds, specialised funds, balancedfunds and managed funds. Managed funds _____________________.

A. include funds invested only in equities and bondsB. include funds invested in fixed proportion of specialised assets, for

example, 70% of the funds are in equities and 30 % in bondsC. include funds that are restricted to investment in a particular country only

such as the ASEAN Fund, the Emerging Markets Fund and theInternational Bond Fund

D. investing in a wide variety of assets, their allocation of funds will dependon the fund managers’ views of the future prospects of the financialmarkets involved

156. The following statements are features of Investment-linked life insurance policies_________.

I. there is no guaranteed minimum sum assured for the purpose of declaringbonuses

II. there is no guaranteed minimum sum assured as a level of life insuranceprotection

III. each of the policyowner’s money will be used to purchase units, thenumber of which is dependent on the offer price of each unit

IV. top-up can be made in order to purchase more units from the Investment-linked fund itself


157. Which one of the following statements about Investment-linked policies andendowment policies are FALSE?

I. the policy values of Investment-linked and endowment policies directlyreflect the performance of the fund of the life office

II. the premiums and benefits of the endowment policies are determined at theinception of the policy whereas Investment-linked policies are flexible asthey are account driven

III. the benefits and risk of Investment-linked and endowment policies aredirectly transferred to the policyholders


158. Under the dual pricing method of her single premium Investment-linked lifeinsurance policy, Agnes had allocated an amount of RM4,000 premium to buyingunits. The number of units that Agnes holds is 4,000. After 10 years, the offerprice is now RM1.97. The bid-offer spread is 5%. The mortality charge is 1% andthe policy fee is RM100. The ending value of investment, the return on grosspremium and the annual yield under Agnes’s policy are _______________.

A. RM7, 701.20, RM1.925 and 0.118 or 11.8% respectivelyB. RM 7,486, RM1.871and 0.087 or 8.7% respectivelyC. RM7, 311.14, RM1.828 and 0.062 or 6.2% respectivelyD. RM7, 311.14, RM1.924 and 0.118 or 11.8% respectively

159. Which of the following statements about single premium Investment-linkedpolicies are TRUE?

I. the amount of insurance protection is a percentage of the single premiumpaid and is subject to a minimum amount

II. top-ups or single premium injections are allowed in the plansIII. the emphasis is normally on investment and life protectionIV. single premium policies must at least have a minimum premium of

RM5,000

A. I & IIB. II & IIIC. I, II & IVD. II, III & IV

E & OE (1-June-2000) 22

160. Which one of the following statements about the flexibility features ofInvestment-linked policies is FALSE?

A. policyowners have the flexibility of switching from one fund to anotherprovided it satisfies the companies switching criteria

B. policyowners may request for a partial surrender of the policy and thewithdrawal amount will be met by cashing the units at bid price

C. policyowners can take loans against their Investment-linked policies up tothe entire cash value of their policies

D. policyowners have the flexibility of increasing or decreasing theirpremiums for regular premium Investment-linked policies

161. Which one of the following statements is FALSE?

A. for traditional with-profit life insurance, the life office will carry out avaluation of its assets and liabilities yearly and any surplus may beallocated to policyholders in the form of bonuses

B. Investment-linked life insurance policies offer investors policies withvalues indirectly linked to the investment performance of the life office

C. the investment element of Investment-linked policies varies according tounderlying assets of the portfolio

D. both Whole Life and Endowment policies can be used as an investmentvehicle which the benefits become payable at a future date, either death ormaturity

162. One of the following statements about surrender value under traditional withprofit life insurance products is TRUE.

A. the amount of the surrender value is usually lower than the amount underwithout profit policies and it varies with the age of the assured, beinglower at older age

B. the amount of the surrender value is usually equal to the amount underwithout profit policies and it varies with the age of the assured, beinglower at older age

C. in the case of with profit life insurance policies, the net cash surrendervalue includes the surrender value of the reversionary bonus up to the dateof surrender

D. in the case of with profit life insurance policies, the net cash surrendervalue excludes the surrender value of the reversionary bonus up to the dateof surrender

163. One of the followings is true about Investment-linked insurance policy?

A. has no guaranteed minimum death benefitB. has cash value like the traditional life insurance policiesC. must be issued with a minimum premium of RM4,000D. must be issued with a minimum death cover of RM5,000

164. Which one of the following statements about the benefits of Investment-linkedfund is FALSE?

A. the fund provides a highly diversified portfolio, thus lowering the risk ofinvestment

B. the fund relieves the investor from the hassle of administering his/herinvestment

C. the fund ensures definite high yield for an investor since it is managed byprofessionals who are well-versed in the management of risks ofinvestment portfolio

D. the fund enables small investor to participate in a pool of diversifiedportfolio in which he/she, with low investment capital is unlikely to haveaccess

E & OE (1-June-2000) 23

1. C 41. D 81. D 121. B 161. B2. B 42. D 82. D 122. C 162. C3. C 43. C 83. B 123. D 163. D4. A 44. B 84. D 124. B 164. C5. B 45. A 85. B 125. C6. A 46. A 86. D 126. B7. C 47. C 87. A 127. D8. A 48. D 88. D 128. C9. D 49. B 89. D 129. A10. B 50. C 90. C 130. B11. C 51. D 91. C 131. D12. B 52. C 92. B 132. B13. C 53. D 93. D 133. B14. D 54. B 94. A 134. A15. D 55. D 95. C 135. C16. D 56. B 96. A 136. B17. C 57. C 97. C 137. A18. D 58. C 98. A 138. B19. A 59. C 99. A 139. B20. A 60. C 100. D 140. D21. A 61. C 101. C 141. A22. A 62. A 102. C 142. A23. B 63. D 103. A 143. C24. B 64. B 104. A 144. B25. C 65. D 105. D 145. D26. B 66. A 106. B 146. A27. B 67. C 107. B 147. C28. C 68. A 108. C 148. D29. D 69. C 109. C 149. B30. D 70. C 110. A 150. D31. A 71. C 111. C 151. B32. C 72. B 112. D 152. D33. A 73. A 113. C 153. B34. C 74. B 114. A 154. D35. B 75. C 115. D 155. D36. A 76. A 116. B 156. C37. B 77. A 117. A 157. B38. D 78. D 118. C 158. C39. C 79. D 119. B 159. A40. C 80. C 120. D 160. C

Education

PCE Sample Exam_3