CEILLI- Set 2 2010

CEILI - SET 2
Anticipated Questions with Answers
1

The term Investment-linked in Malaysia shall be similar to the term "__________________" in

the United Kingdom and to the term "_______________________" in the United States.

A
B
C
D
2

Unit-Linked and Unit Trust

Unit-Linked and Variable Life
Unit Trust and Variable Investment
Investment Trust and Variable-Linked

Risk can be classified into two particular categories in relation to investment. They include
_________________.

I.
II.
III.
IV.

A
B
C
D
3

I & II
I & III
II & IV
III & IV

Diversification in investment involves __________________________.

A
B
C
D
4

the risk of not losing some or all of a persons initial investment

the risk of rate of return on the investment not matching up to the individuals
expectation
the risk of rate of return on the investment matching up to the individuals
expectation
the risk of losing some or all of a persons initial investment

reducing the risks of investment by putting the fund under management into several
categories of investment
reducing the risks of investment by putting all ones eggs in one basket
putting all the funds under management into one category of investment
spreading the risks of investment by not putting the fund into several categories of
investment

People generally invest their money to provide:

I.
II.
III.
IV.

A
B
C
D

an improvement in their financial position

a less comfortable standard of living
income in retirement
funds for paying necessary expenses and taxes when the person dies

I, II & III
I, III & IV
I, II & IV
II, III & IV

AIA Premier Academy

Page 1

CEILLI- Set 2 2010

5

Three elements affect the accessibility of the funds. They include __________________.

I.
II.
III.
IV.

A
B
C
D
6

I, II & III
I, II & IV
I, III & IV
II, III & IV

What is/are the characteristic(s) of warrants?

I.
II.
III.
IV.

A
B
C
D
7

warrants give the holder the option to subscribe for ordinary shares at a
predetermined conversion ratio
warrants give the holder the option to subscribe for ordinary shares at a
predetermined exercise price
warrants are usually detached from the loan stock and traded separately in
securities market
warrants are issued on their own

I
I, II & III
I, III & IV
I, II, III & IV

The following characteristics of shares at a predetermined conversion ratio warrants are true,
EXCEPT

A
B
C
D
8

the age and attitude of the investor towards risk

the initial cost in setting up or buying into the investment
the time horizon of needs of the fund
the cost or penalty of realising the investment before its maturity period

warrants gives the holder the option to subscribe for ordinary shares at a
predetermined conversion ratio
warrants gives the holder the option to subscribe for ordinary shares at a
predetermined exercise price
the life span of a warrant can be varied at the discretion of the holder
the option attached to the warrants can be exercise by subscribing for ordinary shares
in cash, by exchanging the loan stock or by a combination of both

The disadvantage of warrants or TSR is _____________________.

A
B
C
D

investor have to put in a large initial outlay to establish an exposure to the shares
on expiry, warrants which are not exercised lose their value completely
like ordinary shares, there is no chance for price recovery
by selling the warrants given to an investor in the first instance; the investor cannot
benefit from the capital gain

AIA Premier Academy

Page 2

CEILLI- Set 2 2010

9

Rank the following investment vehicle in terms of their level of risks, from the least risky to the
most risky.

I.
II.
III.
IV.
A
B
C
D
10

I, III, IV & II
I, IV, III & II
I, II, III & IV
I, IV, II & III

Which of the following is NOT a type of fixed income securities?

A
B
C
D
11

cash and deposit

derivatives
a well diversified investment portfolio of a company
stock option

money market instruments

government bonds
preference shares
none of the above

Which of the following statements about corporate bonds are FALSE?

I.
II.
III.

A
B
C
D
12

I, II
I, III
II, III
I, II & III

What are the advantages of investing in preference shares?

I.
II.
III.

A
B
C
D
13

medium or long term debt obligation of a company secured by specific assets

the higher the security pledge and the credit worthiness of the company
the higher the rate of return will be unsecured bonds carry lower rates of
interest than secured bonds

it gives shareholder the right to a fixed dividend

has priority over company assets during dissolution
they enjoy benefit of capital appreciation

I, II
I, III
II, III
I, II & III

Which one of the following investment vehicles are for capital appreciation purpose?

A
B
C
D

corporate bonds and preference shares

preference shares and ordinary shares
corporate bonds and ordinary shares
ordinary shares and option

AIA Premier Academy

Page 3

CEILLI- Set 2 2010

14

What are the disadvantages in investing in ordinary shares?

I.
II.
III.

A
B
C
D
15

B
C
D

it is a place of temporary refuge when the investor foresee

that the market outlook is uncertain
it offers protection to the principal and guaranteed steady
stream of income
it enables the investor an opportunity for capital appreciation

it allows the investor a chance for capital preservation

Spot markets, a type of cash markets are ___________________.

A
B
C
D
18

futures, investment trusts and options

fixed income stocks, treasury bills and time deposits
debenture stocks, loan stocks and convertible stocks
preference stocks, unit trusts and derivatives

Investing in bonds offers the following advantages EXCEPT

17

I, II
I, III
II, III
I, II & III

The three basic types of corporate stocks include ___________________.

A
B
C
D
16

dividends are paid not more than the fixed rate

investor are exposed to market and specific risks
shares can become worthless if company becomes insolvent

markets which quote prices referred to the current market price of an item available for
immediate delivery
markets for deferred delivery of commodities
markets that are traceable only from the late 20 century
known to establish forward contracts featuring the contract price and future delivery
dates

Which of the following fixed income securities yield the highest return?

A
B
C
D

government bonds
corporate bonds
convertible bonds
unsecured non-convertible bonds

AIA Premier Academy

Page 4

CEILLI- Set 2 2010

19

Which of the following statements about fixed income securities are FALSE?

I.
II.
III.
A
B
C
D
20

cash
bond
futures
ordinary shares

An investment trust is _______________.

A
B
C
D

23

people invest money to enhance a comfortable standard of living

people invest money in fixed deposits to produce high and guaranteed returns
people invest money to provide funds for higher education for their children
investment in commodities no regular income

Which of the following investment options has all the advantages of capital appreciation,
liquidity and inflation hedge?

A
B
C
D
22

I & II
I & III
II & III
I, II & III

Which of the following statements about investment objectives is FALSE?

A
B
C
D
21

the interest rate is directly proportional to the price of the bonds

the coupon rate is directly proportional to the price of the bonds
the longer the maturity period, the more volatile the price of the bonds will be

one whereby investor buy units in the trust itself and not shares in the company
an organisation registered under the Societies Act which usually invests in a wide
range of equities and other investment
a closed-end fund and does not have to dispose off its assets if large number of
investors sell their shares
established by a trust deed which enables a trustee to hold the pool of money and
assets in trust on behalf of the investor

Which one of the following statements about diversification in portfolio management is FALSE?

A
B
C
D

diversification can completely eliminate the risk of investing in stocks in a portfolio

diversification helps to spread the portfolio risk by investing in different categories of
investment in a portfolio
diversification can involve purchasing different types of stocks and investing in stocks
of different countries
a diversified portfolio provides greater security to an investor having to sacrifice the
return for the portfolio

AIA Premier Academy

Page 5

CEILLI- Set 2 2010

24

Investing in properties can __________________.

A
B
C
D
25

Which of the following statement is TRUE?

A
B
C
D
26

B
C
D

provides for payment of the sum assured when the life assured survives a specific
period
is one that if the life assured survives the specified period, the policy ceases and no
return of premiums is given
is the most complex and expensive of all the life insurance
provides for surrender or cash values on early termination of the insurance

Whole life and endowment policies are known as ______________________, because they
may be for a guaranteed return only.

A
B
C
D
29

ensuring that the fund manager adhere to the provision of the trusts deeds
acting generally to protect the unit-holders
holding the pool of money and assets in trust on behalf of the investors
managing the portfolio of investments and administering the buying and selling of
shares in the unit trust itself

Term insurance _______________.

28

amount invested in cash depends on the size of cash flow requirement

investment in cash decrease when interest rates rise
investment in cash increase when there is a bull run in the stock market
it has high yield potential

The duties of the trustee of unit trust do not include ________________.

A
B
C
D
27

provide good capital appreciation cut a poor flow of income

be high risks investment especially if good repayment methods are obtained
result in easy disposal of the properties during economic recession
result in free capital gain through proper mortgaging of the properties

profit or participating policies

options
non-profits or non-participating policies
spot transaction

The first new generation investment-linked life insurance product was ______________.

A
B
C
D

an individual retirement annuity for the self-employed by London & Manchester

Assurance Company limited in 1957
variable life insurance in the US in 1976
the Hambro Whole Life Plan introduced in 1977
in 1973 by NTUC Income Singapore

AIA Premier Academy

Page 6

CEILLI- Set 2 2010

30

The introduction of the _____________________ is one of the factors which contributed to the
expansion of the investment-linked insurance business in Singapore.

A
B
C
D
31

the formation of the Investment Scheme by the Central Provident fund in 1997
the requirement of the Securities Exchange Act 1934 that all insurance agents and
agency office employees dealing in variable life insurance must pass an examination in
securities business
the introduction of the Enhanced Investment Scheme by the Central Provident fund in
1993
the regulation of investment companies management and operation including that of
insurance companies underwriting variable life

Under the Securities Exchange Act 1934 of US ________________________.

I.
II.
III.
IV.
A
B
C
D
32

I, II & III
I, II & IV
I, III & IV
II, III & IV

Apart from the investment management charges, what other kind of charges do single premium
investment-linked policy charge?

I.
II.
III.
A
B
C
D
33

insurance agents and agency office employees dealing in variable life

insurance must register with the National Association of Securities Dealers
insurance companies or the sales company dealing in variable life insurance
must register as a broker-dealer
insurance agents and agency office employees dealing in variable life
insurance must pass an examination in securities business
a prospectus disclosing the identity and nature of the insurers business,
among others, must be provided by the insurers to potential client

policy fees
administrative and mortality charges
assurance charges

I & II
I & III
II & III
I, II & III

The investment returns under an investment-linked life insurance policy _________________.

I.
II.
III.
IV.

A
B
C
D

are not guaranteed

are assured
are linked to the performance of the investment fund managed by the life
office
fluctuate according to the rise and fall of market prices

I, II & III
I, II & IV
I, III & IV
II, III & IV

AIA Premier Academy

Page 7

CEILLI- Set 2 2010

34

The initial units form of charge under the investment-linked life insurance policies _________.

I.
II.
III.
IV.
A
B
C
D
35

I, II & III
I, II & IV
I, III & IV
II, III & IV

Policy fee payable by an investment-linked life insurance policyowner is to cover _________.

A
B
C
D
36

will have higher annual management charges such as 6% per annum

throughout the term of the policy contract
means that their cash value of the initial units is much lower than their
is much less commonly used these date than in the past
bear lighter discontinuance charges

the mortality costs of the investment-linked life insurance policy

the administrative expenses of setting up the investment-linked life insurance policy
the handling charges by professional investment managers
the price for each unit bought under the investment-linked life insurance policy

Under a regular premium investment-linked whole life insurance plan ______________.

I.
II.
III.
IV.

A
B
C
D

premium top-ups and holidays, subject to the life offices administrative rules
are usually allowed
life protection is the main objective of the plan with investment as a nominal
purpose
withdrawals and surrenders, usually after the payment of a few years premium
are allowed
a one-off premium contribution is made to the policy which uses the premium
to purchase units in an investment-linked fund and to provide certain level life
cover

I, II & III
I, II & IV
I, III & IV
II, III & IV

AIA Premier Academy

Page 8

CEILLI- Set 2 2010

37

The characteristics of an investment-linked life insurance policy include ____________.

I.

its cash value and protection benefits are determined by the investment
performance of the underlying assets
its protection costs are generally met by implicit charges
its commissions and office expenses are met by a variety of explicit charges
with normally 6 months notice given by the life offices prior to any change
its cash value is normally the value of units allocated to the policyowner,
calculated at the bid price

II.
III.
IV.
A
B
C
D
38

I, II & III
I, II & IV
I, III & IV
II, III & IV

Which of the following statements about the characteristics of investment-linked policies are
TRUE?

I.

investment-linked policies generally have a larger exposure to equity

investment than with profits and other conventional policies
the protection costs are generally met by implicit charges, which vary with age
and level of cover
commission and office expenses are met by a variety of explicit charges, some
of which are variable

II.
III.
A
B
C
D
39

I & II
I & III
II & III
I, II & III

Which of the following is/are the main characteristic(s) of investment-linked life policies?

I.

the policies can be used for investment, as source of regular savings and
protection
the cash values and protection benefits are determined by the investment
performance of the underlying assets
the net cash values of the policies are the gross cash values shown in the
policy that includes reversionary bonus up to the date of surrender, less all
indebtedness include interest

II.
III.

A
B
C
D
40

I
II
I & II
I, II & III

Surrender charges under the investment-linked life insurance policies _________________.

A
B
C
D

are deducted from the value of units at surrender

are deducted from the value of units at the commencement of the policies
are applicable to policies with not uniform allocation
represent initial expenses which have already been incurred and recovered

AIA Premier Academy

Page 9

CEILLI- Set 2 2010

41 The offer price under an investment-linked life insurance policy is _____________.
A
B
C
D

a fixed amount throughout the life of the policy

also known as the bid price
the price at which units under the policy are bought back by the life office
the price at which units under the policy are offered for sale by the life office

42 The fundamental differences between traditional with-profit life insurance policies and investmentlinked life insurance policies include ___________.

I.
II.
III.
IV.
A
B
C
D

investment-linked life insurance policies are less likely to offer more choice in
terms of the type of investment funds
the investment element of investment-linked life insurance policies is made
known to the policyowner at the outset and is invested in a separately identifiable
fund which is made up units of investment
investment-linked life insurance policies offer the potential for higher returns
traditional with profits life policies aim to produce a steady return by smoothing
out market fluctuation

I, II & III
I, II & IV
I, III & IV
II, III & IV

43 The protection costs under an investment-linked life insurance policy ______________.

I.
II.
III.
IV.
A
B
C
D

are met by a flat initial charge for regular premium plans

are generally covered by cancellation of units in the fund
are generally met by explicit charges stipulated openly in the policy terms
vary with age of policyowner and level of cover

I, II & III
I, II & IV
I, III & IV
II, III & IV

44 Investment-linked funds can be structured into two ways, namely accumulation units and

distribution units. In accumulation units, the investment income of the funds is _____________.

A
B
C
D

ploughed back into the fund, thus the unit prices will increase over the long term
ploughed back into the fund, thus the unit prices will decrease over the long term
used to purchase additional units to be distributed to the policyowners, thus the unit price
remains unchanged but the policyowners gets more units
used to purchase additional units to be distributed to the policyowners, thus the unit price
decreases and the policyowners get more units

AIA Premier Academy

Page 10

CEILLI- Set 2 2010

45 Which of the following statement(s) about switching is/are TRUE?
I.
II.
III.
IV.
A
B
C
D

switching facility allows a policyholder the liberty to move part or all of his money
from one fund to another
switching facility can be useful for retirement and education fees planning
if the company offers only one fund to its policyholders, it will normally include a
switching facility
it is advisable for policyholders to switch assets in the bond type funds (which are
more variable in returns)

I & II
II
III
III & IV

46 The switching facility under investment-linked life insurance policies is very useful ________.
A
B
C
D

for the purpose of assets planning by the trustee

for the purpose of profit planning by the life policies
for the purpose of financial planning by the policyowners
for the purpose of sales planning by the fund managers

47 Which one of the following funds comprises a higher proportion of equity and a lower proportion
of fixed income instruments?

A
B
C
D

Bond funds
Mixed funds
Property funds
Managed funds

48 Which of the following funds normally include a provision for the deferment of unit redemption by
the manager, for up to 12 month, except for death?

A
B
C
D

Property funds
Managed funds
Equity funds
Government bond funds

AIA Premier Academy

Page 11

CEILLI- Set 2 2010

49 Investment-linked funds can be invested in any financial instruments including cash funds, bond
funds, equity funds, property funds, specialised funds and diversified funds. Diversified funds
____________.

I.
II.
III.
IV.
A
B
C
D

include funds invested in a wide variety of assets such as equities, bonds,

properties, cash, etc.
include funds invested in fixed proportion of specialised assets, for example, 70%
of the funds are in equities and 30% in bonds
include funds that are restricted to investment in a particular country only such as
the ASEAN Fund, the Emerging Markets Fund and the International Bond Fund
invest in a wide variety of assets, their allocation of funds will depend on the fund
managers views of the future prospects of the financial markets involved

I, II & III
I, II & IV
I, III & IV
II, III & IV

50 Investment-linked funds can be invested in any financial instruments including cash funds, bond
funds, property funds, specialised funds and diversified funds.
Equity funds ________________________.

A
B
C
D

invest in stocks and shares and the magnitude of the change in unit prices will depend on
the quantity only of the equities held
invest in stocks and shares and are inherently of lower risk in nature and the prices of the
stocks and shares are stable
invest in stocks and shares and investor who buy such assets usually aim for capital
appreciation
invest in stocks and shares and during market recession, such assets are usually the last to
depreciate

51 In risk-return profile of cash funds, bond funds, balanced funds, managed funds and equity funds,
a risk-return graph will show that _______________.

I.
II.
III.
IV.
A
B

I, II & III
I, II & IV

C
D

I, III & IV
II, III & IV

higher return normally comes with lower risk

higher return normally comes with higher risk
at the top end of the graph are the equity funds
the relatively risk less cash funds sit at the bottom end of the graph

AIA Premier Academy

Page 12

CEILLI- Set 2 2010

52 Single premium investment-linked life insurance policy
A
B

has no death benefit

has cash value

C
D

must be issued with a minimum of RM3000

must be issued with a minimum of RM5000

53 Under investment-linked life insurance policies _________________.

I.
II.
III.
IV.
A
B
C
D

there is no guaranteed minimum sum assured for the purpose of declaring

bonuses
there is no guaranteed minimum sum assured as a level of life insurance
protection
each of the policyownerss will be used to purchase units, the number of which is
dependent on the offer price of each unit
purchases of units can only be made from the investment-linked fund itself, which
will then create new units and add the investment monies to the value of the fund

I, II & III
I, II & IV
I, III & IV
II, III & IV

54 Under an investment-linked life insurance policy, if a policyowner pays a regular payment to the
insurance company; this is normally for _________________.

A
B
C
D

Regular premium plans

Annual policy plans with renewals
Top-up policy plans
Single premium plans

55 Under the dual pricing method of single premium policies, ________________.

A
B
C
D

the policyowner buys the units at the life offices buying price and sells the units at the life
offices selling price
the policyowner buys the units at the offer price and sells the units at the bid price
there is only one price quoted whether the policyowner is buying or selling his units
the bid price is always higher than the offer price

56 Under the single pricing method of single premium policies, the number of units that can be
bought is equivalent to ___________.

A
B
C
D

the premium paid divided by the unit price

the premium paid less policy charges divided by the unit price
the premium paid divided by the bid price
the premium paid less policy charges divided by the bid price

AIA Premier Academy

Page 13

CEILLI- Set 2 2010

57 Under the dual pricing method of her single premium investment-linked life insurance policy,

Agnes had allocated an amount of RM4,000 premium to buying units. The number of units that
Agnes holds is 4,000. After 10 years, the offer price is now RM1.97. The bid-offer spread is 5%.
The mortality charge is 1% and the policy fee is RM100. The ending value of investment, the
return on gross premium and the annual yield under Agness policy are ____________.

A
B
C
D

RM7,311.14, RM1.828 and 0.062 or 6.2% respectively

RM7,701.20, RM1.925 and 0.118 or 11.8%
RM7,486, RM1.871 and 0.087 or 8.7% respectively
RM7,311.14, RM1.924 and 0.118 or 11.8% respectively

58 Investment-linked life insurance policyowners may make withdrawals in term of _____________.

A
B
C
D

number of units through cancellation of units

fixed monetary amount only through reduction of the life cover sum assured
number of units or fixed monetary amount through reduction of the life cover sum assured
number of units or fixed monetary amount through cancellation of units

59 The number of units under a single pricing method single premium investment-linked life

insurance policy is 3,800 with a sum assured of RM5,000. The offer price when the policyowner
first pays his premium is RM1.00. The units price at the time of the policyowners death is
RM1.22. Under the unit value plus sum assured type of death benefits, this will result in a death
benefit of ___________.

A
B
C
D

RM9,636
RM8,800
RM5,000
RM4,636

60 The following statements about investment-linked policies are true EXCEPT

A
B
C
D

some investment-linked policies grant loans to policyholders and it is limited to a percentage

of cash value
the structure of charges and the investment content of investment-linked policy are specified
in an investment-linked policy
policyholders may request for a partial surrender of the policy and the withdrawal amount
will be met by cashing the units at the offer price
all or part of the premiums of an investment-linked policy will be applied to purchase units in
the fund

61 Which of the following statements about single premium investment-linked policies are TRUE?
I.
II.
III.
A
B
C
D

there is no fixed term in a single premium investment-linked policy and

therefore, they are technically whole life assurance
top-ups or single premium injections are allowed
policyholders have the flexibility of varying the level cover

I & II
I & III
II & III
I, II & III

AIA Premier Academy

Page 14

CEILLI- Set 2 2010

62 What are the risks involved in investing in investment-linked products?
I.
II.
III.
A
B
C
D

the risk of insolvency of the life insurance company due to the depletion of the
life funds
the risk of fluctuations of the unit price of the policy that may rise or fall,
depending on the current market situation
the risk of the cash and maturity values of the policy being adversely affected if
the bid price of the units falls

I & II
I & III
II & III
I, II & III

63 Which one of the following BEST describes the policy benefits of investment-linked policies?
A
B
C
D

the policy benefits are guaranteed

the policy benefits are payable only on death or disability
the policy benefits will depend on the long-term of the life office
the policy benefits are directly linked to the investment performance of the underlying
assets

64 Which one of the following statements about the benefits in investment-linked fund is FALSE?
A
B
C
D

the fund provides a highly diversified portfolio, thus, lowering the risk of investment
the fund relieves the investor from the hassle of administering his/her investment
the fund ensures definite high yield for an investor since it is managed by professionals
who are well-versed in the management of risks of investment portfolios
the fund enables small investor to participate in a pool of diversified portfolio in which
he/she, with low investment capital is unlikely to have acceded to

65 What are the benefits available when investing in investment-linked funds?

I.
II.
III.
A
B
C
D

the investment-linked funds offer policyholders an access to a pooled or

diversified portfolio
the investment-linked policyholder can vary his premium payments, take
premium holidays, add single premium top-ups and change the level of sum
assured easily
the investment-linked policyholder can have access to a pool of qualified and
trained professional fund managers

I & II
I & III
II & III
I, II & III

AIA Premier Academy

Page 15

CEILLI- Set 2 2010

66 The benefits of investing in investment-linked funds include _______________.
I.
II.
III.
IV.
A
B
C
D

policyowners have access to a pooled or diversified portfolio of investment

policyowners can easily change the level of the premium payments as the
product design of investment-linked life insurance policies have clear structures
which cater separately for investment and insurance protection
policyowners can gain access to investment-linked funds managed by
professional investment managers with unproven tracked records
policyowners can buy an investment-linked life insurance policy with an initial
investment of as low as RM4,000

I, II & III
I, II & IV
I, III & IV
II, III & IV

67 Which one of the following statements about the flexibility features of investment-linked policies
is FALSE?

A
B
C
D

policyholders have the flexibility of switching from one fund to another provided it satisfies
the companies switching criteria
policyholders may request for a partial surrender of the policy and the withdrawal amount
will be met by cashing the units at bid price
policyholders can take loans against their investment-linked policies up to the entire cash
value of their policies
policyholders have the flexibility of increasing or decreasing their premiums for regular
premium investment-linked policies

68 The flexibility benefit of investing in investment-linked funds include ______________.

I.
II.
III.
IV.
A
B
C
D

policyowners can easily change the level of sum assured and switch their
investment between funds
policyowners can easily take premium holidays and add single premium top-ups
investment-linked life insurance products have a simple product design with a
clear structure with caters separately for investment and insurance protection
policyowners can easily change the level of their premium payment

I, II & III
I, II & IV
I, III & IV
I, II, III & IV

AIA Premier Academy

Page 16

CEILLI- Set 2 2010

69 Policyowners of investment-linked life insurance policies are relieved of the day-to-day

administration of their investment. All that are required of them include ____________.

I.
II.
III.
IV.
A
B
C
D

their engaging independent professional fund managers personally to manage

the complicated transactions
their constructing their own diversified portfolio and passing them on to the life
offices
keeping track of their investment through the unit statements provided regularly
by their life offices
keeping track of the unit price published in financial pages of major newspapers

I & II
I, II & III
I, II & IV
I, II, III & IV

70 The following statement about risks of investing in investment-linked funds is TRUE.

A
B
C
D

policyowners who are risk averse should not purchase life insurance policies with high
protection and guaranteed cash and maturity values
policyowners who invest in unitised funds with high equity investment face greater risk but
can expect to achieve higher return than the traditional life insurance product over the long
term
investment in unitised funds which are fully invested in units of equity funds are not
suitable for policyowners who can tolerate the risks of short term fluctuation in their cash
value
policyowners who are risk averse should buy investment-linked life insurance policies with
high equity investment

71 The administrative fee, insurance charge, fund management fee and the like under an
investment-linked life insurance policy are ______________.

A
B
C
D

usually guaranteed
not subject to review
subject to change by the life office after written notice is given
always up-front charges

72 Why is a term assurance policy not suitable for investment purpose?

A
B
C
D

it is a short term policy

there is no investment element in a term policy
term policies are meant solely for protection needs
the cash value in a term is not enough to cover the investment returns from other
investment vehicles

AIA Premier Academy

Page 17

CEILLI- Set 2 2010

73 Which of the following statements describe the differences between investment-linked products
and with-profits products?

I.
II.
III.
A
B
C
D

investment-linked products allow policyholders to vary the premium payments

unlike with-profits products
investment-linked products can take the form of whole life or endowment
policies with-profits products
investment-linked products allows policyholders to pay future single premiums
from time to time to add more units to his accounts unlike with-profits products

I
I & III
II & III
I, II & III

74 The criteria for comparing traditional life insurance products with investment-linked life insurance
products include _____________.

I.
II.
III.
IV.
A
B
C
D

the life offices management expertise

the products investment returns and risks
the policies premium computation
death benefit provided under the policies

I, II & III
I, II & IV
I, III & IV
II, III & IV

75 Which one of the following statements is FALSE?

A
B
C
D

life office will carry out a valuation of its funds yearly and any surplus may be allocated to
with-profits policyholder as reversionary bonus
investment-linked life insurance policies offer investors policies with values indirectly
linked to the investment performance of the life office
the investment element of investment-linked policies varies according to underlying assets
of the portfolio
both Whole Life and Endowment policies can be used as an investment media with
benefits than become payable at a future date

AIA Premier Academy

Page 18

CEILLI- Set 2 2010

76 Which one of the following statements about the difference between investment-linked policies
and endowment policies are FALSE?

I.
II.
III.

A
B
C
D

the policy values of investment-linked and endowment policies directly reflect

the performance of the fund of the life office
the premiums and benefits of the endowment policies are described at inception
of the policy whereas investment-linked policies are flexible as they are account
driven
the benefits and risk of investment-linked and endowment policies directly
accrued to the policyholders

I & II
I & III
II & III
I, II & III

77 Which one of the following statements describe the differences between investment-linked
products and with products?

I.
II.
III.
A
B
C
D

Investment-linked products allow policyholders to pay top-up premiums from

time to time to buy more units to his account unlike with-profits products
Investment-linked product allow policyholders to take a premium holiday unlike
with-profits products
Investment-linked products can take the form of whole life or endowment
policies unlike with-profits products

I
I & II
I & III
I, II & III

78 With traditional with-profit life insurance products, the allocations to policyowners in the form of
bonuses __________.

I.
II.
III.
IV.
A
B
C
D

are not directly linked to the life offices investment performance

have already been smoothened by the life offices
do not have the peaks and troughs of investment return as in good investment
years of life offices, contributions have been made to reserve and vice versa
are not fixed at the inception of the policy, but are greatly dependent on the
investment performance of the life offices

I, II & III
I, II & IV
I, III & IV
II, III & IV

AIA Premier Academy

Page 19

CEILLI- Set 2 2010

79 Reversionary bonus under traditional with-profit life insurance policies ___________.
is paid at the time of death under the life policies or on maturity of the policies
can either be simple (based purely on the original sum assured) or compound (based on
the sum insured less previous bonuses)
once allocated can, however, be removed or reduced when the life office cannot afford to
sustain it
is usually expressed as a percentage of the sum assured and will vary in accordance with
the performance of the underlying assets of the unitised fund

A
B
C
D

80 The death benefit under regular premium investment-linked life insurance policies is either
______________.

I.
II.
III.
IV.
A
B
C
D

81

I & II
II & III
III & IV
I & IV

The following statement about surrender value under traditional with-profit life insurance
products is TRUE.

A
B
C
D
82

the sum assured chosen by the life assured or the value of the units in the fund
at the bid price, whichever is higher
the sum assured chosen by the life assured plus the value of units in the fund at
the bid price
the minimum sum assured or the value of the units in the fund at the bid price,
whichever is higher
the minimum sum assured plus the value of the units in the fund at the bid price

the amount of surrender value is usually higher that the amount under without-profit
policies and it varies with the age of the assured, being lower at older age
in the case of with-profit policies, the net cash surrender value includes the surrender
value of the reversionary bonus up to the date of surrender
other than term insurance of more than 20 years, limited payment is made when such
insurance policies are surrender
when a with-profit insurance policy is surrendered, the surrender value is calculated by
multiplying the bid price with number of units

The following statement about surrender value under investment-linked life insurance is
TRUE.

A
B
C
D

the amount of surrender value is always higher than the amount under with-profit
policies
for dual pricing policies, the surrender value is the offer price multiplied by the number
of units
for single pricing policies, the surrender value is the market price multiplied by the
number of units
the amount of surrender value varies with the age of the policyowner, being higher at
older ages

AIA Premier Academy

Page 20

CEILLI- Set 2 2010

83

The following statement about option to top-up under investment-linked life insurance products
is FALSE.

A
B
C
D
84

policyowners are normally allowed to top-up their policies at any time, subject to a
minimum amount
to top-up a policy, the policyowner pays further single premium at the time to top-up
policyowners may buy additional units of the investment-linked fund and these units will
be allocated to new investment-linked life insurance policies
further premiums at time of top-up will be used in full, after deducting charges for topups, to purchase additional units of the investment-linked fund

Which of the following statement are TRUE?

I.
II.
III.
A
B
C
D
85

capital gain is not taxable

capital losses is not tax deductible
dividend income is not subjected to withholding tax according to the prevailing
corporate tax rate
if personal tax rate is less than corporate tax rate, shareholder is entitle to rebate on the
portion of the dividend paid as tax

The principal legal document regulating income tax in Malaysia is the ___________.

A
B
C
D
87

I & II
I & III
II & III
I, II & III

The following statements about taxation are true, EXCEPT

A
B
C

86

the policy values of investment-linked policies is determined by the offer price

at the time of valuation
the policy value of endowment policies is the cash value plus any reversionary
bonus less any outstanding automatic premium loans and any interest due at
time of surrender
the life office needs to maintain a separate fund for investment-linked policies
distinct from the life fund as in the case for conventional policies

Income Tax Act, 1967

Insurance Act, 1996
Contracts Act, 1950
Companies Act, 1965

An insurer must provide each investment-linked policyholder with

A
B
C
D

an advice of daily investment of funds

a policy statement and the fund performance report
the company annual financial reports
the funds manager entertainment expenses

AIA Premier Academy

Page 21

CEILLI- Set 2 2010

88

In order to encourage national thrift and promote individual financial independence particularly
in old age, tax relief is allowed in respect of premiums paid on life insurance and deferred
annuities which is on the ________________.

I.
II.
III.
IV.
A
B
C
D
89

B
C
D

there is no free-look provision in an investment-linked policy as there is no life

insurance
the agent can decide when he wants to deliver the policy
the agent can decide within 15 days of the issuance of the policy to demand a full
refund of all his units at offer price
a policyholder has only 15 days from the date he receives the policy document to
examine and decide the suitability of the policy and demand a full refund

Effective from the year of assessment 1997, the sum of tax relief allowable ____________.

A
B
C
D
91

I, II & III
I, II & IV
I, III & IV
II, III & IV

Under the free-look provision

90

in respect of payment of life insurance premiums for a life insurance policy is subject to
the limit of 7% of the capital sum assured of the policy
in respect of separate assessments for married couples, the limit of 7% in respect of
payment of life insurance premiums is the same in total
is RM2,500 plus RM2,000 for education and medical insurance
in respect of payment of life insurance premiums for a life insurance policy is no longer
subject to the limit of 7% of the capital sum assured of the policy

Which one of the following statements about investment-linked policies are TRUE?

I.
II.
III.
A
B
C
D
92

Individuals life
The life of the spouse of the individual
The joint lives of the individual and his/her spouse
The lives of the individual and his/her immediate family members

the cash value is not guaranteed

the volatility of the returns depends on the investment strategy of the fund
the investment-linked policyholders has direct control over the investment
decisions of the unitised fund

I & II
I & III
II & III
I, II & III

Which one of the following statement is FALSE?

A
B
C
D

The principles of investment-linked policies vary but all operate on the same features
Investment-linked policies can be classified single premium assurance plans or regular
premium assurance plans or investment-linked annuities
Investment-linked policies can be used for investment, regular savings and protection
The cash value and protection benefits are determined by the investment performance
of the underlying assets

AIA Premier Academy

Page 22

CEILLI- Set 2 2010

93

Which one of the following statements about investment-policies are TRUE?

I.
II.
III.

A
B
C
D
94

I & II
I & III
II & III
I, II & III

BNMs circular JPI:1/1997 on Specification of Assets for the purpose of a Licensed Insurers
Margin of Solvency _________________

I.
II.
III.
IV.
A
B
C
D
95

offer price is used to determined the number of units to be credited to the

account
the margin between the bid and offer price is used to cover the marketing cost
of the policy
the policy value is calculated based on the bid price of units allocated into the
policy

is not applicable to the investment-linked funds, in view of the nature of the

business that investment-linked funds could be invested 100% in equities
specifies the extent of a class of assets or description of assets that may be
taken into account for the purpose of a licensed insurers margin of solvency
is applicable to the investment-linked funds as all laws to investment-linked
life insurance policies
specifies the class or description of assets of a licensed insurer that may be
taken into account for the purpose of a licensed insurers margin of solvency

I, II & III
I, II & IV
I, III & IV
II, III & IV

Which one of the following statements are true for investment-linked policies?

I.
II.
III.
A
B
C
D

the owner of an investment-linked policy must be at least 18 years old

there is no requirement of insurable interest for investment-linked policies
there is no restriction on the age of the life assured

I & II
I & III
II & III
I, II & III

AIA Premier Academy

Page 23

CEILLI- Set 2 2010

96

What are required of an insurance agent conducting investment-linked life insurance

business?

I.
II.
III.
IV.
A
B
C
D
97

Sales-oriented basis
Hard sales basis
Market oriented basis
Varied product basis

Why is it so important that the customer must understand the recommendation in full?

A
B
C
D
99

I & III
I & IV
II & III
III & IV

Owing to changes in the market environment, many insurance companies now sell their
products on a ___________.

A
B
C
D
98

relevant knowledge and understanding of the technical aspects of investmentlinked life coverage
ability to give financial advice according to clients needs
general idea only of investment-linked life coverage
good marketing strategy with promising talk

because the insurer may give the wrong recommendations

because the insurer does not guarantee any return
because the impact on changed in investment condition of investment-linked life policy
falls wholly on the customer
because the policyholder expects higher return

The objective of satisfying customers needs profitably can be achieved by an agent through
_________.

I.
II.
III.
IV.
A
B
C
D

the giving of freebies to the customers

extensive investment training by the company
the use of sales plan, where sales goals, strategies and objectives are
coordinated with market analysis, segmentation and targeting
the giving of monetary assistance and discount to the customers

I, II & IV
II, III & IV
I & III
II & III

AIA Premier Academy

Page 24

CEILLI- Set 2 2010

100

Why is the personal delivery of policy regarded as an important aspect of providing after-sale
service?

I.
II.
III.
IV.
A
B
C
D
101

I, II & III
II, III & IV
I, III & IV
All

In Part II of the General Sales Principles of LIAMs Code of Conduct, intermediaries are
forbidden to ________________.

I.
II.
III.
IV.
A
B
C
D
102

sell high premium policy with good income for herself

make inaccurate or unfair criticism of any insurers
deal with or source other specialist advice when in doubt except from his
supervisor
attempt to persuade a prospect to cancel any existing policies unless these
are clearly unsuited to his needs

I & II
II & III
II & IV
III & IV

Which one of the following statements about rebating are TRUE?

I.
II.
III.

A
B
C
D
103

it alleviates the customers cognitive dissonance by the agents reassurance

on the right purchase
the agent can take the opportunity to obtain more names of referred leads and
other prospects
it re-emphasize the agents commitment to provide the policyholder with
quality service
policyholder is encouraged to call the agent whenever the need arises

rebating is prohibited under the Professional Agent Code of Conduct

rebating deals with offering the prospect a special inducement to purchase a
policy
rebating will enhance the sales performance and uphold the prestige of an
agent

I & II
I & III
II & III
I, II & III

Which one of the following statements is FALSE?

A
B
C
D

twisting is a specific form of misrepresentation

misrepresentation is a specific form of twisting
switching is a facility allowing policyholders to switch to other offered by company
rebating is to offer a prospect a special inducement to purchase a policy

AIA Premier Academy

Page 25

CEILLI- Set 2 2010

104

Which one of the following statements about twisting is FALSE?

A
B
C
D
105

it refers to an agent offering a prospect a special inducement to purchase a policy

twisting is a special form of misrepresentation
it refers to an agent inducing a policyholder to discontinue policy with another company
without disclosing the disadvantage of doing so
it includes misleading or incomplete comparison of policies

Misrepresentation resulting in inducing policyowner to cancel or have his policy made paid-up
in order to purchase a new policy to earn more income for the agent is known as

A
B
C
D

switching
replacing
twisting
changing

AIA Premier Academy

Page 26