1
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FP1 / Practice Exam 2 Questions and
Answers (100% Correct Answers) Already
Graded A+
Vivian buys a life insurance policy in which the insurer pays
policyholders dividends based on how well the life insurer is doing.
If the insurer is profitable, Vivian will receive dividends. If the insurer
underperforms financially, Vivian and other policyholders will
receive fewer dividends. Indicate the type of insurance policy
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Vivian purchased.
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A. Variable life insurance.
B. Participating life insurance.
C. Limited-pay life insurance.
D. Non-participating life insurance [ANS:] B. Participating life
insurance.
Choose the type of insurance that combines term and whole life
for a predetermined contract period and guarantees a sum of
money for either the beneficiar(ies) or at the end of the term for
the contract holder.
A. Variable life insurance.
B. Universal life Insurance.
, 2
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C. Permanent life Insurance.
D. Endowment life insurance. [ANS:] D. Endowment life insurance.
Endowment life insurance is a combination of term life and whole
life. It provides coverage for a specified period of time (usually to
age 65) and builds cash value. If the insured should die during the
period of coverage, the beneficiary receives the face amount of
coverage. If the insured does not die during the period of
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coverage, the policy owner receives the entire face value of the
policy as a cash payment and the insurance coverage ceases.
Reference: Module 4, Section 2.
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Select the type of insurance that can be extended, at the option
of the policyholder, at the end of the term without medical
evidence of insurability.
A. Level term insurance.
B. Decreasing term insurance.
C. Convertible term insurance.
D. Renewable term insurance. [ANS:] D. Renewable term
insurance.
Renewable term insurance allows for the policy to be extended
for another term of equal length without the insured having to
provide medical evidence of insurability.
, 3
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Henry, a 48 year-old director of engineering at an environmental
firm, has $50,000 in Canada Savings Bonds on which he earns 3%
interest annually. He has paid off the mortgage on his house but
he has an outstanding $30,000 bank loan (taken out for home
improvements) on which he pays 6% interest. His marginal tax rate
is 50%. Select the action an advisor is most likely to recommend to
Henry?
A. Cash in $30,000 of CSBs and pay off the bank loan. 0%
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B. Don't do anything; let the situation remain as it is.
C. Cash in $30,000 of CSBs and pay off the bank loan, then borrow
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$30,000 and invest it in a conservative balanced fund.
D. Cash in $30,000 of CSBs and pay off the bank loan, then borrow
$50,000 and invest it in an aggressive equity fund. [ANS:] C. Cash
in $30,000 of CSBs and pay off the bank loan, then borrow $30,000
and invest it in a conservative balanced fund.
The most likely recommendation involves paying off the bank loan
by cashing in CSBs and then borrowing the previous loan amount
and investing it so that interest on the new loan becomes tax
deductible. While borrowing more than the previous loan amount
(in C.) could be an option, it would change the risk profile and risk
tolerance level, and that may not be the best route to take.
Jacob who is about to retire, strategically moves a major portion
of his investment portfolio into Canada Savings Bonds (CSBs),
guaranteed funds and money market funds. Select the loss
For Expert help and assignment solutions, +254707240657
FP1 / Practice Exam 2 Questions and
Answers (100% Correct Answers) Already
Graded A+
Vivian buys a life insurance policy in which the insurer pays
policyholders dividends based on how well the life insurer is doing.
If the insurer is profitable, Vivian will receive dividends. If the insurer
underperforms financially, Vivian and other policyholders will
receive fewer dividends. Indicate the type of insurance policy
© 2025 Assignment Expert
Vivian purchased.
Guru01 - Stuvia
A. Variable life insurance.
B. Participating life insurance.
C. Limited-pay life insurance.
D. Non-participating life insurance [ANS:] B. Participating life
insurance.
Choose the type of insurance that combines term and whole life
for a predetermined contract period and guarantees a sum of
money for either the beneficiar(ies) or at the end of the term for
the contract holder.
A. Variable life insurance.
B. Universal life Insurance.
, 2
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C. Permanent life Insurance.
D. Endowment life insurance. [ANS:] D. Endowment life insurance.
Endowment life insurance is a combination of term life and whole
life. It provides coverage for a specified period of time (usually to
age 65) and builds cash value. If the insured should die during the
period of coverage, the beneficiary receives the face amount of
coverage. If the insured does not die during the period of
© 2025 Assignment Expert
coverage, the policy owner receives the entire face value of the
policy as a cash payment and the insurance coverage ceases.
Reference: Module 4, Section 2.
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Select the type of insurance that can be extended, at the option
of the policyholder, at the end of the term without medical
evidence of insurability.
A. Level term insurance.
B. Decreasing term insurance.
C. Convertible term insurance.
D. Renewable term insurance. [ANS:] D. Renewable term
insurance.
Renewable term insurance allows for the policy to be extended
for another term of equal length without the insured having to
provide medical evidence of insurability.
, 3
For Expert help and assignment solutions, +254707240657
Henry, a 48 year-old director of engineering at an environmental
firm, has $50,000 in Canada Savings Bonds on which he earns 3%
interest annually. He has paid off the mortgage on his house but
he has an outstanding $30,000 bank loan (taken out for home
improvements) on which he pays 6% interest. His marginal tax rate
is 50%. Select the action an advisor is most likely to recommend to
Henry?
A. Cash in $30,000 of CSBs and pay off the bank loan. 0%
© 2025 Assignment Expert
B. Don't do anything; let the situation remain as it is.
C. Cash in $30,000 of CSBs and pay off the bank loan, then borrow
Guru01 - Stuvia
$30,000 and invest it in a conservative balanced fund.
D. Cash in $30,000 of CSBs and pay off the bank loan, then borrow
$50,000 and invest it in an aggressive equity fund. [ANS:] C. Cash
in $30,000 of CSBs and pay off the bank loan, then borrow $30,000
and invest it in a conservative balanced fund.
The most likely recommendation involves paying off the bank loan
by cashing in CSBs and then borrowing the previous loan amount
and investing it so that interest on the new loan becomes tax
deductible. While borrowing more than the previous loan amount
(in C.) could be an option, it would change the risk profile and risk
tolerance level, and that may not be the best route to take.
Jacob who is about to retire, strategically moves a major portion
of his investment portfolio into Canada Savings Bonds (CSBs),
guaranteed funds and money market funds. Select the loss
