FIN375e_JAN_2017_Exam Paper.pdf - FIN375e Examination January Semester 2017 Risk Management and Insurance Planning Friday 19 May 2017 10:00 am 12:00 pm

FIN375e Copyright © 2017 SIM University Page 1 of 5 Examination – January Semester 2017 FIN375e Examination – January Semester 2017 Risk Management and Insurance Planning Friday, 19 May 2017 10:00 am – 12:00 pm ____________________________________________________________________________________ Time allowed: 2 hours ____________________________________________________________________________________ INSTRUCTIONS TO STUDENTS: 1. This examination contains FIVE (5) questions and comprises FIVE (5) printed pages (including cover page). 2. You must answer ALL questions. 3. This is a closed book examination. 4. All answers must be written in the answer book. At the end of the examination Please ensure that you have written your examination number on each answer book used. Failure to do so will mean that your work cannot be identified. If you have used more than one answer book, please tie them together with the string provided. THE UNIVERSITY RESERVES THE RIGHT NOT TO MARK YOUR SCRIPT IF YOU FAIL TO FOLLOW THESE INSTRUCTIONS.

FIN375e Copyright © 2017 SIM University Page 2 of 5 Examination – January Semester 2017 You must answer ALL the questions. (Total 100 marks) Question 1 Jenny, 25 years old, has recently bought an investment-linked life insurance that protects her from death and disability for a sum of $100,000. She has also added on a rider of critical illnesses of $100,000 to the main policy. Her Financial Consultant who sold her the plan has mentioned some features about the policy, which she could only remember bits and pieces of. Please help her to clarify the following questions she has in mind: (a)“I remembered some mention of investment-linked insurance being more expensive as one ages and that it may eat into the investment value.”Please explain to Jenny how an investment-linked life insurance works. (5 marks) (b)“I also remembered that when I was deciding between a life insurance or an investment linked-life insurance, I was told that a life insurance with a critical illnesses rider attached will stop upon a claim. Whereas for an investment-linked life insurance, upon the diagnosis of critical illnesses, my policy still goes on and covers me for death and total permanent disability.”Please compare a life insurance and an investment-linked life insurance, and evaluate the benefit of an investment-linked life insurance.