Segregated Funds and Annuities Questions with correct Answers

Segregated Funds and Annuities Questions with
correct Answers

1). Investing

 Ans: using money to make money


2). Principal

 Ans: initial capital/seed

sometimes ACB (adjusted cost base)


3). Fair market value

 Ans: current value of a property


4). Return, gain, growth, interest

 Ans: profit above the principal


5). Liquidity

 Ans: quick, easy, conversion to cash, without affecting value


6). Volatility

 Ans: fluctuation in investment value


7). Leveraging

 Ans: borrowing money to invest

a "multiplier" of risk and return


8). Inflation




PaperStoc.com Page 1 of 26

,  Ans: increased cost of living

lowering the value of money over time


9). Rate of return formula

 Ans: Gain / Principal


10). Interest formula

 Ans: Principal * % rate of return


11). Real rate of return formula

 Ans: nominal rate - inflation rate


12). Future value formula

 Ans: PV * (1 + interest rate)^n


13). Present value formula

 Ans: FV / (1 + interest rate)^n


14). Diversification

 Ans: contains many different types/areas of investment

decrease overall risk


15). Investment objectives

 Ans: - purpose
- financial goal
- need for guarantee
- time horizon
- tax preference / tax advantage


16). Short term investment




PaperStoc.com Page 2 of 26

,  Ans: less than 3 years - can take low risk


17). Medium term investment

 Ans: 3-10 years


18). Long term investment

 Ans: 10+ years - can take high risk


19). Asset classes

 Ans: equity

income

cash


20). Equity

 Ans: - stocks

- generally high volatility, high opportunity


21). Income

 Ans: - fixed income, bonds

- generally low volatility, low opportunity


22). Cash

 Ans: - money market, treasury bills

- no volatility, very low opportunity


23). Types of investments

 Ans: segregated funds

annuities


PaperStoc.com Page 3 of 26