CEILLI SET 1 2010

AIA Premier Academy Page 1

CEILI - SET 1

Anticipated Questions with Answers

1 The public generally invest their money to provide ___________.
I. funds for a company
II. comfortable standard of living
III. income in retirement
IV. funds for the education and up-bringing of their children

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV

2 Depending on the investment objective, a person would need to choose
___________.

A investing in asset that yield less regular income or those that have
better for capital gain
B investing in asset that yield more regular income or those that have less
for capital gain
C investing in asset that yield less regular income or those that have less
for capital gain
D investing in asset that yield more regular income or those that have
better for capital gain

3 Important considerations of an individuals decision in investment include
________.
I. the individuals attitude towards risk
II. the accessibility of fund
III. the taxation liability
IV. the individuals employer performance

A I, II and III
B II, III and IV
C I, II and IV
D I, III and IV


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4 A persons horizon will greatly depend on __________.

A the investment objectives, age of investor and the current financial
condition of investor
B the education background, sex and occupation background of investor
C the taxation treatment, moral characteristics of the investor and age of
investor
D the process of investment, the fund for paying financial expenses and
age of investor

5 The performance of an investment depends on _________.
I. a countrys economy factors and past experience of the invested
company
II. the competencies and capability of the invested company
management team
III. the number and spread of small-time investors choosing to invest
IV. the invested companys level of cost and the life cycle of the
investment

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV

6 The factors that may influence the choice of deposits in a bank include
_________.
I. fund available for investment
II. the length of time the funds can be in the account
III. whether emergency withdrawal are likely
IV. the age of depositor

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV


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7 Among the advantages in investing in shares are:
I. investors are able to participate directly in the future of the
invested company
II. shares provide good dividends and capital appreciation
III. shares are very liquid and can be traded in open market
IV. the value of the shares can never go beyond the price at which
the shares are bought.

A I, II and III
B II, III and IV
C I, II, and IV
D I, III and IV

8 Unit trust is essentially for:

A two-way arrangements between the investors and the fund manager
B two-way arrangements between the investors and the trustee
C three-way arrangements among the investors, the trustee and the fund
manager
D three-way arrangements among the investors, the trustee and the
supervisory authority

9 The function of investment trust include:
I. making investment simpler to small-time investors
II. making investment accessible to small-time investors
III. making investment more cost effective to small-time investors
IV. making investment a definite profitable transaction for small-time
investors

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV

10 An example of investment trust is:

A that of Amanah Saham National
B that of KL Mutual Fund
C the listed Seacorp Schroders
D that of Mayban Management Bhd


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11 What are derivatives?

A They are real estate investment providing good capital appreciation and
high flow of income
B They are pools of fund introduced to many investors kept in trust by bank
managed by a professional fund manager
C They are preference shares that give the holders the right to a fixed
dividend provided that have been made
D They are financial instruments whose values are linked to the price of
underlying instruments in the cash market

12 Investors purchasing call option will be hoping that:

A the share price will fall when option is exercised, the premium and the
fixed price will be more than the values of the share
B the share price will rise when option is exercised, the premium and the
fixed price will be more than the values of the share
C the share price will fall when option is exercised, the premium and the
fixed price will be less than the values of the share
D the share price will rise when option is exercised, the premium and the
fixed price will be less than the values of the share

13 Warrants or TSR are:
I. seldom issued on their own
II. often issued free and attached to rights or loan stocks
III. often issued as an added attraction or sweetener allowing a
corporate issuer to obtain a lower financing costs
IV. not permitted to be detached from the loan stock and sold
separately in the securities market

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV

14 Hedging can be described as:

A assuming of present position opposite to future positions in an attempt to
maximize financial gains from price stability
B assuming of future positions opposite to cash position in an attempt to
minimize the risk of financial loss from adverse price changes
C making money by selling a physical commodity immediately to a buyer for
his immediate enjoyment
D shifting of the risk of price fluctuation from participants who are willing to
assume risks to those who are not

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15 Life insurance can be described as:
I. a means of alleviating of the financial distress that death may
bring
II. a means of spending and divesting when death occurs
III. a pool of fund into which a large numbers of policyowners jointly
contribute in relation to their risk exposures
IV. a contract dependent in human life

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV

16 The first investment-linked life insurance contract in the United Kingdom
transacted some 30 years ago was ________

A a group retirement annuity for the self-employed
B an individual retirement annuity for the self-employed
C introduced by the London & Manchester Association Company Limited in
1953
D linked to an internal unit trust administered by the London & Manchester
Association Company Limited

17 The Investment Company Act 1940 of United States ________
A regards entities that invest assets of variable life insurance policyowners
as investment companies and regulates the companies management
and operations
B requires that potential clients be provided with a prospectus that among
others discloses the identity and nature of the insurers business
C requires that potential clients be provided with a prospectus that among
others discloses the financial information of the insurer
D requires that insurance agents and agency office employees dealing with
variable life insurance must pass an examination in securities business
and be registered with the National Association of Securities Dealers


18 One of the factors which has contributed to the expansion of the investment-
linked life insurance business in Singapore was ___________
A the requirement of the Securities Exchange Act 1934 that all insurance
agents and agency office employees dealing in variable life insurance
must pass an examination in securities business
B the regulations of investment companys management and operation
including that of how the premiums are going to be invested, financial
information of the insurer, chargeable fees and expenses and rights of
policyowners
C the introduction of the Enhanced Investment Scheme (EIS) by the Central
Provident Fund (CPF) in 1993
D the introduction of the new generation of investment-linked life insurance
products, the Hambro Whole Life Plan in 1997
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19 How are the premiums under investment-linked life insurance policies
apportioned?
A A major portion of the investment-linked life insurance policies premium
are allocated for the mortality protection aspects under the policy and the
lesser part of the premium are used to purchase units in the investment-
linked fund managed by the life offices
B Investment-linked life insurance policies premium will be divided equally
in both mortality protection aspects and to purchase units in the
investment-linked fund managed by the life offices
C A major portion of the investment-linked life insurance policies premium
are used to purchase units in the investment-linked fund and a lesser
portion for the mortality protection aspects under the policy
D The whole Investment-linked life insurance policy premiums are used to
purchase units in the investment-linked fund, and the mortality aspects is
given free

20 Each premium that an investment-linked life insurance policyowner makes is
_________.
A allocated to units at the life offices selling price called offer price
prevailing on each investment date
B allocated to units at the life offices selling price called offer price
prevailing on each cash-in-date
C allocated to units at the life offices selling price called bid price prevailing
on each investment date
D allocated to units at the life offices selling price called bid price prevailing
on each cash-in-date

21 In respect of investment-linked life insurance funds, the difference between the
offer and bid prices in normal market condition is ___________.
A 10% - 20% of offer price, and this difference is known as the offer-bid
spread
B 10% - 20% of bid price, and this difference is known as the offer-bid
spread
C 5% - 6% of offer price, and this difference is known as the offer-bid
spread
D 5% - 6% of bid price, and this difference is known as the offer-bid spread

22 One fundamental difference between traditional with profit life insurance
policies and investment-linked life policies is ___________.
A investment-linked life insurance policies aim to produce a steady return by
smoothing out market fluctuations
B traditional with-profit life insurance policies aim to produce a steady return
by smoothing out market fluctuations
C investment-linked life insurance policies do not offer the potential for
higher returns
D traditional life insurance policies offer the potential for higher returns


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23 The expenses of running a life office and acquiring investment-linked life
insurance business ___________
A are covered by making certain charges on the policies issued both up-
front and regular policy charges not specifically detailed in the policy
items
B are borne in part by the policyowners directly in relation to the particular
policies and in part taken out of the life fund as a whole
C are levied on the policies through open stipulation in the policies including
the types and level of charges imposed
D cannot be determined by a careful study of the policies document and
policies statement

24 If the offer price in an investment date is RM2.50 and the premium amount of
RM250.00 is used to buy units, it will buy __________.
A 0.01 unit
B 10 units
C 100 units
D 100 units less the unallocated premium

25 Investment-linked funds can be structured into 2 ways:
A Warrant units and right units
B Investment units and mortality units
C Accumulation units and distribution units
D Term units and annuity units

26 As the value of Investment-link policy depends on the performance of financial
instrument in which the investment is invested,
A fund manager bears the risk and the policyowner bears the benefit of the
policy
B the life office bears the risk and policyowner bears the benefit of the
policy
C the invested company bears risk and life office bears the benefit of the
policy
D policyowner bears both risk and benefit of the policy

27 Currently, financial instrument which Investment-linked Funds are invested
include:
I. Cash Fund
II. Equity Fund
III. Property Fund
IV. Diversified Fund

A I
B I and II
C I, II and III
D I, II, III and IV
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28 The switching facility in Investment-linked fund allows

A a life office to switch on Investment-linked life insurance policy to a
traditional with profit endowment policy
B a life office to switch a single premium Investment-linked whole life
insurance plan to a regular premium Investment-linked whole life
insurance plan
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 offices
policy to another life offices policy at the same premium

29 If the number of unit in an Investment-linked Fund is 100,000 and the value of
the total value of the fund at x point in time is RM1 million, the value of each
unit can be calculated by

A multiplying number of unit in existence with value of the total fund
B subtracting the number of unit existing before x point from the 100,000
unit multiply the number with the value of total fund
C dividing the value of the total fund by the sum of the number of units in
existence
D dividing the value of the total fund by the sum of the number of units
existing before x point in time

30 Under traditional with-profit life insurance policy,
I. the life fund maintains a reserve to help level out the short term
fluctuation in value of the life funds investment
II. maintaining a reserve could mean that the policyowner does not
receive the full value in a year of high investment gains
III. maintaining a reserve could mean that the policyowner does not
suffer in a year of poor investment conditions
IV. maintaining a reserve could mean that the full impact of the
changes in investment conditions will be directly borne by the
policyowner

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV


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31 A major difference between traditional with-profit life insurance product and
Investment-linked life insurance policy

A traditional with-profit life insurance policy can reduce in value particularly
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 fluctuate greatly
depending on the investment performance of the life office
D the value of Investment-linked life insurance policy can never fluctuate
once the units are added to the policyowners policy

32 The value of investment depend on 2 factors:

A the offer price and bid price
B disability income and cash value
C cash value plus protection cost
D the value of each of the units plus number of units the policy has
accumulated to date

33 The phrase "Top-Up" in Investment-Linked Life Insurance means:

A the policyowners pay further premium to purchase additional units of the
investment-linked fund which will be added to the existing units in the
policyowners account
B the life office maintain reserves to level out short term fluctuation in the
value of Investment-linked fund
C when the Investment-linked fund value increases, the value of the fund
will also increase
D the policyowner can change his investment fund to another fund which he
believes to have great opportunities for higher return

34 With dual pricing method, Ahmad has paid RM4,000 premium to buy his single
premium investment-linked policy. The offer price is Rm1 and bid offer spread
is 5%. Assuming the unit price never change, what is the bid price and the
amount that Ahmad will get if he cash in or claim the policy ________

A 0.095 and RM3,800 respectively
B 0.95 and RM3,800 respectively
C 0.05 and RM2,000 respectively
D 0.50 and RM2,000 respectively

35 Under single premium pricing method, Joo Hin bought a single-premium
investment-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 RM3,938
B RM3,800
C RM3,700
D RM3,662

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36 The formula for Annual Yield for single premium fund is
A (RGP)
1/n
+ 1,n = number of units
B (RGP)
1/n
+ 1,n = number of year
C (RGP)
1/n
- 1,n = number of units
D (RGP)
1/n
- 1,n = number of years

37 The benefits of investing in investment-linked funds.
I. It offers the policyowner an access to a "pooled" or "diversified
portfolio" of investment.
II. Investment-linked products have simple design with clear
structure which caters separately for investment and insurance
protection.
III. Policyowners can access to the investment-linked fund managed
by professional fund manager with unproven track record.
IV. Investors can buy investment-linked life insurance policy with an
initial investment at as low as RM4000.

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV

38 A well-diversified investment-linked fund has.

A many professional fund managers who take care of many funds
B a better risk characteristic than a less-diversified fund
C a simple designed product which cater separately for investment and
insurance protection
D provision of flexibility to change the level of premium payment and take
premium holidays

39 The flexibility of investment-linked fund are.
I. investment-linked products have simple product design which
cater separately for investment and insurance protection
II. policyowner can easily change the level of his premium payment
and add single premium top-ups
III. policyowner can buy an investment-linked life insurance policy
with an initial investment at as low as RM4,000
IV. policyowner can easily change the level of sum assured and
switch investment between funds

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV


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40 The following statements about investment expertise in investment-linked is
FALSE.

A Investment-linked funds have professional fund managers who have the
investment expertise to invest the fund to achieve high return over the
long term.
B Investment-linked funds have professional fund managers who have the
investment expertise to invest the fund to always achieve high return over
the short term.
C An ordinary policyowner does not normally has good knowledge of
financial market to invest his money effectively.
D Investment-linked fund have professional fund manager to manage the
fund.

41 The criterias for comparing traditional life insurance products with investment-
linked life insurance products include
I. the products investment returns and risks.
II. the policy premium computation.
III. the death benefit.
IV. the life offices management expertise.

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV

42 Investment-linked life insurance products benefits

A are solely dependent on fixed income securities in which the funds invest.
B comprise the investment returns only.
C wholly or partly determined by referring to the value of or income from
property of any description or by referring to the fluctuation in or in an
index of, the value of property of any description.
D are determined and fixed at the inception of the policy contract.

43 Under traditional without-profit life insurance products, the amount payable to
the policyowners
A does not depend on the investment performance of the life office as it is
fixed at the inception of the policy thus there are no investment risks.
B Includes bonuses which are allocated to the policyowner in the form of
additions to the sum assured but these allocations are not directly linked
to the life office investment performance.
C vary according to the performance and values of the underlying assets of
the life offices investment.
D vary according to the performance and values of the underlying assets
that the policies are tied to.


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44 Investment-linked life insurance policies are said to be account driven. This
means that
I. the premiums charged and the benefits under the policy are fixed
base on specific sum assured and stated in the policies at their
inceptions.
II. Policyowner have the flexibility in changing their premium
payments.
III. Life offices may retain the right to vary some of the changes made
under the policies.
IV. If the future experience differs from what is assured when the
policies are priced, the life offices may depart from their intended
policies and change the offer and bid prices.

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV

45 The following statements concerning taxation in respect of investment-linked
life insurance policies are true.
I. surpluses generated from writing investments-linked life insurance
products are already taxed at the level of the life insurance
companies.
II. Proceeds distributed to policyowner of investment-linked life
insurance policy are tax free in the hands of policyowner.
III. Disposal of units in investment-linked life insurance should attract
tax as they are capital receipts.
IV. The tax laws currently governing other forms of life insurance
apply to investment-linked life insurance.

A I, II and III
B I, II and IV
C I, III and IV
D II, III and IV


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46 What are the stages involved in providing effective advice to investment-linked
life insurance customers?
I. conducting the fact-finding
II. marketing qualification
III. assessing and satisfying customers
IV. making recommendation to customers

A I, II and III
B I, III and IV
C II, III and IV
D I, II, III and IV

47 After the financial needs of a customer is assessed, what must an investment-
linked life insurance agent do?
I. consider the most appropriate means to satisfy those needs
offered within the investment-linked insurance.
II. Consider the most appropriate means of satisfying those needs
which may involve financial products other than investment-linked
life insurance.
III. Refer the customer to another person with better expertise in
certain areas of financial services, should the need arise.
IV. If the financial needs fall outside the scope of the insurers
portfolio the agent must discontinue his finding.

A I and IV
B II and III
C II and IV
D II

48 What do you understand by the phrase " conducting the fact-finding" which is
done by an investment-linked insurance agent?

A Gathering all information of the investment available by the insurer.
B Gathering all relevant information about the customer before making
recommendation.
C Gathering all information about the various plans offered by other
insurers in the market.
D Gathering as far as possible all elements that will affect the customers
investment.

49 Under the sales-oriented basis. What technique is frequently used?

A Product Sales Technique
B Market Sales Technique
C Hand Sales Technique
D Forced Sales Technique

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50 For a company to be successful in selling the products, the most important
thing to have is :

A Market-oriented agency force.
B Competitive products.
C Dedicated Staff.
D Good working environment.

51 An agent who engages in personal selling requires the following process:
I. conducting fact finding.
II. Assessing/satisfying customers needs.
III. Making recommendation to the customer.

A I and II
B I and III
C II and III
D I, II and III

52 What are the important ingredients in a successful sales interview?

A The agents skill in handling objections from a prospect.
B The reduction of the product price.
C Change in sales plan
D The agent making objections and drawing the prospects attention to the
advantages of the product.

53 What is the main reason of insurance agent in participating in the planning of
new product?
A Feedback on the market.
B To establish a goal for the agency and ways to achieve it.
C New ideas are established.
D To promote self esteem and confident in agent.