LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
An equity fund's primary risk and return characteristics are:
- ALow risk and low return, since the fund is diversified across many companies
- BNo risk, since the fund's guarantees protect the client against any market decline
- CGuaranteed returns set by the insurer at the start of each year
- Higher volatility and higher expected long-term return, suited to long horizons
Correct answer: D) Higher volatility and higher expected long-term return, suited to long horizons
Equity funds range from broad-market to sector-specific. Short-term losses are normal; long horizons are required.
Why the other options are wrong
- AEquities are higher risk even when diversified.
- BEquities carry market risk; guarantees apply only at maturity or death.
- CNo return is guaranteed.
Exam tip
Equity: growth objective, long horizon, volatility.
Common mistake
Placing short-horizon money in equity funds.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.