Q1. Relative to a drawdown plan that is based upon an individual’s life expectancy, if an individual only spends the real returns on their financial assets, their income will be:

A)   larger, and the remaining estate will also be larger.

B)   larger, but the remaining estate will be smaller.

C)   smaller, but the remaining estate will be larger.

Q2. Once an individual reaches the retirement stage of life, the main concern is:

A)   safety of principal, with investment income being secondary.

B)   reallocating financial assets to adopt a more conservative profile.

C)   establishing a drawdown rate that will not result in their outliving their assets.

Q3. A financial asset that is specifically designed to address the problem of outliving one’s assets is called:

A)   a guaranteed investment contract.

B)   a life annuity.

C)   life insurance.

答案和详解如下：

Q1. Relative to a drawdown plan that is based upon an individual’s life expectancy, if an individual only spends the real returns on their financial assets, their income will be:

A)   larger, and the remaining estate will also be larger.

B)   larger, but the remaining estate will be smaller.

C)   smaller, but the remaining estate will be larger.

Correct answer is C)

If an investor only spends the real returns on assets held, their income will be smaller than a plan based upon life expectancy. This is because a plan based upon life expectancy will also result in a drawdown of principal. However, since only the real returns are spent, the remaining estate will be larger than any plan that also draws down principal.

Q2. Once an individual reaches the retirement stage of life, the main concern is:

A)   safety of principal, with investment income being secondary.

B)   reallocating financial assets to adopt a more conservative profile.

C)   establishing a drawdown rate that will not result in their outliving their assets.

Correct answer is C)

When an individual reaches the retirement stage, the primary issue is to establish a drawdown rate (i.e., an income distribution plan) that will not result in their outliving their assets.

Q3. A financial asset that is specifically designed to address the problem of outliving one’s assets is called:

A)   a guaranteed investment contract.

B)   a life annuity.

C)   life insurance.

Correct answer is B)

Life annuities are designed to pay income to the owner as long as the owner is alive. Therefore, unless the insurance company issuing the annuity fails and is unable to make the payments as promised, the annuitant cannot outlive their income.

b

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