Life Assurance As Investment

The subject of life assurance generally is treated in Chapter 12. A particular form of life assurance policy called an `endowment policy' is described in some detail on page 135. This kind of policy sets up a capital sum which becomes payable to you at the end of the agreed endowment period as well as providing protection for your dependants.

The possibility of using endowment policies as a savings and investment medium should not be overlooked in any long-term plan. The tax-free yield on the regular premiums invested can work out as high as 10.5% per annum.


1. What are ordinary shares in a limited comapny?

2. Why are ordinary shares sometimes called 'equities'?

3. Explain the divergence between market value and nominal value of ordinary shares.

4. How can companies acquire additional capital for expansion from their own resources?

5. It is said that the market price of a share is not determined by the value of the company's net assets. Why is this so? What does determine market price?

6. How is the yield on an ordinary share calculated?

7. If dividend yield on shares is below current interest rates, what can a potential buyer of the shares be expecting to gain from a purchase of the shares?

8. Is income tax payable on dividends received?

9. What is a 'tax credit'?

10. Describe one of two ways in which the asset value of a share can be assessed in a rough and ready way from balance sheet figures.

11. What is meant by 'number of times covered' in the case of the dividend on ordinary shares?

12. What is the significance of the price/earnings ratio of shares?

13. Describe a unit trust.

14. What advantages do unit trusts have over direct purchases of individual company shares?

15. What kind of life assurance policies can be a profitable means of long-term investment for the regular saver?

Unit Trusts

Investing directly in the purchase of company stocks and shares carries more risk, both as to income and growth, than many small investors are willing to undertake. But they, and others who lack the knowledge, experience, or skill adequately to supervise their shareholdings, can participate indirectly in the stock and share market by buying units of unit trusts.

A unit trust is a fund invested in a large range of undertakings, ordinary company shares, overseas shares, preference shares, and so on. Each unit holder thus enjoys a wide spread of risk since he has only a very small interst in a very... see: Unit Trusts

Refunds, Personal And Business Finance 2017

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