Segregated Funds and Annuities Exam 2024

Segregated Funds and Annuities Exam 2024 Investing -Correct Answer-using money to make money Principal -Correct Answer-initial capital/seed sometimes ACB (adjusted cost base) Fair market value -Correct Answer-current value of a property Return, gain, growth, interest -Correct Answer-profit above the principal Liquidity -Correct Answer-quick, easy, conversion to cash, without affecting value Volatility -Correct Answer-fluctuation in investment value Leveraging -Correct Answer-borrowing money to invest a "multiplier" of risk and return Inflation -Correct Answer-increased cost of living lowering the value of money over time Rate of return Formula -Correct Answer-Gain / Principal Interest Formula -Correct Answer-Principal * % rate of return Real rate of return Formula -Correct Answer-nominal rate - inflation rate Future Value Formula -Correct Answer-PV * (1 + interest rate)^n Present Value Formula -Correct Answer-FV / (1 + interest rate)^n Diversification -Correct Answer-contains many different types/areas of investment decrease overall risk Investment objectives -Correct Answer-- purpose - financial goal - need for guarantee - time horizon - tax preference / tax advantage Short term investment -Correct Answer-less than 3 years - can take low risk Medium term Investment -Correct Answer-3-10 years Long term Investment -Correct Answer-10+ years - can take high risk Asset Classes -Correct Answer-equity income cash Equity -Correct Answer-- stocks - generally high volatility, high opportunity Income -Correct Answer-- fixed income, bonds - generally low volatility, low opportunity Cash -Correct Answer-- money market, treasury bills - no volatility, very low opportunity Types of Investments -Correct Answer-segregated funds annuities stocks bonds savings account GIC mutual funds ETF real estate Bonds -Correct Answer-- are debt investments - as if investor is lending money to earn interest - also called a fixed-income security - could be issued by government (less risk) or corporation (more risk) - if more established (less risk, then lower interest rate) - can be bought from bond dealers - default risk, interest risk (if prevailing rat