Seg Funds and Mutual Funds Questions and Answers Already Passed

Seg Funds and Mutual Funds Questions and Answers Already Passed On November 6, 2016 Jenny purchased a $200,000 non-registered segregated fund that invests in Canadian equities. The segregated fund has a 10 year, 75% maturity guarantee. If this fund matures on November 6, 2026 with an account value of $160,000, how much will Jenny receive from the maturity guarantee? $0 When presented with a choice between a bank's 5-year GIC and an insurance company's deferred annuity for the same time period, why might this client choose the deferred annuity? An annuity can be creditor protected and bypass probate Sheila works for a company that provides generous group retirement and investment plans consisting of a DCPP, DPSP, GRRSP and TFSA. In addition to working for the company, she also owns a small marketing business. Unfortunately her business is not fairing very well and she is concerned about being unable to repay the debts that her business has. Sheila is asking you if any of these group retirement and investment plans are not creditor protected. Which of the following will you tell her is not creditor protected? TFSA Which of the following statements is NOT accurate about a GRRSP? There are usually more investment options in a group plan Out of the following list which one list has its segregated funds in the correct order of risk? Canadian Bond Fund, Balanced Fund, Dividend Fund Which of the following statements is NOT correct? Mutual fund values grow by increases in unit value; segregated fund values grow by the addition of new units Out of the following list, which fund will typically have the most diversification? Fund of Funds Bobby owns a segregated fund contract with a 100% maturity and death benefit guarantee. Bobby named his son, Jack, as the contract's beneficiary. Bobby passed away today. The contract was started with an investment of $80,000 and Bobby has withdrawn total of $10,000. As of today's date the contract value is $60,000. As the beneficiary, how much will Jack receive? $60,000 or the guaranteed amount adjusted for partial withdrawals, whichever is greater Joe is retiring from his position with the manufacturing company that he's been with for over the past 35 years. As part of his retirement benefits he has been given a lump sum of cash equal to the last five years of his salary. Since he is retiring early at age 60, he wants to know what the best option is to use this money to provide consistent income over the next five years, until his retirement pension begins. Which of the following choices should you suggest? 5-year immediate term annuity Mr. Domingo purchased a $250,000, 5-year accumulating segregated fund with a 5% interest rate maturing in 5 years. The value at maturity would be $319,070. At the end of 4 years, the value had climbed to $303,877 and interest rates had increased to 6%. Mr. Domingo decided that he wished to close the 5% fund so that he could reinvest in the current 6% fund. What is the market value adjustment that Mr. Domingo would pay at the end of 4 years to break his contract and receive his money? $2,868.00 Out of the following list what is NOT an acceptable identification document when an agent is required by FINTRAC to obtain an identification document? Driver's Insurance Candice, a retired school teacher, receives $4,250 per month from her life annuity. She would like to know how much she would receive every month in the unlikely event that the insurance company providing the annuity went bankrupt. Given this scenario which of the following is correct? 3,612.50 A married couple who classify themselves as very conservative investors have already contributed the maximums to their RRSPs and TFSAs and would like to invest more in other products. They would like to know which of the following option best fits their investing profile. Equity segregated fund that has a 100% death and maturity guarantee In addition to interest rate risk, what is the primary risk of investing in an annuity? Inflation risk Kevin has investments in a non-registered account. Since he understands that these investments are taxable, he is looking for the most tax-efficient option for them. Given this scenario which of the following segregated funds will be of most interest to him? Canadian Dividend Fund Given the following list, which one shows the investments in the correct order, taxed from the lowest to the highest? Earning based on capital gains, dividend income, interest Chris is 70 years old and owns a segregated fund contract. It's current market value is $93,000. He opened his account twelve years ago by depositing $71,000. Upon his death Chris is planning on making a charitable donation to a local charity that supports minority rights. Chris wants your advice on how his estate can maximize the tax benefits of making a such a charitable donation. Given this scenario which of the following statements is most correct? By transferring the ownership of the account on his death to the charity, Chris will be able to claim up to 100% of his net income and not be liable for any capital gains tax on the account. Sarah is on a pension. She would like to know if she can split her pension with her spouse. Given this scenario which of the following will CRA NOT allow her to split with her spouse? OAS income Out of the following list what is NOT a feature of a DBPP? If the employer becomes insolvent it can be forced to fund the pension plan For the past 22 years Jimmy has worked for a company with a defined benefit pension plan. The formula to calculate the pension benefit is 2% per year of the employee's last five years' of income. In Jimmy's situation, that average income is $89,500. Given this scenario how much pension income can Jimmy expect to receive annually? $39,380 A client has $75,000 invested in a segregated fund with a ten year, 75% guarantee. Three years into the contract the fund has lost 50% and the client has decided to surrender the contract. In this case how much will the client receive? $37,500 because that is half of their original investment All of the following are characteristics of segregated income funds except: Mainly focuses on growth Your client has investments in a 5-year GIC, a high interest savings account, and a money market segregated fund. Given this scenario what is her major investment risk? Inflation Risk Segregated funds can be an appropriate investment vehicle for many investors. Given the following list who would segregated funds NOT be appropriate for? A person saving for a home down payment in 3 years Given the following information about a segregated fund as of the close of business on November 1, 2016, what is the net asset value per unit of this fund? Total Assets:$211,000,000 Total Liabilities: $8,300,000 Number of Units Outstanding: 5,900,000 $34.36 Olivia belongs to a Group Registered Retirement Savings Plan (GRRSP) with her current employer which she and her employer contribute 5% of her earnings. She is now planning to leave her job and take another position with a competing firm. Olivia has asked you whether her GRRSP has vested yet. When do you tell her GRRSP has vested? Immediately Bill is a 65 year old male who is retiring from his job. He has a DCPP with his current employer as well as a LIRA into which he had transferred the pension fund from his previous employer. His goal is to begin receiving retirement income as soon as possible, preferably in the next year. What can Bill do to achieve this goal? Transfer his funds to a Life Income Fund (LIF) Jacob is turning 71 this year. With regards to his RRSP, he can do any of the following except: Transfer 50% of his RRSP to his spouse Your client, Mr. Bailey, has asked you for some advice. He would like to know how much he can contribute to his RRSP in the current year without over contributing. Mr. Bailey has a carry forward amount of $21,000 and a pension adjustment of $4,500 from the previous year. In addition Mr. Bailey has been divorced for the past three years and pays $1,500 per month in alimony. Given this scenario and based on the financial information below, how much can Mr. Bailey contribute this year? Current Year Previous Year Base Salary $85,000 $80,000 Commission $25,000 $30,000 Bonus $15,000 $18,000 Investment Portfolio Capital Gains $5,000 $4,000 Dividends $6,000 $5,000 Total taxable income $136,000 $137,000 $36,300 Sally is the owner of small technology company where the average salary is $55,000. In order to incent her best employees to stay with her company she wants to implement a group plan for retirement savings. Sally's company is willing to contribute to the plan as long as her employees contribute as well. She wants to ensure that her company's contributions are consistent so that she knows what they will be and that there are no additional charges. Sally also wants these contributions to go towards retirement and not anything else. What type of group plan will most effectively meet Sally's needs? Defined contribution pension plan (DCPP) Cecelia has a term annuity to age 85 with her two children designated as equal beneficiaries of the contract. When Cecelia dies at age 83, her children receive the balance of the contract. Given this scenario which of the following statements is most correct? Each will be responsible for the tax on the sum they receive On February 17, 2004 Janet purchased a $200,000 non-registered segregated fund that invested in Canadian equities. The segregated fund had a 10 year, 75% maturity guarantee. During those ten years Janet received and maintained allocations of $100,000. On February 17, 2014 Janet's fund matured and had a value of $280,000. Given this scenario how much money did Janet receive upon maturity? $280,000, tax free Lee works for a company that has a defined benefit pension plan, but is concerned about what might happen if the company goes out of business, or is unable to fund the pension. Given this scenario which of the following statements is most correct? It may be government guaranteed Which of the following is NOT a benefit of income splitting? Potential to increase the pension credit from $2,000 to $4,000 Ten years ago Haley invested $150,000 in a segregated fund with a 100% maturity as well as death benefit guarantee. When the fund matured it only had $140,000 in the account due to poor performance of the markets. Although the account value was less than her original investment, Haley was optimistic about market performance over the next ten years so she decided to renew her contract for another 10 years. Given this scenario, will Haley receive the guarantee top-up on renewal? Yes, the insurer will deposit it into her account Out of the following list what is NOT true about a TFSA? Low income earners should invest in a TFSA instead of an RRSP so that when they retire they won't be in a higher tax bracket When David retires his company pension plan will pay him $59,500 per year for the rest of his life. When he dies his spouse will continue to get part of that income for the rest of her life. Given this scenario what type of pension plan does David belong to? Defined Benefit Pension Plan Tearesse, while young, is an experienced investor with a long-term time horizon. She would like to invest partially in U.S. equities that will have similar returns to what the S&P 500 Index produces, and at the lowest cost available. Out of the following list, which investment fund would Tearesse likely prefer for her U.S. equities? U.S. Equity exchange-traded fund Which of the following is NOT true about an RESP? Deposits are not deductible, beneficiary's withdrawals are not taxable A client who has a DBPP with her current employer is getting a job with a different employer and would like to know what she can do about her DBPP. Given this scenario which of the following is NOT an option for her? Transfer the pension money to her RRSP