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Question 1 of 10
1. Question
What is true in regards of derivative securities?
I. Derivatives may be used to produce income for retirees, hedge investments by locking in guaranteed sell prices.
II. A derivative is a financial security with a value that is reliant upon or derived from an underlying asset or group of assets.
III.Certain kinds of derivatives can be used for hedging, or insuring against risk on an asset
IV. The derivative itself is a contract between two or more parties based upon the asset or assetsCorrect
Derivatives have multiple uses to investors and are useful across a broad range of investment goals. Derivatives may be used to produce income for retirees, hedge investments by locking in guaranteed sell prices, produce high returns through speculative bets on the volatility of an asset’s price, and many more useful activities.
Incorrect
Derivatives have multiple uses to investors and are useful across a broad range of investment goals. Derivatives may be used to produce income for retirees, hedge investments by locking in guaranteed sell prices, produce high returns through speculative bets on the volatility of an asset’s price, and many more useful activities.
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Question 2 of 10
2. Question
What is/are true in regards of variable annuities?
I. A variable annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis.
II. The investor does not bear the market risk associated with the variable account balance.
III.The investor can decide in which markets their annuity premiums are invested.
IV. Variable annuities are high-fee, high-commission products.Correct
Variable annuities are insurance products that guarantee a variable payout over the life of the contract. Unlike fixed annuities, the investor may decide in which markets their annuity premiums are invested. Although bond markets are available, investors generally choose to invest their premiums in equity markets, as their investments will have a better chance of keeping pace with inflation.
Incorrect
Variable annuities are insurance products that guarantee a variable payout over the life of the contract. Unlike fixed annuities, the investor may decide in which markets their annuity premiums are invested. Although bond markets are available, investors generally choose to invest their premiums in equity markets, as their investments will have a better chance of keeping pace with inflation.
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Question 3 of 10
3. Question
Which of the following statements is/are true?
I. Fixed annuities offer a guaranteed payout because they have a set rate of return.
II. Under a fixed annuity the life insurance company agrees to pay a fixed rate of income to the investor for life after a certain date.
III. A variable annuity has no guaranteed returns because the investor’s principal is invested in one or more sub-accounts comprised of stocks.
IV. Variable annuities have the possibility of providing higher annuity payments, but also present the risk of lower annuity paymentsCorrect
A fixed annuity is a contract between an investor and an insurance company in which the investor provides the insurance company with a premium or multiple premiums in exchange for regular annuity payments at some future date. Since the annuity payments are based on the underlying account value, variable annuities have the possibility of providing higher annuity payments, but also present the risk of lower annuity payments. Sellers of variable annuities must be licensed by FINRA as well as by the state insurance department.
Incorrect
A fixed annuity is a contract between an investor and an insurance company in which the investor provides the insurance company with a premium or multiple premiums in exchange for regular annuity payments at some future date. Since the annuity payments are based on the underlying account value, variable annuities have the possibility of providing higher annuity payments, but also present the risk of lower annuity payments. Sellers of variable annuities must be licensed by FINRA as well as by the state insurance department.
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Question 4 of 10
4. Question
Which statements hold true for equity indexed annuities?
I. It is an alternative investment to a traditional fixed rate or variable rate annuity.
II. They are distinguished by the interest yield return being partially based on an equities index, such as the S&P 500 index.
III. Equity indexed annuities help provide investors with a hedge against inflation.
IV. Under Equity indexed annuities the investor may choose the underlying investments.Correct
Equity indexed annuities, also called equity linked annuities, are contracts between investors and insurance companies in which the investors provide the insurers with premiums in exchange for guaranteed income at a later date, usually retirement.Equity indexed annuities differ from variable annuities in that the investor may not choose the underlying investments; however, they are similar because in both types of contracts the investor bears the brunt of the market risk.
Incorrect
Equity indexed annuities, also called equity linked annuities, are contracts between investors and insurance companies in which the investors provide the insurers with premiums in exchange for guaranteed income at a later date, usually retirement.Equity indexed annuities differ from variable annuities in that the investor may not choose the underlying investments; however, they are similar because in both types of contracts the investor bears the brunt of the market risk.
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Question 5 of 10
5. Question
What are the different types of life insurances?
I. Term Life Insurance
II. Universal Life Insurance
III. Variable Life Insurance
IV. Derivative SecuritiesCorrect
Three types of life insurance which has been stated above.
Incorrect
Three types of life insurance which has been stated above.
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Question 6 of 10
6. Question
Which statement holds true for life term insurance?
I. In case of death of the insured individual during the policy term the death benefit is paid by the company to the beneficiary.
II. Term insurance provides the highest life insurance coverage for the lowest premiums during the period of the plan.
III. The ideal candidates for this plan are young people with children.
IV. The death benefit is the only benefit taken from term insurance.Correct
Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid. Term life insurance protects the insured against death, and the death benefit is the only benefit taken from term insurance.The main benefit of term insurance is its inexpensive premiums, which provide the highest amount of coverage received per dollar paid in premiums of all life insurance types. The ideal candidate for term life insurance is a younger person with children and a lower income
Incorrect
Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid. Term life insurance protects the insured against death, and the death benefit is the only benefit taken from term insurance.The main benefit of term insurance is its inexpensive premiums, which provide the highest amount of coverage received per dollar paid in premiums of all life insurance types. The ideal candidate for term life insurance is a younger person with children and a lower income
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Question 7 of 10
7. Question
What is true in regards of Universal life insurance?
I. Premiums paid under these are also variable.
II. A universal life insurance policy can accumulate cash value.
III. Universal life insurance is very attractive to investors that prefer multiple options.
IV. Universal life insurance is permanent life insurance with an investment savings element and low premiumsCorrect
Universal life insurance is a permanent life insurance policy that grows a cash value, but at a variable rate to help investors combat inflation. Premiums paid are also variable. They may be raised by the investor who wants to grow the cash value (the cash value will be raised by premiums only after the insurance portion has been paid), or lowered by the investor that wants lower premiums (as long as enough premium is paid to keep the insurance policy in force).
Incorrect
Universal life insurance is a permanent life insurance policy that grows a cash value, but at a variable rate to help investors combat inflation. Premiums paid are also variable. They may be raised by the investor who wants to grow the cash value (the cash value will be raised by premiums only after the insurance portion has been paid), or lowered by the investor that wants lower premiums (as long as enough premium is paid to keep the insurance policy in force).
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Question 8 of 10
8. Question
What is/ are true in regards of variable life insurance?
I. Variable life insurance is typically more expensive.
II. Variable life insurance policies have specific tax benefits, such as the tax-deferred accumulation of earnings.
III. Variable life insurance policies typically have a guaranteed minimum death benefit.
IV. Variable life insurance is a permanent life insurance product with separate accounts comprised of various instruments and investment fundsCorrect
In exchange for bearing some of the market risk, investors are provided an opportunity to more effectively combat the effects of inflation on the value of their life insurance policy. Variable life insurance policies typically have a guaranteed minimum death benefit. This minimum benefit is funded by a portion of the investor’s premiums going into the insurance company’s general account, where the insurer chooses how best to invest the premium.
Incorrect
In exchange for bearing some of the market risk, investors are provided an opportunity to more effectively combat the effects of inflation on the value of their life insurance policy. Variable life insurance policies typically have a guaranteed minimum death benefit. This minimum benefit is funded by a portion of the investor’s premiums going into the insurance company’s general account, where the insurer chooses how best to invest the premium.
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Question 9 of 10
9. Question
What is true in regards of investment real estate?
I. Cash flow from real estate is stable and far more predictable than most other businesses.
II. Under this the profit can arise either from recurring income, such as lease or rental income, or from unrealized appreciation in value.
III.Real estate is not a tangible asset
IV. It involves making investment in any real estate—buildings, fixtures, land, and associated natural resources—held for the purpose of profit rather than residence.Correct
Investment real estate involves any real estate—buildings, fixtures, land, and associated natural resources—held for the purpose of profit rather than residence. This profit can arise either from recurring income, such as lease or rental income, or from unrealized appreciation in value. Oftentimes even properties held for the purpose of producing income are also held to grow in value and so provide a capital gain on sale.
Incorrect
Investment real estate involves any real estate—buildings, fixtures, land, and associated natural resources—held for the purpose of profit rather than residence. This profit can arise either from recurring income, such as lease or rental income, or from unrealized appreciation in value. Oftentimes even properties held for the purpose of producing income are also held to grow in value and so provide a capital gain on sale.
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Question 10 of 10
10. Question
What is true in regards of investment characteristics of commodities and precious metals?
I. Commodity investing is investing in raw materials that are either consumed directly, such as food, or used as building blocks to create other products.
II. Commodities are frequently traded through futures contracts and on regulated exchanges.
III. Precious metals are metals with a high economic value due to their rarity.
IV. Precious metals can also be traded in terms of mutual funds and exchange-traded funds.Correct
Commodities are basic goods extracted from natural resources with minimal processing. These can include animal flesh like beef or pork; crops like wheat, rice, or beans; raw materials like iron ore, natural gas, or lumber; and precious metals like gold, silver, or platinum. Commodities are frequently traded through futures contracts and on regulated exchanges.Precious metals are metals with a high economic value, not infrequently due to their rarity. They are generally traded either through futures contracts or in terms of the physical assets themselves, such as coins or bars
Incorrect
Commodities are basic goods extracted from natural resources with minimal processing. These can include animal flesh like beef or pork; crops like wheat, rice, or beans; raw materials like iron ore, natural gas, or lumber; and precious metals like gold, silver, or platinum. Commodities are frequently traded through futures contracts and on regulated exchanges.Precious metals are metals with a high economic value, not infrequently due to their rarity. They are generally traded either through futures contracts or in terms of the physical assets themselves, such as coins or bars