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ABA CTFA Exam Practice Questions (P. 3)

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Question #21
Stephen is about to commence taking benefits from his personal pension scheme, which includes protected rights. He should be aware that:
  1. A
    He can take up to 25% of the total fund as a pension commencement lump sum
  2. B
    He has the right to exercise the open market option
  3. C
    His whole pension fund must provide limited price indexation in payment
  4. D
    The value of the protected rights element will not count towards the lifetime allowance

Correct Answer:
AB

Question #22
Frank, age 55, is considering adopting a lifestyle investment technique as he aims to build up his personal pension prior to retirement. He should be aware that:
  1. A
    The asset mix of the fund will be adjusted automatically on pre-determined dates
  2. B
    His ongoing exposure to equities will reduce with lifestyling
  3. C
    After 10 years, a maximum of 25% of the investments will be in bonds
  4. D
    Lifestyling is likely to be appropriate if he intends to purchase a conventional annuity with his entire fund.

Correct Answer:
ABD

Question #23
Under an employer's group life assurance policy, what is the normal tax treatment of the death benefit?
  1. A
    It is liable to Inheritance Tax
  2. B
    It is liable to Capital Gains Tax
  3. C
    It is liable to Income Tax
  4. D
    It is not liable to any form of taxation

Correct Answer:
D

Question #24
If an income protection insurance (PHI) policy has reviewable premiums, this usually means that the insurance company can:
  1. A
    Alter the cost of the cover
  2. B
    Withdraw cover on any anniversary date
  3. C
    Only increase premiums in line with inflation
  4. D
    Pay benefits for less than the full period of incapacity

Correct Answer:
A

Question #25
Apart from comparing cover and costs, what other key factor should usually be considered if a financial adviser intends to recommend that a client cancels an existing term assurance policy and replaces it with a new one?
  1. A
    The insurable interest
  2. B
    The underwriting requirements
  3. C
    The secondhand policy market value
  4. D
    The chargeable gains

Correct Answer:
B

Question #26
The primary purpose of a key person insurance policy is to provide funds on the death of the life assured directly to the deceased's:
  1. A
    Children only
  2. B
    Employer only
  3. C
    Estate only
  4. D
    Spouse only

Correct Answer:
B

Question #27
The phase of the economic cycle when levels of employment and production are high and economy is growing, generally accompanied by high prices for goods and services is called:
  1. A
    Growth
  2. B
    Expansion
  3. C
    Depression
  4. D
    Recovery

Correct Answer:
B

Question #28
The phase of the economic cycle when levels of employment and production fall and the growth of the economy slows is called:
  1. A
    Growth
  2. B
    Expansion
  3. C
    Recession
  4. D
    Recovery

Correct Answer:
C

Question #29
The phase of the economic cycle when levels of employment and production are low and economic growth is at a virtual standstill or even negative is called:
  1. A
    Growth
  2. B
    Expansion
  3. C
    Recession
  4. D
    Depression

Correct Answer:
D

Question #30
Gross domestic product is:
  1. A
    The total of all goods and services produced in a country used to monitor economic growth
  2. B
    The half of all goods and services produced in a country used to monitor economic growth
  3. C
    The division of all goods and services produced in a country used to monitor economic growth
  4. D
    None of the above

Correct Answer:
A

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