Segregated Funds & Annuities - Chapter 2 - Segregated Funds with Complete Solutions!

A segregated fund is also known as what? - ANSWER-An Individual Variable Contract or IVIC What investment fund would be most appropriate when an objective is to (for example) purchase a house in the near future, and why? - ANSWER-Money Market Fund. 95% of the net assets must be invested in cash or cash equivalents such as treasury bills, short-term Government bonds, etc. This is the lowest-risk fund type that can be used for short-term investing or as an emergency fund. (Note: Due to the low level of risk, a money market fund will have a lower expected return as compared to other fund types). Which memory aid is used to remember the risk level associated with each type of fund, from lowest to high (in general)? - ANSWER-Mickey Mouse's Big Brother Dated Every Rich Singer Name each type of fund, ranked from lowest to highest level of risk; - ANSWER-Money Market Fund Mortgage Fund Bond Fund (Fixed Income) Balanced Fund Dividend Fund Equity Fund Real Estate Fund Specialty Fund Which one of the following funds would have the HIGHEST risk? Fixed Income Fund, Real Estate Fund, Dividend Fund, or Equity Fund? - ANSWER-Real Estate Fund (in order to be classified as a real estate fund, at least 90% of the fund's assets must be invested in residential, retail, commercial and industrial properties. This type of fund earns rental income on properties, has the potential to earn capital gains income on properties, and has the potential to earn interest income if the fund also invests in mortgages. In an extremely illiquid market, a real estate fund reserves the right to suspend redemption privileges. The rationale behind doing so is that selling properties at a loss hurts all unit holders). A segregated fund is protected from creditors during an investor's lifetime if: - ANSWER-An irrevocable beneficiary is named, or a revocable beneficiary is named and that beneficiary is part of the protected class. Who falls under the protected class with a seg fund? - ANSWER-Parent, spouse, child or grandchild. Felicity invests $10,000 into an RRSP. The funds were later used to purchase units in a segregated fund. Over the years, the fund earned $3,245 in dividend allocations as well as $1,250 in interest allocations. Felicity is now withdrawing the full amount from the RRSP, which is $15,302. Assuming that Felicity is in a 30% tax bracket, how much tax would she owe? - ANSWER-$4,590.60 (the entire amount withdrawn from an RRSP would be subject to tax, regardless of whether it is the original principal or the investment income earned within the plan. If Elaine i