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Question 1 of 10
1. Question
What is the use of a level sales charge?
Correct
Many variable annuity contracts will contain a level sales charge that is applied to deposits into the contract. This sales charge is used to compensate the broker who sold the contract and to cover the costs associated with issuing the contract. The maximum amount of this sales charge must be specified in the contract.
Incorrect
Many variable annuity contracts will contain a level sales charge that is applied to deposits into the contract. This sales charge is used to compensate the broker who sold the contract and to cover the costs associated with issuing the contract. The maximum amount of this sales charge must be specified in the contract.
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Question 2 of 10
2. Question
What is the accumulation phase?
Correct
Throughout the accumulation phase, which is the period in which contributions are made into the variable annuity contract and prior to the beginning of benefit distributions, deposits are allocated into a variety of investment options and grow in accordance with the performance of that asset allocation, less reductions for expenses, and fees.
Incorrect
Throughout the accumulation phase, which is the period in which contributions are made into the variable annuity contract and prior to the beginning of benefit distributions, deposits are allocated into a variety of investment options and grow in accordance with the performance of that asset allocation, less reductions for expenses, and fees.
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Question 3 of 10
3. Question
What is the use of sales charges?
Correct
Life insurance companies typically deduct both a sales charge and a premium expense charge from contributions to a variable life insurance policy. The sales charge is used to compensate the broker who sold the policy and also to cover the costs of issuing the policy.
Incorrect
Life insurance companies typically deduct both a sales charge and a premium expense charge from contributions to a variable life insurance policy. The sales charge is used to compensate the broker who sold the policy and also to cover the costs of issuing the policy.
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Question 4 of 10
4. Question
What is the most common eventual settlement of a variable life insurance policy?
Correct
The most common eventual settlement of a variable life insurance policy is through the death of the insured. In this instance, the death benefits specified by the policy are payable tax-free to the policyholder’s beneficiary(ies).
Incorrect
The most common eventual settlement of a variable life insurance policy is through the death of the insured. In this instance, the death benefits specified by the policy are payable tax-free to the policyholder’s beneficiary(ies).
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Question 5 of 10
5. Question
How the ratio required for maintaining the qualification of an insurance determined?
Correct
In order to maintain its qualification as insurance, a variable life insurance policy must maintain a certain ratio between the amount of the cash value and the death benefit. This ratio is determined based on the issuing carrier’s mortality tables factoring in age and gender. As the cash value increases over time with strong investment performance, the death benefit rises accordingly.
Incorrect
In order to maintain its qualification as insurance, a variable life insurance policy must maintain a certain ratio between the amount of the cash value and the death benefit. This ratio is determined based on the issuing carrier’s mortality tables factoring in age and gender. As the cash value increases over time with strong investment performance, the death benefit rises accordingly.
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Question 6 of 10
6. Question
Which of the following statements is true regarding universal life insurance?
Correct
A universal life policy differs from a whole life policy primarily through the flexibility of premium payments. Additionally, any amount paid into the policy as premium is credited with interest based upon a rate set by the insurer and also is debited with cost of insurance charges based upon the insured’s demographic information and the amount of net amount at risk (excess of death benefit over cash value).
Incorrect
A universal life policy differs from a whole life policy primarily through the flexibility of premium payments. Additionally, any amount paid into the policy as premium is credited with interest based upon a rate set by the insurer and also is debited with cost of insurance charges based upon the insured’s demographic information and the amount of net amount at risk (excess of death benefit over cash value).
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Question 7 of 10
7. Question
What is the source of the interest rate risk?
Correct
An investor purchasing domestic corporate bonds will face a number of risks. Two of the most important of these risks include interest rate risk and reinvestment risk. The interest rate risk in this circumstance arises from the fact that the investor would be subject to a reduction in the value of the security if market interest rates rise.
Incorrect
An investor purchasing domestic corporate bonds will face a number of risks. Two of the most important of these risks include interest rate risk and reinvestment risk. The interest rate risk in this circumstance arises from the fact that the investor would be subject to a reduction in the value of the security if market interest rates rise.
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Question 8 of 10
8. Question
What is one of the most important risks an investor purchasing an emerging markets equity security will face?
Correct
An investor purchasing an emerging markets equity security will face a number of risks. Two of the most important of these risks include social and political risk and currency exchange risk. Due to the less stable nature of many governments within emerging markets, emerging markets equities typically require a higher level of expected returns to compensate investors for the additional level of risk to the security.
Incorrect
An investor purchasing an emerging markets equity security will face a number of risks. Two of the most important of these risks include social and political risk and currency exchange risk. Due to the less stable nature of many governments within emerging markets, emerging markets equities typically require a higher level of expected returns to compensate investors for the additional level of risk to the security.
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Question 9 of 10
9. Question
How will political instability affect a security?
Correct
Due to the less stable nature of many governments within emerging markets, emerging markets equities typically require a higher level of expected returns to compensate investors for the additional level of risk to the security. The real risk of political instability is that changes in the government structure or in the government’s attitude toward business and international integration could negatively impact the price of a security.
Incorrect
Due to the less stable nature of many governments within emerging markets, emerging markets equities typically require a higher level of expected returns to compensate investors for the additional level of risk to the security. The real risk of political instability is that changes in the government structure or in the government’s attitude toward business and international integration could negatively impact the price of a security.
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Question 10 of 10
10. Question
What is the primary role of market maker?
Correct
he Specialist or Market Maker is responsible for making a market in a given security. The Specialist/Market Maker’s primary role is to match bids and offers to obtain the optimal pricing for both buyers and sellers. The goals of this process are to obtain better price discovery, improve liquidity, and dampen volatility.
Incorrect
he Specialist or Market Maker is responsible for making a market in a given security. The Specialist/Market Maker’s primary role is to match bids and offers to obtain the optimal pricing for both buyers and sellers. The goals of this process are to obtain better price discovery, improve liquidity, and dampen volatility.