5. A UNIT TRUST is __________________________.
a. Established by a trust deed which enable a trustee to hold the pool of money and assets in trust on behalf
of the investor
b. A close-end fund and does not have to dispose of its assets if a large number of investors sell their shares
c. One whereby an investor buys units in the trust itself and not shares in the company
d. An organization registered under the SECURITIES AND EXCHANGE COMMISSION (SEC) which usually invests
in a wide range of equities and other investments
6. Characteristics of a variable life insurance policy include ____________________
I. Its withdrawal value and protection benefits are determined by the investment performance of the
underlying assets
II. Its protection costs are generally met by implicit charges
III. Its commission and company expenses are met by a variety of implicit charges with normally 6 months
notice given by the life companies prior to any change
IV. Its withdrawal value is normally the value of units allocated to the policy owner calculated at the bid price
a. I, II and III c. I, II and IV
b. II, III and IV d. I, III and IV
7. Which of the following statements are FALSE?
I. The policy value of variable life policies is determined by the offer price at the time of valuation
II. The policy value of endowment policies is the cash value plus any accumulated dividends less any
outstanding loans due at time of surrender
III. The life company needs to maintain a separate account for variable life policies distinct from the general
account.
a. II and III c. I and III
b. I, II and III d. I
8. Variable life insurance policy owners may withdraw in terms of __________________
a. Number of units or fixed monetary amount through cancellation of units
b. Number of units or fixed monetary amount through reduction of the life cover sum assured
c. Fixed monetary amount only through reduction of the life cover sum assured
d. Number of units through cancellation of units
41. The selling price under a variable life insurance policy is:
a. The price at which units the policy are bought back by the life company
b. The price at which units under the policy are offered for sale by the life company
c. Also known as the bid price
d. A fixed amount throughout
42. When investing in variable life funds, what are the benefits available?
I. The variable life funds offer policyholders an access to pooled or diversified portfolios
II. The variable life policyholder can vary his premium payments, take premium holidays, add single premium
top-ups and change the level of sum assured easily
III. The variable life policyholder can have access to a pool of qualified and trained professional fund managers
a. I and II c. I, II and III
b. I and III d. II and III
43. In variable life insurance policies ______________
I. There is no guaranteed minimum sum assured for the purposed of declaring dividends
II. There is no guaranteed minimum sum assured as a level of life insurance protection
III. Each of the policy owner’s premium will be used to purchase units, the number of which is dependent on
the selling price for each unit
IV. Purchase of units can only be made from the variable life fund itself, which will then create new units and
add the investment monies to the value of the fund
a. I and IV c. III and IV
b. II and IV d. II and III
44. Why is it important that the customer has to understand the sales proposal completely?
a. Because the insurer does not guarantee any return
b. Because the impact of changes in investment condition on variable life policy borne solely by the customer
c. Because the agent may give the wrong recommendations
d. Because the policyholders expects higher returns
45. A single premium variable life insurance policy must be issued with _____________
a. A minimum death benefit
b. A maximum withdrawal value
c. Without death benefit
d. Without withdrawal value
32. Which of the following statements about twisting are TRUE?
I. Twisting is a special form of misrepresentation
II. It refers to an agent inducing a policyholder to discontinue policy with another company without disclosing
the disadvantage of doing so
III. It includes misleading or incomplete comparison of policies
IV. It refers to an agent offering a prospect a special inducement to purchase a policy
a. I and IV c. II, III and IV
b. III and IV d. I, II and III
33. Rank the following in terms of liquidity, from the least liquid to the most liquid:
I. I. Short Term Securities III. Cash
II. II. Property IV. Equities
a. IV, II, III, I c. II, I, IV, III
b. III, I, IV, II d. II, IV, I, III
34. Which of the following best describes the benefits of variable life policies?
a. The policy benefits are payable only on death or disability
b. The policy benefits will depend on the long-term performance of the life company
c. The policy benefits are directly linked to the investment performance of the underlying assets
d. The policy benefits are guaranteed
35. Investing in bonds offer the following advantages with the exception of ______________
a. Offering protection to the principal and guaranteed steady stream of income
b. Being a place of temporary refuge when the investor foresees that the market outlook is uncertain
c. Allowing the investor a chance for capital preservations
d. Enabling the investors an opportunity for capital appreciation
36. Which of the following statements about benefits in a variable life fund is FALSE?
a. The fund provides a highly diversified portfolio, thus, lowering the risk of investment
b. The fund ensures definite high yield for the investor since it is managed by professionals who are well-
versed in the management of risks of investment portfolios
c. The fund relieves investor from the hassle of administering his/her investment
d. The fund enable small investor to participate in a pool of diversified portfolio in which he/she with low
investment capital, is likely to have acceded to
