The solution says "the company's shareholders may want to have the profit distributed as soon as possible and so may like the high proportion of regular reversionary bonus proposal". If reversionary bonuses are paid on death or maturity, how can it be distributed as soon as possible?
The solution says that 1)"the company could be out of the market too long between receiving money and the unit price being allocated". Please clarify. 2)"Time lags can be exploited by policyholders or sales people, if they can trade units at a price which is based on known market movements". Please clarify. 3)"The tax may be determined incorrectly and not treat all policyholders fairly". Please clarify. 4)"The tax allowed for in the fund may not reflect the tax position of the company". Please clarify. Are individual tax rates on unit linked funds based on individual's salary tax rates?
The solution says "There may be counterparty risk of intermediaries not paying premiums". Are premiums not paid directly to the company?
The solution says "A mixture of equity and property is most likely for future discretionary bonuses". Will future premiums and free assets be invested in equity and property? "Lower free assets would usually mean a higher proportion of bonds". Is it because that equity and property are more riskier investments than bonds?