01. Whole life insurance is a life insurance designed to offer ongoing insurance coverage over the course of an insured’s entire life. The noteworthy advantage of whole life insurance is:
a) It’s a low-load life insurance
b) One can budget premium payments for a long period
c) Premium payments contribute towards building an estate
d) These are sold only by agents
02. Distributions from which of the following CANNOT be rolled over into an IRA?
a) 401(k)
b) Money Purchase Pension Plan
c) Profit Sharing Plan
d) Rabbi Trust
03. A client faces a 30% federal income tax rate and a 5% state tax rate. Municipal bonds issued in the client’s state of residence are exempt from state taxes. Considering current income only, and not adjusting for the federal deductibility of state taxes,
Which of the following represents a proper comparison of bond attractiveness?
a) A 10% Treasury bond is more attractive than a 7.2% municipal bond issued by a state of which the client is not a resident.
b) A 6.0% bond issued by the client's state of residence is more attractive than a 7.2% municipal bond issued by another state.
c) An 18% corporate bond is more attractive than a 12% municipal bond issued by the client's state of residence.
d) A 6.75% municipal bond issued by the client's state of residence is more attractive than a 7% municipal bond issued by a U.S. territory.
04. When premium income less return premiums arising from policies issued or other contracts entered into to reinsure other insurance entities that provide the related primary coverage are called:
a) Indirect premiums
b) Direct premiums
c) Assumed reinsurance premiums
d) Real reinsurance premiums
05. A trust you administer, in a jurisdiction that has adopted Directed Trust statutes, contains language in the trust document appointing a fiduciary for investment purposes. Your institution is a directed trustee responsible as a fiduciary for administration only.
You believe that the investment fiduciary is abusing this power and is directing you to make an imprudent investment. You should:
a) Tell the advisor he must first obtain the consents of the current beneficiary and presumptive remaindermen.
b) Confront the advisor and, if the situation cannot be remedied, seek court guidance.
c) Follow the advisor's directions nonetheless.
d) Obtain the written consent of all fiduciaries.
06. What is that principle which states that an insured may not be compensated by the insurance company in an amount exceeding the insured"™s economic loss?
a) Principle of cash value
b) Principle of indemnity
c) Right of subrogation
d) Co-insurance
07. _____________ is an insurance specialist who works for the insurance company as an independent adjustor or for an adjustment bureau, to investigate claims.
a) Personal liability umbrella
b) Captive agent
c) Independent agent
d) Claims adjuster
08. Which of the following was not suggested by John Maynard Keynes as a reason for holding cash?
a) Speculative motive
b) Investment motive
c) Precautionary motive
d) Transaction motive
09. Your client is married and has a net worth of $12 million, which includes a jointly owned house worth $2.5 million. His wife has assets of $1,000,000. They have simple wills leaving everything to each other and then to their two children in equal shares.
The BEST advice to reduce federal estate taxes is that he:
a) Leave everything to his wife in his will.
b) Give $14,000 per year to each of his two children.
c) Transfer the house ownership completely to his wife.
d) Incorporate a credit shelter trust provision in his will.
10. John creates a trust with income during life to Sam, the remainder to Sue. John retains the right to amend or revoke the agreement. Sue will have to disclaim her interest in the trust within 9 months of:
a) John's death
b) Sam's death
c) The creation of the trust
d) The appointment of the executor or administrator of Sam's estate
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