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Welcome

Below are three exam type formulas along with three practice LLQP exam questions that require you to use the formulas to get the correct answer. As you are probably finding out as you read through the Foran/Advocis material, there are many types of formulas you need to know and apply in order to pass your exams.

See how you do with these three.

Three LLQP formulas you need to know:

1. RRSP formula: Earned income from the previous year x 18%, less pension adjustment (P.A.) from the previous year (if any), plus carry forward room from the previous December 31st (if any) = RRSP contribution room for the current year.

2. Residual Benefit:	Income lost	x Benefit
	Pre-disability income

3. Segregated Fund Guarantee

Proportional Method:
Step #1:	Guaranteed amount x Withdrawal FMV	amount the guarantee is reduced by.
Step #2:	Subtract answer from step #1 from the guaranteed amount.

LLQP Sample Exam Questions using the above formulas:

1) Gurpreet’s salary in 2010 was $65,000. She also belonged to the company’s Registered Pension Plan which has a 5% matching formula. Based on this information only, how much could Gurpreet invest into her RRSP in 2011?

$11,700
$5,200
$8,450
None of the above are correct.

2) Sally earns $120,000 yearly at the hospital as an emergency room doctor. She purchased a disability policy after interning at the hospital a few years back. The disability policy was for 70% of her income, and had a residual benefit rider. Sally suffered a disability and was off work for four months. She returned to work but was not able to work for the same period of time she worked before the disability. She was only able to earn $5000 per month. What, if any, is her residual benefit?

$2,000
$3,500
$5,000
$3,000

3) You have invested a lump sum amount of $20,000 (2,000 units at $10.00 each) into a segregated fund. The death and maturity guarantee is 80%. It is a proportional guarantee. Today the FMV is $28,000 (2,000 units at $14.00 each) and you redeem $7,000 or 500 units. What is true about the guarantee after the surrender?

Guarantee reduces 25% , $16,000 to $12,000

Guarantee reduces 25%, $20,000 to $16,000

Guarantee reduces 35%, $16,000 to $10,400

Guarantee reduces 35% , $20,000 to $14,400

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Answers

Question # 1: b. $5,200

Rationale
$65,000 salary x 18% = $11,700 less $6,500 ($65,000 x 10%= $6,500), which is the contributions the employer and employee made into the employee’s Registered Pension Plan (RPP) = $5,200 RRSP room for 2011.

Reference: Module 10 (Retirement)

Question # 2: Answer: b. $3.500

Rationale
$120,000 / 12 months = $10,000 monthly income
$10,000 x 70% = $7,000 monthly disability benefit
Residual formula: Residual Benefit = income earned / pre-disability income x disability benefit. ($5,000 / $10,000 x $ 7,000 = $3,500 residual disability benefit).

Reference: Module 3 (Accident and Sickness Insurance (Disability Insurance))

Question # 3: a. Guarantee reduced 25%, $16,000 to $12,000.

Rationale for Question # 3

$7,000 divided by the FMV of $28,000 is the percentage drop in the guarantee or 25%.
and
$20,000 x 80% = $16,000 guarantee
Apply formula: $16,000 x $7000/ $28,000 = $l4,000 reduction in guarantee.
$16,000 guarantee Less $4,000 = a $12,000 guarantee left after the withdrawal of $4,000.

Reference: Module 9 (Fundamentals of Insurance Investments (Segregated Funds))

Good luck with these questions and your LLQP exams.

Sincerely,

Doug Planche, CFP, CLU, CH.F.C., F.L.M.I.,
Senior Vice President
Foran Financial Institute

Doug Planche is the instructor for the Foran LLQP 4-Day Exam Preparation Seminars. For information on the Foran LLQP seminars, please contact Foran Financial Institute at 1-800-565-0374 or visit www.foranfinancial.com.

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Additional study aids

Preparatory Seminars and Practice Exams

LLQP Prep Seminars – A comprehensive four-day classroom-based seminar intended to prepare you for writing the certification and final licence exams: $545+ taxes
Contact Foran Financial at: 416-947-1922 or 1-800-565-0374.

Please contact Advocis Member Services at 1-877-773-6765 for more details.

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