LLQP: Segregated Funds and
Annuities - Chapter 2
questions and answers
What is a Probate? - answer Probate is a legal process where the courts
review the will in question and decide if it's valid and up to date.
What types of investments would a "dividend fund" hold? - answer Invest in
stocks of companies that have historically paid a stable or rising dividend.
May also invest in bonds.
If a segregated fund is held within a registered plan (ex. RRSP), how is
investment income from the fund treated from a tax perspective? - answer
Earnings within an RRSP are sheltered from taxation. In other words, they are
not taxed when they are earned. Instead, the earnings can grow tax
sheltered until withdrawal.
How are the withdrawals from an RRSP taxed? - answer The entire amount is
treated as taxable income.
What is a passively managed fund? - answer One that is simply trying to
mimic the return of the overall market, such as an index fund.
How are interest rates related to the market values of existing bonds? -
answer Inverse relationship. Interest rates rise, bond prices decrease.
Interest rates lower, bonds price increase
What is the primary difference between a GMWB and a GLWB? - answer A
guaranteed minimum withdrawal benefit is guaranteed payments for a
certain number of years (term), whereas a guaranteed life withdrawal benefit
is guarantee payments for life.
, If a segregated fund is held outside a registered plan (i.e., an RRSP), how is
investment income from the fund treated form at a tax persepective? -
answer Any allocations received by the investor are taxed in the year of
receipt. The income earned is taxed on a flow-through basis, meaning
interest income is taxed as interest, capital gains are taxed as capital gains,
and so on.
If a segregated fund is held within a non-registered account, how is a
maturity benefit or death benefit treated from a tax perspective? - answer
Neither the Income Tax Act nor CRA have formally defined the tax
implications of the guarantee payouts. The investor would have to discuss
this matter with his tax advisor.
What is the safest type of segregated fund? - answer A money market fund
Name the two sources that the growth of an equity fund investment come
from - answer 1. Reinvested distributions
2. An increase in value of the shares the fund holds
Why would a segregated fund put an age restriction on the maximum age
limit to invest? - answer Death Benefit Guarantees
What is another name for a "high-yield bond"? - answer A junk bond
To what extent is an insurer concerned about the client's health when
purchasing a segregated fund that offers death benefit guarantees? - answer
Insurers are not concerned about the individual's health, and do not perform
a medical underwriting.
What is a balanced fund? - answer Balanced funds invest in fixed-income and
equity investments. The way in which the fund chooses to spread its assets
across each asset class is referred to as the "asset mix". The fund manager
will adjust the asset mix according to current and future market conditions.
Annuities - Chapter 2
questions and answers
What is a Probate? - answer Probate is a legal process where the courts
review the will in question and decide if it's valid and up to date.
What types of investments would a "dividend fund" hold? - answer Invest in
stocks of companies that have historically paid a stable or rising dividend.
May also invest in bonds.
If a segregated fund is held within a registered plan (ex. RRSP), how is
investment income from the fund treated from a tax perspective? - answer
Earnings within an RRSP are sheltered from taxation. In other words, they are
not taxed when they are earned. Instead, the earnings can grow tax
sheltered until withdrawal.
How are the withdrawals from an RRSP taxed? - answer The entire amount is
treated as taxable income.
What is a passively managed fund? - answer One that is simply trying to
mimic the return of the overall market, such as an index fund.
How are interest rates related to the market values of existing bonds? -
answer Inverse relationship. Interest rates rise, bond prices decrease.
Interest rates lower, bonds price increase
What is the primary difference between a GMWB and a GLWB? - answer A
guaranteed minimum withdrawal benefit is guaranteed payments for a
certain number of years (term), whereas a guaranteed life withdrawal benefit
is guarantee payments for life.
, If a segregated fund is held outside a registered plan (i.e., an RRSP), how is
investment income from the fund treated form at a tax persepective? -
answer Any allocations received by the investor are taxed in the year of
receipt. The income earned is taxed on a flow-through basis, meaning
interest income is taxed as interest, capital gains are taxed as capital gains,
and so on.
If a segregated fund is held within a non-registered account, how is a
maturity benefit or death benefit treated from a tax perspective? - answer
Neither the Income Tax Act nor CRA have formally defined the tax
implications of the guarantee payouts. The investor would have to discuss
this matter with his tax advisor.
What is the safest type of segregated fund? - answer A money market fund
Name the two sources that the growth of an equity fund investment come
from - answer 1. Reinvested distributions
2. An increase in value of the shares the fund holds
Why would a segregated fund put an age restriction on the maximum age
limit to invest? - answer Death Benefit Guarantees
What is another name for a "high-yield bond"? - answer A junk bond
To what extent is an insurer concerned about the client's health when
purchasing a segregated fund that offers death benefit guarantees? - answer
Insurers are not concerned about the individual's health, and do not perform
a medical underwriting.
What is a balanced fund? - answer Balanced funds invest in fixed-income and
equity investments. The way in which the fund chooses to spread its assets
across each asset class is referred to as the "asset mix". The fund manager
will adjust the asset mix according to current and future market conditions.
