American Bankers Association American Bankers Association Certifications CTFA Questions & Answers

• Question 21:

  It is a measure of inflation based on changes in consumer goods and services:

  A. Consumer price Index

  B. Customer price Index

  C. Market rate Index

  D. Market value

  Correct Answer: A

• Question 22:

  Inflation is a vital concern to financial planning. It affects not only what we pay for our goods and services but also what we earn in our jobs. The amount of goods and services each dollar buys at a given time is:

  A. Purchasing power

  B. Seller's demand

  C. Market value

  D. Sales purchase difference

  Correct Answer: A

• Question 23:

  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:

  A. Growth

  B. Expansion

  C. Depression

  D. Recovery

  Correct Answer: B

• Question 24:

  The phase of the economic cycle when levels of employment and production fall and the growth of the economy slows is called:

  A. Growth

  B. Expansion

  C. Recession

  D. Recovery

  Correct Answer: C

• Question 25:

  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:

  A. Growth

  B. Expansion

  C. Recession

  D. Depression

  Correct Answer: D

• 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:

  A. Children only

  B. Employer only

  C. Estate only

  D. Spouse only

  Correct Answer: B

• Question 27:

  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?

  A. The insurable interest

  B. The underwriting requirements

  C. The secondhand policy market value

  D. The chargeable gains

  Correct Answer: B

• Question 28:

  If an income protection insurance (PHI) policy has reviewable premiums, this usually means that the insurance company can:

  A. Alter the cost of the cover

  B. Withdraw cover on any anniversary date

  C. Only increase premiums in line with inflation

  D. Pay benefits for less than the full period of incapacity

  Correct Answer: A

• Question 29:

  Under an employer's group life assurance policy, what is the normal tax treatment of the death benefit?

  A. It is liable to Inheritance Tax

  B. It is liable to Capital Gains Tax

  C. It is liable to Income Tax

  D. It is not liable to any form of taxation

  Correct Answer: D

• Question 30:

  Stephen is about to commence taking benefits from his personal pension scheme, which includes protected rights. He should be aware that:

  A. He can take up to 25% of the total fund as a pension commencement lump sum

  B. He has the right to exercise the open market option

  C. His whole pension fund must provide limited price indexation in payment

  D. The value of the protected rights element will not count towards the lifetime allowance

  Correct Answer: AB