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Segregated Funds & Annuities - Chapter
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What is the minimum maturity date for a segregated fund contract? ✔✔10 years.
(Reference: Chapter 2)
What is the NAVPU Formula? ✔✔NAVPU = [total value of assets - liabilities] / [number of units outstanding].
(Reference: Chapter 2)
Jenna invests $40,000 in a 75% / 75% segregated fund. Upon maturity, the value of the fund is $35,000. How much does Jenna receive? ✔✔$35,000. The client receives the greater of market value or guarantee.
(Reference: Chapter 2)
Sarah has $10,000 invested in a segregated fund. She wants to withdraw $5,000. When can Sarah make the withdrawal? ✔✔Any time.
(Reference: Chapter 2)
Which type of investment returns are generated by income funds? ✔✔Interest, dividends, and capital gains.
(Reference: Chapter 2)
Laura invests $100,000 in a segregated fund with a 75 / 75 guarantee. How much of Laura's original capital is at risk? ✔✔$25,000.
(Reference: Chapter 2)
What does creditor protection refer to? ✔✔The issue of whether or not an investor's assets are exempt from claims of their creditors in the event that the investor becomes bankrupt.
(Reference: Chapter 2)
The insurer makes up the difference between the market value and the guarantee from its financial reserves. In effect, the insurer "tops up" the market value to equal the value of the maturity guarantee. ✔✔When the market value at maturity is less than the guarantee value, where does the difference come from?
The death benefit guarantee is a promise made by the insurer that the beneficiary of the segregated fund will receive at least 75% of the sum deposited to the contract if the annuitant of the contract dies. ✔✔What is the death benefit guarantee?
A reset allows the segregated fund policy owner to take advantage of an increase in market value by increasing the value of the guarantees. However, the reset also extends the contract's maturity date - 10 years from the reset date. ✔✔What is a "reset"?
Guaranteed lifetime withdrawal benefit ✔✔What does GLWB stand for?
A savings phase and a payout phase ✔✔What are the two phases of GMWB and GLWB plans?
NAVPU = (total value of assets - liabilities) / number of units outstanding ✔✔How do you calculate NAVPU?
On each valuation day. For a fund investing in Canadian equities, a valuation day is a day that the Toronto Stock Exchange is open. ✔✔When is the NAVPU determined?
The same documents for the new fund as were received at the initial purchase. This includes both the information folder and the Fund Facts for the new fund. ✔✔When an investor contemplates a switch, which documents must they be provided?
A withdrawal can be made at any time. This provides him/her with investment flexibility. ✔✔When can an investor make a withdrawal?
- Investor informs insurer of the amount she wishes to withdraw
- The investor redeems the number of units that will provide the desired sum of money based on their market value
- Market value is determined at the valuation day following the request
- Fixed Income
- Equity
- Commodity
- Other ✔✔What are the five asset class types that a segregated fund can be classified by?
Money market funds are classified as a "cash" asset class. ✔✔Which asset class do money market funds fall into?
No. They are low risk and generally suitable for short term objectives because they typically offer a very low rate of return. ✔✔Are money market funds high risk?
They are a fixed income type of fund. ✔✔Which asset class do Bond funds belong in?
They are generally low-risk and have a low rate of return. ✔✔What risk level and rate of return do bond funds have?
Mortgage funds invest in residential, commercial, and industrial mortgages. ✔✔What do mortgage funds invest in?
Real estate investment trust ✔✔What does REIT stand for?
- Risk to capital
- Sales charge
- Management expense
- Penalties
- Age restriction for acquisition ✔✔What are the limitations of segregated funds?
