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Seg Mock Exam 2 Questions & answers
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Seg Mock Exam 2 Questions & answers
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Seg Mock Exam 2Gary is reviewing his portfolio and notices that the value of a segregated fund he
recently purchased has dropped significantly. He is worried about the fund. The last
time he spoke with his advisor was the day he purchased the fund. He and his advisor
have both been busy and not had time to speak.
What did Gary's advisor do incorrectly?
a) Gary's advisor should have followed up to see if he was satisfied with the segregated
fund.
b) Gary and his advisor are required to meet at least once every two years to review his
portfolio.
c) Gary's advisor should have updated him on the risks in his portfolio so Gary did not
lose any money.
d) Gary and his advisor should have made a fund switch before his investment dropped
in value. - ANS-(wrong) Gary and his advisor should have made a fund switch before
his investment dropped in value.
Rationale:
The agent should follow up with the client once the sales process is completed to
ensure his satisfaction with the product and to answer any questions. (Refer to section
6.3.3.1)
Danny is with his agent filling in an application for a non-registered segregated fund
investment. He is 40 years old and wants to use the funds when he turns 60. Danny
wants to choose the reset option on the fund. The insurer only offers scheduled resets
and the account is reset every six months.
The agent tells Danny that:
,a) He can have the reset option for the first 10 years, after which he can terminate the
scheduled resets.
b) He should not go for scheduled resets because the contract will be reset irrespective
of the value in the contract.
c) He should choose the scheduled reset because it locks in the growth. He can
surrender his contract at any time.
d) He should not choose the reset option because he needs to use the funds when he
turns 60. - ANS-He should choose the scheduled reset because it locks in the growth.
He can surrender his contract at any time.
Rationale:
A reset can be scheduled or unscheduled. Not all funds allow resets. When a reset
occurs, the contract maturity date is advanced to 10 years from the reset date. (Refer to
Section 6.3.3)
Cory is a manager of a food transformation plant where the average salary is $40,000.
In an effort to keep his best employees, he is looking to implement a group plan for
retirement savings. The company is willing to contribute on behalf of the employees in
this plan, as long as the employees contribute as well. It is important to Cory that the
company contributions are stable and do not incur additional charges. He also wants to
make sure that the money invested goes towards retirement and not other purchases.
What type of group plan is best suited for Cory's company?
a) Define Contribution Pension Plan (DCPP)
b) Group Registered Retirement Savings Plan (GRRSP)
c) Group Tax-Free Savings Account (TFSA)
d) Deferred Profit Sharing Plan (DPSP) - ANS-(correct) Define Contribution Pension
Plan (DCPP)
Rationale:
, A DCPP will ensure that the investments made in the plan are for retirement because of
the locked-in provision. Employer contributions will be stable since it is a fixed
percentage of employee salaries. Furthermore, the employer contributions will not
trigger additional payroll taxes as they would with a GRRSP. The company can request
that employees contribute to the plan, which is not possible with a DPSP. (Refer to
Section 8.2.2.2)
Ten years ago, Holly invested $100,000 in a segregated fund that has a 100% maturity
guarantee as well as a death-benefit guarantee. Due to market conditions, the
now-mature fund is worth $90,000. Even though the current value is less than her
original investment, Holly expects the value of the fund to go up and she decides to
renew her contract for another 10 years.
Is Holly entitled to the maturity guarantee if she renews her policy?
a) No. She has not terminated her contract.
b) No. She did not make a disposition.
c) Yes, but it will be paid only on expiration of the contract.
d) Yes. The insurer will deposit the top-up guarantee amount into her account. -
ANS-(correct) Yes. The insurer will deposit the top-up guarantee amount into her
account.
Rationale:
The fund guarantee was $100,000 (100%) at maturity. When Holly's contract matured,
the account value was $90,000, or $10,000 short of the guaranteed amount. When she
renews her contract on maturity, the insurer will deposit the top-up of $10,000 into her
account. (Refer to Section 2.1.1)
Romina has $400,000 invested in a segregated fund held in a Registered Retirement
Savings Plan (RRSP). She will be turning 71 this year and wants to decide upon the
options she has with the account. Though Romina likes the idea of guaranteed income,
she wants some flexibility so that she can withdraw more in years when she has
additional expenses. She also does not need to leave an inheritance for her children.
Which of these RRSP maturity options is the most appropriate for Romina?
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