Risk Management and Insurance
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Course Introduction
Risk Management and Insurance explores the fundamental principles and practices involved in identifying, assessing, and managing various types of risks faced by individuals and organizations. The course covers risk analysis techniques, strategies for risk mitigation, and the pivotal role of insurance in managing both personal and business risk exposures. Students will examine the structure and functioning of insurance markets, types of insurance products, policy provisions, and regulatory considerations. Real-world case studies and practical examples are used to illustrate how risk management and insurance solutions are implemented to safeguard assets and ensure financial stability in an ever-changing environment.
Recommended Textbook
Financial Planning 2nd Edition by Warren McKeown
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15 Chapters
443 Verified Questions
443 Flashcards
Source URL: https://quizplus.com/study-set/3555
Page 2
Chapter 1: Personal Financial Planning
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) The 'know your client rule':
A) provides that a licensee must monitor and supervise the activities of representatives to ensure they are complying with the law
B) provides that before a financial planner is able to give specific advice on an investment, the Corporations Act requires the planner to make every effort to understand the client's investment objectives, financial situation and particular needs C) applies to both wholesale and retail clients
D) is contained within the Financial Services Guide
Answer: B
Q2) Market volatility as a component of interest-rate risk:
A) affects the amount of interest payments received on a fixed-interest investment
B) affects the value of a fixed-interest investment at its maturity date
C) affects the value of a fixed-interest investment sold before its maturity date
D) both a and b
Answer: C
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3
Chapter 2: Financial Planning Skills
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31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70600
Sample Questions
Q1) Which of the following items would not generally be included in the calculation of an individual's liquidity ratio?
A) the total outstanding balance of a 25-year mortgage loan taken out in the last year
B) debt repayments over the next 12 months
C) amount of an outstanding telephone account
D) both a and c
Answer: A
Q2) NPV is:
A) the comparison of what is proposed to be outlaid or invested in today's dollars with what the investment is predicted to return in today's dollars.
B) the sum of the future value of cash inflows less cash outflows.
C) both a and b
D) positive at all discount rates greater than the IRR.
Answer: A
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Chapter 3: Taxation Planning
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) For negative gearing purposes:
A) the benefit of the tax loss created depends on the marginal tax rate of the lender.
B) the tax loss created by the investor can be offset against salary and other net investment income in the same financial year.
C) total allowable deductions excluding interest expense from the investment will always exceed net investment income.
D) all of the above.
Answer: B
Q2) Examples of income tax offsets in Australia include:
A) subscriptions to professional journals.
B) imputation or franked credits.
C) interest on loans used for investment purposes.
D) all of the above.
Answer: B
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Chapter 4: Investment Choices
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) The enterprising or aggressive investor is characterised by:
A) speculation.
B) their willingness to devote time and care to the selection of sound and attractive investments even though they may not be fully trained experts in the field.
C) the conservation of capital.
D) both a and b
Q2) In terms of behavioural theory, overconfidence can result in:
A) individual investors being mistakenly convinced that they can regularly beat the market.
B) sharemarket investors less likely to speculate by regularly trading in stocks.
C) people deviating from rational thinking in making judgements where there is an element of uncertainty.
D) both a and c
Q3) Briefly explain some of the investment choices available to investors.
Q4) Explain the general range of classifications used by financial planners.
Q5) Describe how investor behaviour can challenge the assumption that investors are rational.
Q6) How does diversification reduce risk?
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Chapter 5: Direct Investment Fixed Interest and Shares
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29 Verified Questions
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Sample Questions
Q1) Briefly explain how lenders use the cash rate when setting interest rates.
Q2) Mickey Ronaldo purchased a 180 day Commonwealth Treasury Note (T-note) having a face value of $100,000 on 15 April 2014. The purchase price of the T-note was $96,730.
a) Calculate Mickey's annualised nominal rate of return based on the face value of the T-note.
b) Calculate Mickey's annualised nominal rate of return based on the purchase price of the T-note.
c) Which of the above annualised nominal rates of return is more representative of Mickey's actual rate of investment return?
Q3) Technical analysts:
A) use forecasts of future data based on company fundamentals to make financial decisions.
B) examine the past price history of a company in order to identify patterns of price movements.
C) prepare graphs of past price movements in order to isolate buy and sell points which are used to make financial decisions.
D) both b and c
Q4) Outline the primary differences between ordinary and preference shares.
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Chapter 6: Direct Investment - Property
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) The NTA of an unlisted property trust assuming all other items are held constant:
A) will increase in situations where the fund manager decides to repay principal on outstanding debt from surplus cash holdings.
B) will increase in situations where the fund manager decides to revalue upwards the amount included in the balance sheet for goodwill attached to a prominent property held by the fund.
C) is used by fund managers to determine the current value of units in the trust before adjusting for any management fees.
D) both a and c
Q2) When providing advice to a client on whether it is best for them to rent or buy a family home based only on financial grounds, the advice:
A) will favour the buying option in times of relatively low interest rates and current flat housing prices.
B) will favour the buying option in times of relatively tight rental markets.
C) both a and
D) none of the above.
Q3) Outline the taxation advantages of investing in a property trust.
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Chapter 7: Managed Funds
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) The indirect cost ratio (ICR):
A) measures management costs not deducted directly from investors' account balances to the average net assets of the fund.
B) measures the average net assets of the fund divided by the management costs deducted directly from investors' account balances.
C) approximates current performance bonuses.
D) all of the above.
Q2) The constitution of a managed investment scheme (MIS) includes matters such as:
A) the cost of buying interests in the scheme.
B) the name of the auditor of the MIS.
C) both a and b
D) none of the above.
Q3) Briefly differentiate active and passive fund management styles.
Q4) The relationship that exists between unsystematic risk and the number of securities held in an investment portfolio is:
A) non applicable as no relationship exists.
B) inverse until unsystematic risk is removed.
C) positive until unsystematic risk is removed.
D) inverse up to a maximum of 10 securities and then positive.
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Chapter 8: Leveraged Investments
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Sample Questions
Q1) An option:
A) is an agreement to trade something in the future, either to buy or to sell a specific amount of a specific asset
B) is an agreement that gives the buyer (holder) of the option the right but not the obligation to buy or sell something in the future at a fixed price
C) is an agreement that gives the holder the right to buy or sell the underlying asset, so, as with all investment assets, the investor wishes to be long if they expect prices to rise and wishes to be short if they expect them to fall
D) none of the above
Q2) The buyer of a futures contract will prefer prices of the underlying asset in the future to:
A) remain constant
B) fall
C) rise
D) either a or c
Q3) Briefly discuss the principal benefits of undertaking gearing as an investment strategy.
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Chapter 9: Risk Management and Insurance
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30 Flashcards
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Sample Questions
Q1) The effect of the 'co-insurance' or 'average' clause included in a house and contents policy is to:
A) increase payouts to policyholders if they are over-insured at the time of making a claim.
B) decrease payouts to policyholders if they are under-insured at the time of making a claim.
C) both a and b .
D) ensure that a claim rejection arising from late payment can be overturned by the courts.
Q2) a) Outline the principal differences between the measures of speculative risk and pure risk.
b) Justify which of the above measures is more commonly associated with policies of insurance.
Q3) A terminal illness benefit is:
A) typically included in a basic term life policy.
B) paid as a regular income for a specified period.
C) generally limited to a total payment of $1 million.
D) both a and c
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Chapter 10: Superannuation
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Sample Questions
Q1) a) Given the information for the AEU Superannuation Fund as stated in the previous question, calculate the fund's 2015 before-tax return as a percentage on an average fund investment of $42,450.
b) Given the information for the AEU Superannuation Fund in the previous question, calculate the fund's 2015 after-tax net cash flows.
Q2) Using the individual tax rate table in chapter 3 of the text, calculate the amount of tax that Mr. Robbie Anders (56 years of age) would save by contributing $35,000 as a salary sacrifice superannuation contribution in the 2015 financial year instead of receiving the same amount ($35,000) as part of his annual salary of $105,000. For the purposes of this question ignore the Medicare levy and any superannuation guarantee payments for this year.
Q3) Australia's system of superannuation is based on how many pillars?
A) 3
B) 4
C) 7
D) none of the above
Q4) Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.
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Page 12
Chapter 11: Retirement Planning
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Sample Questions
Q1) The issue of longevity risk has been identified as an increasing problem in more recent times, particularly in a relatively low-inflationary environment. Comment on this statement.
Q2) In Australia the market for long-term annuities purchased from life insurance companies to fund the public's retirement needs:
A) is relatively small compared to other forms of annuities. B) is currently serviced by a large number of life companies. C) includes lifetime annuities.
D) both a and c
Q3) Mr Jobe Laney has recently invested part of his retirement funds, an amount of $65,000 into a term deposit with the Wakpac Credit Union at an interest rate of 6% with interest compounding annually and all funds returned at maturity. If inflation was forecast to be 3% in year 1 and 4% in year 2, using a method that calculates a real rate of return each year, calculate the real amount (in dollars) that Jobe would have on maturity and the overall real rate of return on the investment.
Q4) Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.
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Chapter 12: Self-Managed Superannuation Funds
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Sample Questions
Q1) The residency status of a SMSF will not be jeopardised where the trustees:
A) travel overseas for no more than 30 months before returning for at least 28 days.
B) travel overseas for no more than 24 months before returning for at least 14 days.
C) travel overseas for no more than 24 months before returning for at least 28 days.
D) none of the above.
Q2) Actions by trustees for a particular offence that are held to be non-compliant with the superannuation rules can result in the trustees being exposed to:
A) both civil prosecution up to a maximum penalty of $220,000 and criminal action with a maximum penalty of 5 years in prison.
B) either civil prosecution up to a maximum penalty of $220,000 or criminal action with a maximum penalty of 5 years in prison.
C) either civil prosecution up to a maximum penalty of $220,000 or criminal action with a maximum penalty of 10 years in prison.
D) none of the above.
Q3) Why are there likely economies of scale in operating a SMSF?
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Chapter 13: Social Security
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) The Department of Human Services (DHS) pays:
A) 5 different types of benefits.
B) 23 different types of benefits.
C) more than 140 types of benefits.
D) none of the above.
Q2) In Australia, social security services are provided by:
A) Centrelink .
B) the Commonwealth Services Delivery Agency.
C) the Department of Veterans Affairs.
D) all of the above.
Q3) An accommodation charge will be payable by a person entering a nursing home: A) in all circumstances.
B) where assets exceed a threshold level with payment made periodically or deferred with an appropriate interest charge.
C) where assets exceed a threshold level with payment made as a lump sum.
D) where assets are below a threshold level.
Q4) On what basis do you consider that some assets are allocated as fully assessable, partly assessable or exempt from the pension assets test?
Q5) Outline the extent of the assets test exemption for the family home.
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Chapter 14: Estate Planning
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Sample Questions
Q1) Shares acquired by the deceased before the introduction of the capital gains tax (CGT) will not be subject to CGT if sold by the:
A) executor or the beneficiary.
B) executor within 6 months of the date of death.
C) beneficiary within 12 months of the date of death.
D) none of the above.
Q2) In Australia, a will falls under:
A) state jurisdiction.
B) federal jurisdiction.
C) federal jurisdiction unless seen to be prejudicial to a family member.
D) none of the above.
Q3) A discretionary trust provides:
A) for the separation of legal and beneficial ownership of trust assets.
B) beneficiaries with a right to minimum future income distributions.
C) protection for trust assets from claims made on beneficiaries by third parties.
D) both a and c
Q4) Outline how the use of a trust can provide useful asset protection for individuals.
Q5) What are the general consequences where a person dies intestate?
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Chapter 15: Development of a Statement of Advice
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Sample Questions
Q1) An SOA must:
A) tailor advice to the needs of the client.
B) incorporate the level of the client's financial literacy in its presentation.
C) assess the complexity of the advice provided.
D) all of the above.
Q2) A limited advice plan:
A) considers all aspects of the client's personal circumstances, needs and objectives.
B) is also termed scaled advice.
C) is often sought and requested by clients seeking financial advice on a particular issue or specific circumstances, for example research on a particular product, investigation into negative gearing strategies, or salary packaging.
D) both b and c
Q3) Discuss the form and extent of remuneration disclosure that applies to financial advisers.
Q4) Typically the financial planner will need to make a number of assumptions in the preparation of a comprehensive and detailed SOA. Provide details as to some of the assumptions used by the financial planner including the basis for the relevant amounts.
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