Segregated Funds &
Annuities - Chapter 5 -
Segregated Fund & Annuity
Recommendation questions
and answers
An agent is reviewing a client's non-registered investment portfolio. He has
presented to the client various types of segregated funds that the client
should consider adding to the portfolio. Each of the funds types primarily
earns a different type of income, which is paid out in allocations. Which one
of the following types of allocations would attract the most tax? Capital
Gains, Dividends, or Interest? - answer Interest (it is added to the investor's
taxable income, which is fully taxed at the investor's marginal tax rate). Next
in line would be dividend income, and then capital gains.
What is the NAVPU of a segregated fund? - answer It is the price at which
more units will be sold or the price at which units will be redeemed.
Charlie originally invested in ABC Balanced Fund on July 12, 2013. She opted
to pay a back-end load (or deferred sales charge [DSC]) instead of a front-
end load (FEL), both of which are outlined following. DSC in Year 1: 4.5%,
Year 2: 4%, Year 3: 3.5%, Year 4: 3%, Year 5: 2.5%, Year 6: 2%, Year 7: 0%.
FEL: 3%. On Thursday, Sept 8, 2015, Charlie told her advisor that she would
like to redeem a portion of her segregated fund investment. She stressed the
need for $30,000 net of redemption fees. On Friday, September 9, 2015, the
NAVPU was calculated to be $18.05. Given this information, how many units
would Charlie need to redeem in order to receive $30,000 net of redemption
fees? 1586.21 units, 1585 units, 1722.33 units, or 1720 units? - answer
1722.33 units. 1722.33 x $18.05 = $31,088. $31,088 x 0.035 (Year 3: 3.5%)
= $1,088. $31,088 - $1,088 = $30,000. (The other formula to use to find the
answer is 100% - 3.5% = 96.5%. $30,.5% = $31,088. $31,088 /
$18.05 = 1722.33)
Annuities - Chapter 5 -
Segregated Fund & Annuity
Recommendation questions
and answers
An agent is reviewing a client's non-registered investment portfolio. He has
presented to the client various types of segregated funds that the client
should consider adding to the portfolio. Each of the funds types primarily
earns a different type of income, which is paid out in allocations. Which one
of the following types of allocations would attract the most tax? Capital
Gains, Dividends, or Interest? - answer Interest (it is added to the investor's
taxable income, which is fully taxed at the investor's marginal tax rate). Next
in line would be dividend income, and then capital gains.
What is the NAVPU of a segregated fund? - answer It is the price at which
more units will be sold or the price at which units will be redeemed.
Charlie originally invested in ABC Balanced Fund on July 12, 2013. She opted
to pay a back-end load (or deferred sales charge [DSC]) instead of a front-
end load (FEL), both of which are outlined following. DSC in Year 1: 4.5%,
Year 2: 4%, Year 3: 3.5%, Year 4: 3%, Year 5: 2.5%, Year 6: 2%, Year 7: 0%.
FEL: 3%. On Thursday, Sept 8, 2015, Charlie told her advisor that she would
like to redeem a portion of her segregated fund investment. She stressed the
need for $30,000 net of redemption fees. On Friday, September 9, 2015, the
NAVPU was calculated to be $18.05. Given this information, how many units
would Charlie need to redeem in order to receive $30,000 net of redemption
fees? 1586.21 units, 1585 units, 1722.33 units, or 1720 units? - answer
1722.33 units. 1722.33 x $18.05 = $31,088. $31,088 x 0.035 (Year 3: 3.5%)
= $1,088. $31,088 - $1,088 = $30,000. (The other formula to use to find the
answer is 100% - 3.5% = 96.5%. $30,.5% = $31,088. $31,088 /
$18.05 = 1722.33)
