CERTIFICATE IN INVESTMENT LINKED INSURANCE EXAMINATION

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Choose the most appropriate answer.

1. Under the single pricing method of single premium policies, the number of units that can be bought is equivalent to ______________. A. B. C. D. the premium paid divided by the unit price the premium paid less policy charges divided by the unit price the premium paid divided by the bid price the premium paid less policy charges divided by the bid price

2. The switching facility under investment-linked life insurance policies is very useful ____________. A. B. C. D. for the purpose of financial planning by the policyowners for the purpose of profit planning by the life offices for the purpose of sales planning by the fund managers for the purpose of assets planning by the trustee

3. Under the dual pricing method of single premium policies, ________________ A. There is only one price quoted whether the policyowner is buying or selling his units B. The bid price is always higher than the offer price C. The policyowner buys the units at the offer price and sell the units at the bid price D. The policyowner buys the units at the life offices buying price and sells the units at the lifes office selling price.

4. The flexibility benefit of investment-linked funds include ____________. I. Investment-linked life insurance products have a simple product design with a clear structure which caters separately for investment and insurance protection. II. Policyowners can easily change the level of their premium payment. III. Policyowners can easily take premium holidays and add single premium top-ups IV. Policyowners can easily change the level of sum assured and switch their investment between funds A. B. C. D. I, II & III only I, II & IV only I, III & IV only II, III & IV only

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5. The benefit of investing in investment-linked funds include ______________. I. policyowners have access to a pooled or diversified portfolio of investments II. policyowners can easily change the level of their premium payments as the product design of investment-linked life insurance policies have clear structures which cater separately for investment and insurance protection III. policyowner can gain access to investment-linked funds managed by professional investment managers with unproven tracked records IV. policyowners can buy an investment-linked life insurance policy with an initial investment of as low as RM4,000. A. B. C. D. I, II & III only I, II & IV only I, III & IV only II, III & IV only

6. The following statement about option to top-up under investment-linked life insurance products is false: A. Policyowners are normally allowed to top-up their policies at any time, subject to a minimum amount. B. To top up a policy, the policyowner pays further single premium at the time of top-up. C. Further premiums at time of top-up will be used in full, after deducting charges for top-ups, to purchased additional units of the investment-linked fund. D. Policyowners may buy additional units of the investment-linked funds and these units will be allocated to new investment-linked life insurance policies.

7. Policy fee payable by an investment-linked life insurance policyowner is to cover A. B. C. D. the handling charges by professional investment managers. the price for each unit bought under the investment-linked life insurance policy. the mortality cost of the investment-linked life insurance policy. The administrative expenses of setting up the investment-linked life insurance policy.

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8. The characteristics of an investment-linked life insurance policy include __________ I. its cash 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 commissions and office expenses are met by a variety of life offices prior to any changes IV. its cash value is normally the value of units allocated to the policyowner, calculated at a bid price A. B. C. D. I, II & III only I, II & IV only I, III & IV only II, III & IV only

9. Investment-linked funds can be invested in any financial instruments including cash funds, equity funds, property funds, specialized funds and diversified funds. Equity funds ____________. A. invest in stocks and shares and are inherently of lower risk in nature and the prices of the stocks and shares are stable. B. invest in stocks and shares and investors who buy such assets usually aim for capital appreciation. C. invest in stocks and shares and during market recession, such assets are usually the last to depreciate. D. invest in stocks and shares and the magnitude of the change in unit prices will depend on the quality only of the equities held.

10. The offer price under an investment-linked life insurance policy is __________ A. B. C. D. the price at which units under policy are offered for sale by the life office the price at which units under policy are bought back by the life office also known as the bid price a fixed amount throughout the life of the policy

11. Under a regular premium investment-linked whole life insurance plan, _______ I. premium top-ups and holidays, subject to the life offices administrative rules, are usually allowed II. life protection is the main objective of the plan with investment as a nominal purpose III. a one-Off premium contribution is made to the policy which uses the premium to purchase units in an investment-linked fund and to provide certain level life cover IV. withdrawals and surrenders, usually after the payment of a few years premium, are allowed Indian Business Development Unit 4

A. B. C. D.

I, II & III only I, II & IV only I, III & IV only II, III & IV only

12. Under investment-linked life insurance policies, ____________________. I. there is no guaranteed minimum sum assured for the purposes of declaring bonuses. II. there is no guaranteed minimum sum assured as a level of life insurance protection. III. each of the policyowners premium will be used to purchased units, the number of which is dependent on the offer price of each unit. IV. purchases of units can only be made from the investment-linked fund itself, which will then create new units and add the investment monies to the value of the fund. A. B. C. D. I, II & III only I, II & IV only I, III & IV only II, III & IV only

13. The following statement about risks of investing in investment-linked funds is TRUE. A. Investment in unitized funds which are fully invested in units of equity funds are not suitable for policyowners who can tolerate the risks of short term fluctuations in their cash value. B. Policyowner who invest in unitized fund with high equity investment face greater risk but can expect to achieve higher return than the traditional life insurance product over the long term. C. Policyowners who are risk averse should buy investment-linked life insurance policies with high equity investment. D. Policyowners who are risk averse should not purchased life insurance policies with high protection and guaranteed cash and maturity values.

14. Why is so important that the customer must understand the recommendations full? A. Because insurer does not guarantee any return. B. Because the policyholder expects higher return. C. Because the impact of changes in investment condition of investment-linked life policy falls wholly on the customer. D. Because the insurer may give the wrong recommendations.

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15. When a consumer becomes aware of a potential opportunity and feels the need for a product to satisfy his needs, the term used under the Consumer Buying Decision Process is known as ______________. A. B. C. D. information search problem recognition problem solution evaluation of problem

16. When selling investment-linked insurance policies, the objectives of an insurance agent to his customers are _____________. I. II. III. IV. A. B. C. A. to impose his views on the customers concerning investment to satisfy his customers needs and requirements to increase his sales quotas by all means to earn an income for himself

I & III sahaja II & IV sahaja III & IV sahaja II & III sahaja

17. Investment-linked funds can be structured into two ways, namely accumulation units and distribution units. In accumulation units, the investment income of the funds is _______________. A. ploughed back into the funds, thus the unit prices will increase over the long term. B. ploughed back into the funds, thus the unit prices will decrease over the long term. C. used to purchase additional units to be distributed to the policyowner, thus the unit price remain unchanged but the policyowners get more units. D. used to purchase additional units to be distributed to the policyowner, thus the unit price decreases and the policyowners get more units. 18. The risk of investing in investment-linked funds include _____________. I. II. the value of units is not guaranteed the value of units is directly linked to investment performance of the underlying assets of the funds III. in times of a volatile stock market, the cash and maturity values of units invested in equity fund will rise and fall drastically IV. unitized funds are not managed by professional fund manager A. B. C. D. I, II & III only I, II & IV only I, III & IV only II, III & IV only

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19. Why is sales plan regarded as important to an agent for the successful selling of a new insurance product? I. II. It allows an insurance agent to establish his goal during planning. It allows an insurance agent to participate in the function of controlling. III. It makes the customer buy according to what the sales plan offers. IV. It allows an insurance agent to establish ways to achieve goals for the agency A. B. C. D. I, II & III only I, II & IV only I, III & IV only II, III & IV only

20. The following statements about expertise in investment is false: A. Professional fund managers have the investment expertise to achieve high return over long term. B. Professional fund managers have the investment expertise to always achieve high return over a short term. C. An ordinary policyowner does not normally have good knowledge of financial markets to invest his money effectively. D. Investment-linked funds are managed by fund managers who have investment expertise.

21. What is switching in the context of investment-linked products? A. It is a comparison of many types of investment-linked funds. B. It allows a policyowner to switch part or all of his investment from one fund to another fund. C. It is a means of liabilities allocation exercised by a policyowner. D. It is a technical name for entering into a investment-linked life insurance program.

22. Which of the following is TRUE in regards to the regular premium investmentlinked whole life insurance plan? A. The premium under this plan are paid once only. B. It is the fifth type of investment-linked life insurance policies available in the market. C. Unit in the investment-linked or unitized fund would be purchased as premium is received. D. Both the premium holidays and top-ups allowed in this plan are not subjected to the life offices administration rules.

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23. Which one of the following BEST describes the policy benefits of investmentlinked policies? A. B. C. D. the policy benefits are guaranteed. the policy benefits are payable only on death or disability. the policy benefits will depend on long-term operation of the life office. the policy benefits are linked to the investment performance of the underlying assets.

24. Investors purchasing call option will be hoping that: A. the share price will fall when option is exercise, the premium and the fixed price will be more than the values of the share. B. the share price will rise when option is exercise, the premium and the fixed price will be more than the value of the share. C. the share price will fall when option is exercise, the premium and the fixed price will be less than the values of the share. D. the share price will rise when option is exercise, the premium and the fixed price will be less than the values of the share.

25. 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 call offer price prevailing on each cash in date C. allocated to units at the life offices selling price call bid price prevailing on each investment date D. allocated to units at the life offices selling price call bid price prevailing on each cash in date

26. Important consideration of an individuals decision in investment include _______. I. II. III. IV. A. B. C. D. the individuals attitude towards risk. the accessibility of fund. the taxation liability. the individuals employer performance.

I, II & III only II, III & IV only I, II & IV only I, III & IV only

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

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

A. B. C. D.

I, II & III only I, II & IV only I, III & IV only II, III & IV only

29. A well diversified investment-linked fund has ____. A. many professional fund managers who take care of many funds B. a better risk characteristics then 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

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

III. IV.

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A. B. C. D.

I & II only II & III only II & IV only II only

31. For single premium investment-linked life insurance policy, the death benefit is either one of the following, depending on the companys policy: I. II. III. IV. A. B. C. D. I & II only I & III only I & IV only I only the minimum sum assured or the value of the units, whichever is higher. the minimum sum assured plus the value of the units the sum assured (chosen by the life assured) or the value of the units whichever is higher. the sum assured (chosen by the life assured) plus the value of the units

32. What is the definition of accumulation units? A. Income is ploughed back into the fund and the unit price will increase over the long term. B. Income is distributed to policyowner as additional units, the number of units will increase over long term when unit price remain unchanged. C. Income is ploughed back into the fund and the number of units increase over the long term. D. Income is distributed to the policyowner, both unit price and number of units increase over the long term. 33. Which one of the following statements which describe the rates of the tax and relief of investment-linked insurance is true? A. Reviewed biannually by Finance Minister and proposed for that year. B. Reviewed every quarterly by Bank Negara. C. Disposal of units in an investment-linked life insurance should attract tax as they are capital receipts. D. Proposed by Finance Minister in the budget for the year and then incorporated in the Finance Act for that year.

34. A call option gives the holder _______. A. B. C. D. the right to buy the right to sell the right not to buy the right not to sell 10

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35. A persons investment 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

36. 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 charges not specifically detailed in the policy items. B. are borne in part by policyowners directly in relation to the particular policies and in part taken out of the life funds 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

37. For a company to be successful in selling the products, the most important thing to have is: A. B. C. D. Market-oriented agency force Competitive Products Dedicated staff Good working environment

38. The public generally invest their money to provide _______. I. II. III. IV. A. B. C. D. funds for a company. comfortable standard of living. income in retirement. funds for the education and up-bringing of their children.

I, II & III only I, II & IV only I, III & IV only II, III & IV only

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39. 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.

40. Investment-linked insurance products benefits A. are solely dependent on fixed income securities in which the funds invest. B. comprise the investment return 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.

41. In time of volatile stock market the policyowner may want to switch all or part of his investment ______. A. in cash fund to equity fund B. in managed fund to peroperty fund C. in equity fund to cash fund in order to protect the capital value if he think the stock market will crash D. in balance fund to equity fund

42. The benefits of investing in investment-linked life insurance include: I. Policyholders are relieved of the day to day administration of their investment. II. The funds invested are managed by professional fund managers. III. Investment-linked funds do not offer the policyowner access to diversified portfolio of investments. IV. Policyowner cannot easily change the level of his premium payment, take premium holidays, add single premium top-ups, make withdrawals, and switch his investment between funds. A. B. C. D. I & II only I & IV only II & III only III & IV only

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43. An individuals risks towards investment can be classified into two particular categories. They include ______. I. II. III. IV. A. B. C. D. I & II only I & III only II & IV only III & IV only the risk of not losing some or all of a persons initial investment the risk of rate of return on the investment not matching up to the individuals expectation the risk of rate of return on the investment matching up to the individuals expectation the risk of losing some or all of persons initial investment

44. Temporary or term assurance ________. A. is the most complex and expensive of all the life insurances. B. provides for surrender or cash values on early termination of the insurance C. provides for payment of the sum assured when the life assured survives a specified period. D. is one that if the life assured survives the specified period, the policy ceases and no return of premium is given.

45. The investment returns under an investment-linked life insurance policy ____. I. II. III. IV. A. B. C. D. are not guaranteed are assured are linked to the performance of the investment fund managed by the life office fluctuate according to the rise and fall of market prices

I, II & III only I, II & IV only I, III & IV only II, III & IV only

46. The risk of investing in investment-linked life insurance product includes the following, EXCEPT: A. B. C. D. The value of investment is not guaranteed. The value is linked to the underlying asset. In equity fund the value will move drastically. The professional fund manager not able to invest professionally.

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47. What are derivatives? A. They are real estates investment providing good capital appreciation and low of income. B. They are pool of funds introduced to many investors kept in trust by bank managed by a professional fund manager. C. They are preference shares that gives 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.

48. As the value of investment-linked 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 the life office bears the benefit of the policy. D. policyowner bears both risk and benefit of the policy.

49. 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. B. C. D. I, II and III only II, III and IV only I, II and IV only I, III and IV only

50. Customers who have purchased policies from an organizations who are salesoriented,usually ended buying policies which I. II. III. IV. A. B. C. D. they do not understand cannot meet their needs can meet their needs they surrender for its value or paid-up

I, II and III only I, II and IV only I, III and IV only II, III and IV only 14

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51. The switching facility in investment-linked fund allows ___________________ A. a life office to switch an 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 investmentlinked 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.

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

I, II and III only I, II and IV only I, III and IV only II, III and IV only

53. It is one of the methods used by government to borrow money from the public. It is a short-term funding vehicle issued by Central Bank and it is also the safest type of investment which carries no risk except the country is politically unstable. It is _________________ . A. B. C. D. bank account treasury bill government bond debenture stock

54. An insurer must provide each investment-linked policyholder with ___________ . A. B. C. D. the fund manager entertainment expenses the company annual report an advise of daily investment of funds a policy statement and the fund performance report.

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55. What is defined as the management process responsible for identifying, anticipating and satisfying customers requirement profitably? A. B. C. D. Investment Investment-linked Marketing Marketing investment

56. In the use of funds for investment, three elements affect the accessibility of the funds. They include ______. I. II. III. IV. A. B. C. D. the time horizon of need of the funds the cost or penalty of realizing the investment before its maturity period the age and attitude of the investor towards risk the initial cost in setting up or buying into the investment

I, II & III only I, II & IV only I, III & IV only II, III & IV only

57. The duties of the trustee of unit trust do not include _______. A. managing the portfolio of investments and administering the buying and selling of shares in the unit trust itself B. holding the pool of money and assets in trust on behalf of the investors C. ensuring that the fund managers adhere to the provisions of the trust deeds D. acting generally to protect the unit-holders

58. The investment returns under an investment-linked life insurance policy ____. I. II. III. IV. A. B. C. D. are not guaranteed are assured are linked to the performance of the investment fund managed by the life office fluctuate according to the rise and fall of market prices

I, II & III only I, II & IV only I, III & IV only II, III & IV only

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59. Traditional with-profit life insurance products include: A. B. C. D. non-participating whole life policy temporary assurance participating endowment insurance non-participating endowment insurance

60. 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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ANSWERS
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. A A C D B D D C B A B C B C B B A A B B 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. B C D D A A C A B B A A D A A C A D B C 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. C A C D C D D D A B C C B D C B A C C B

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