What is a Debenture

What is a Debenture?
A debenture is a type of debt instrument that is not secured by physical assets or collateral.
Debentures are backed only by the general creditworthiness and reputation of the issuer. 
Both corporations and governments frequently issue this type of bond to secure capital.

Types
There are two types of debentures as :
1 .convertible debentures  and
2. nonconvertible debentures 

Convertible debentures are bonds that can convert into equity shares of the issuing corporation after a specific period of time.
Nonconvertible debentures are regular debentures that cannot be converted into equity of the issuing corporation. 

Debentures are generally freely transferable by the debenture holder. 
Debenture holders have no rights to vote in the company's general meetings of shareholders,
but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. 
The interest paid to them is a charge against profit in the company's financial statements.

Solved answers of APPLICATIONS OF LIFE INSURANCE

CHAPTER

 APPLICATIONS OF LIFE INSURANCE

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Question 1
The sum assured under keyman insurance policy is generally linked to which of
the following?
I. Keyman income
II. Business profitability
III. Business history
IV. Inflation index
Answer: II. Business profitability

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Question 2
Mortgage redemption insurance (MRI) can be categorised under ________.
I. Increasing term life assurance
II. Decreasing term life assurance
III. Variable life assurance
IV. Universal life assurance
Answer: II. Decreasing term life assurance

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Question 3
Which of the below losses are covered under keyman insurance?
I. Property theft
II. Losses related to the extended period when a key person is unable to work
III. General liability
IV. Losses caused due to errors and omission
Answer: II. Losses related to the extended period when a key person is unable to work

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Question 4
A policy is effected under the MWP Act. If the policyholder does not appoint a
special trustee to receive and administer the benefits under the policy, the sum
secured under the policy becomes payable to the _____________.
I. Next of kin
II. Official Trustee of the State
III. Insurer
IV. Insured
Answer: II. Official Trustee of the State

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Question 5
Mahesh ran a business on borrowed capital. After his sudden demise, all the
creditors are doing their best to go after Mahesh’s assets. Which of the below
assets is beyond the reach of the creditors?
I. Property under Mahesh’s name
II. Mahesh’s bank accounts
III. Term life insurance policy purchased under Section 6 of MWP Act
IV. Mutual funds owned by Mahesh
Answer: III. Term life insurance policy purchased under Section 6 of MWP Act

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Question 6
Which of the below option is true with regards to MWP Act cases?
Statement I: Maturity claims cheques are paid to policyholders
Statement II: Maturity claims cheques are paid to trustees
I. I is true
II. II is true
III. Both I and II are true
IV. Neither I nor II is true
Answer: II. II is true

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Question 7
Which of the below option is true with regards to MWP act cases?
Statement I: Death claims are settled in favour of nominees
Statement II: Death claims are settled in favour of trustees
I. I is true
II. II is true
III. Both I and II are true
IV. Neither I nor II is true
Answer: II. II is true

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Question 8
Ajay pays insurance premium for his employees. Which of the below insurance
premium will not be treated deductible as compensation paid to employee?
Choice I: Health insurance with benefits payable to employee
Choice II: Keyman life insurance with benefits payable to Ajay
I. I only
II. II only
III. Both I and II
IV. Neither I nor II
Answer: II. II only

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Question 9
The practice of charging interest to borrowers who pledge their property as
collateral but leaving them in possession of the property is called
_____________.
I. Security
II. Mortgage
III. Usury
IV. Hypothecation
Answer: II. Mortgage

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Question 10
Which of the below policy can provide protection to home loan borrowers?
I. Life Insurance
II. Disability Insurance
III. Mortgage Redemption Insurance
IV. General Insurance
Answer: III. Mortgage Redemption Insurance

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Question 11
What is the objective behind Mortgage Redemption Insurance?
I. Facilitate cheaper mortgage rates
II. Provide financial protection for home loan borrowers
III. Protect value of the mortgaged property
IV. Evade eviction in case of default
Answer: II. Provide financial protection for home loan borrowers

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Financial planning

Financial planning:

If we want to invest our money we should first think twice about it .
The points to keep in our investment are : Time of period , return of the money with percentage and time.

We should have a financial planning
Financial planning plays a crucial role in building a life with less worry. Careful planning can help set your priorities and work steadily to achieve your various goals.
Types of goals:
1) Short term Goals

2) Medium term Goals

3) Long term Goals

Elements of financial planning include::
#Investing - allocation assets based on one's risk taking appetite,
#Risk management,
#Retirement planning,
#Tax and estate planning , and
#Financing one's needs

Life stages and priorities:
a) Learner -till say age 20-25
b)Earner - from 25 onward
c)Partner - on getting marriage at say 28 - 30
d)Parent - say 28 to 35
e) Provider - say age  35- 55
f) Empty nester - age 55- 65
g) Retirement - the twilight years - age 60 and beyond

As we can see above , the economic life cycle has three phases:
Student phase - first phase is the pre job when typically a student.
Working phase - phase of work begin individual comes to earn more than he consumes and thus begins to save and invest fund.
Retirement phase - process he accumulates wealth and builds assets which would provide funds for various needs in future including an income later years, when one has retired and stopped working.


To achieve one's financial goals , one must follow a disciplined savings in investment vehicles that  best suit one's risk taking appetite.
An unplanned, impulsive approach to financial planning is one of the prime causes of financial distress that affects individuals.

These goals may be short term : Buying an LCD TV set or a family vacation.
They could be medium term : Buying a house or a vacation abroad.
The long term goals may include : Education or marriage of one's child or post retirement provision

Tears wipe by yourself

Wipe your tears by yourself if other comes to wipe then they will do business of it

Never give up

Fell years ago Never gave up

Share market study

In share market you can buy and sell stocks to earn money with proper study of stock you want to purchase.

There is intraday and delivery trading in share market.
Intraday trading deals with buying and selling of stocks on the same day, during the trading hours that are stipulated by the exchange.
In Intraday the cost of brokerage is low and you receive margin profits the same day.

Delivery Trading is, if we buy shares today and sell them after 1 day whenever we want.It is the one of the secured ways of trading in stock market.
Customer can take delivery for undefined period and need not sell them on the same day with loss, even if the market price of share value reduces. This is a kind of long-term investments.

Example if we buy a share of Tata with Rs 100 and we purchase total 500 share that is we have to pay 500*100=Rs 50000 and sell it when the share price goes to Rs 110 ,
so we will get 500 * 110 = Rs 55000 that is we will get 10% profit
Make the overall study of the share you are going to purchase with its all information and management with all the market depth.

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There is NSE and BSE

The National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai.
The NSE was established in 1992 as the first demutualized electronic exchange in the country.

The Bombay Stock Exchange BSE) is an Indian stock exchange located at Dalal Street, Mumbai.BSE is established in 1875 is Asia's first stock exchange
Bombay Exchange was founded by Premchand Roychand.

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Initial public offering (IPO) or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors;
an IPO is underwritten by one or more investment banks,who also arrange for the shares to be listed on one or more stock exchanges.

A new fund offer (NFO) is the first subscription offering for any new fund offered by an investment company.
A new fund offer occurs when a fund is launched, allowing the firm to raise capital for purchasing securities

Solved - LIFE INSURANCE PRODUCTS

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LIFE INSURANCE PRODUCTS 


Question 1
What does inter-temporal allocation of resources refer to?
I. Postponing allocation of resources until the time is right
II. Allocation of resources over time
III. Temporary allocation of resources
IV. Diversification of resource allocation
Answer : II. Allocation of resources over time

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Question 2
Which among the following is a limitation of traditional life insurance products?
I. Yields on these policies is high
II. Clear and visible method of arriving at surrender value
III. Well defined cash and savings value component
IV. Rate of return is not easy to ascertain
Answer: IV. Rate of return is not easy to ascertain

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Question 3
Where was the Universal Life Policy introduced first?
I. USA
II. Great Britain
III. Germany
IV. France
Answer : I. USA

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Question 4
Who among the following is most likely to buy variable life insurance?
I. People seeking fixed return
II. People who are risk averse and do not dabble in equity
III. Knowledgeable people comfortable with equity
IV. Young people in general
Answer: III. Knowledgeable people comfortable with equity

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Question 5
Which of the below statement is true regarding ULIP’s?
I. Value of the units is determined by a formula fixed in advance
II. Investment risk is borne by the insurer
III. ULIP’s are opaque with regards to their term, expenses and savings
components
IV. ULIP’s are bundled products
Answer: III. ULIP’s are opaque with regards to their term, expenses and savings

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Question 6
All of the following are characteristics of variable life insurance EXCEPT:
I. Flexible premium payments
II. Cash value is not guaranteed
III. Policy owner selects where savings reserve is invested
IV. Minimum Death benefit is guaranteed
Answer: I. Flexible premium payments

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Question 7
Which of the below is correct with regards to universal life insurance?
Statement I: It allows policy owner to vary payments
Statement II: Policy owner can earn market-based rate of return on cash value
I. I is true
II. II is true
III. I and II are true
IV. I and II are false
Answer : III. I and II are true

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Question 8
All of the following is true regarding ULIP’s EXCEPT:
I. Unit holder can choose between different kind of funds
II. Life insurer provides guarantee for unit values
III. Units may be purchased by payment of a single premium or via regular
premium payments.
IV. ULIP policy structure is transparent with regards to the insurance expenses
Component
Answer : II. Life insurer provides guarantee for unit values

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Question 9
As per IRDA norms, an insurance company can provide which of the below nontraditional
savings life insurance products are permitted in India?
Choice I: Unit Linked Insurance Plans
Choice II: Variable Insurance Plans
I. I only
II. II only
III. I and II both
IV. Neither I nor II
Answer:  III. I and II both

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Question 10
What does unbundling of life insurance products refers to?
I. Correlation of life insurance products with bonds
II. Correlation of life insurance products with equities
III. Amalgamation of protection and savings element
IV. Separation of the protection and savings element
Answer : IV. Separation of the protection and savings element

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Question 11
 Which among the following is a non-traditional life insurance product?
I. Term assurance
II. Universal life insurance
III. Endowment insurance
IV. Whole life insurance
Answer : II. Universal life insurance

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Question 12
Which of the below statement is incorrect?
I. Variable life insurance is a temporary life insurance policy
II. Variable life insurance is a permanent life insurance policy
III. The policy has a cash value account
IV. The policy provides a minimum death benefit guarantee

Answer : I. Variable life insurance is a temporary life insurance policy

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