Question

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16 kate is 50 years old and employed. she will be retiring at age 65 and is thinking of investing in segregated funds to use the funds for purchasing an annuity at the time of retirement. kate also wants to invest in another contract to leave funds to her daughter upon her death. for which of these segregated fund contracts should kate choose the automatic reset option?
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a. ○ for the retirement contract
b. ○ for both the retirement contract and the contract for her daughter’s benefit
c. ○ neither, kate should choose voluntary resets for both contracts
d. ○ for the contract invested for her daughter’s benefit
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Explanation:

To determine the correct answer, we analyze the purpose of each contract:

• The retirement contract (for purchasing an annuity at 65) has a shorter time horizon until use (15 years until retirement). Automatic reset may not be ideal here as Kate might want more control or adjust based on market conditions as retirement approaches.
• The contract for her daughter's benefit is a long - term investment (intended to be left upon Kate's death, which could be many years from now). Automatic reset, which resets the maturity value periodically to capture market gains, is more suitable for long - term, legacy - type investments.
• Option b is incorrect because the retirement contract may not benefit from automatic reset. Option c is incorrect as voluntary resets are not necessary for the daughter's contract. Option a is incorrect as the retirement contract is short - term relative to the daughter's contract.

Answer:

d. For the contract invested for her daughter's benefit