Question 1

The two most common types of dollar rolls are:

Accepted Answer

A)  Fixed-coupon and yield-maintenance agreements 
B)  Variable-coupon and yield-maintenance agreements 
C)  Fixed-coupon and Accounting agreements 
D)  Variable -coupon and Principal agreements 
A)  Fixed-coupon and yield-maintenance agreements 
B)  Variable-coupon and yield-maintenance agreements 
C)  Fixed-coupon and Accounting agreements 
D)  Variable -coupon and Principal agreements

Question 2

is the price in a hypothetical transaction at the measurement date in the market in which the reporting entity would transact for the asset or liability

Accepted Answer

A)  Feasible financial price 
B)  Asset/Liability price 
C)  Principal price 
D)  Exchange price 
A)  Feasible financial price 
B)  Asset/Liability price 
C)  Principal price 
D)  Exchange price

Question 3

The purest representation of asset/liability dynamics is instead through ____________, which measure assets and liabilities according to the cash flows they generate.

Accepted Answer

A)  Significant changes 
B)  economic values 
C)  Diversify property 
D)  Deliberate bias 
A)  Significant changes 
B)  economic values 
C)  Diversify property 
D)  Deliberate bias

Question 4

Direct serving loans method requires a system of good internal control and requires that the functions be split between the Accounting Department and the Investment Department. In such a case the Accounting Department is responsible for all of the following EXCEPT:

Accepted Answer

A)  Supplying the Investment Department with correct data and reports that summarize all loan transactions 
B)  Alerting the Investment Department promptly whenever an exception to the normal processing routine occurs 
C)  The design, maintenance, and accuracy of accounting records, for periodic management and exception reports, and for statutory statement preparation 
D)  Its records may or may not provide the needed data to support this reporting function 
A)  Supplying the Investment Department with correct data and reports that summarize all loan transactions 
B)  Alerting the Investment Department promptly whenever an exception to the normal processing routine occurs 
C)  The design, maintenance, and accuracy of accounting records, for periodic management and exception reports, and for statutory statement preparation 
D)  Its records may or may not provide the needed data to support this reporting function

Question 5

The risk that the obligation will not be fulfilled and affects the value at which the liability is transferred is known as:

Accepted Answer

A)  performance risk 
B)  nonperformance risk 
C)  hypothetical risk 
D)  relocation risk 
A)  performance risk 
B)  nonperformance risk 
C)  hypothetical risk 
D)  relocation risk

Question 6

Supplementary contracts may be issued by an insurer upon the termination of a life insurance contract that has been terminated by death, maturity, or surrender. The policyholder, if living or the beneficiary elects the option under which the proceeds are paid. The payment options usually available are:

Accepted Answer

A)  To receive a guaranteed fixed number of payments 
B)  To receive payments of a certain amount until the proceeds are exhausted. 
C)  To leave the proceeds with the insurer to earn interest with payment to be made at a later date. 
D)  Any one out of these 
A)  To receive a guaranteed fixed number of payments 
B)  To receive payments of a certain amount until the proceeds are exhausted. 
C)  To leave the proceeds with the insurer to earn interest with payment to be made at a later date. 
D)  Any one out of these

Question 7

Insurance entities usually write covered-call options because they consider the premium received for writing the options to be either:

Accepted Answer

A)  an economic hedge between a decline in market price and security 
B)  a decrease in yield on the underlying risk security 
C)  Both A & B 
D)  Neither A nor B 
A)  an economic hedge between a decline in market price and security 
B)  a decrease in yield on the underlying risk security 
C)  Both A & B 
D)  Neither A nor B

Question 8

The Annual Statement reporting requirements for the participating and nonparticipating branches is limited to major and secondary lines of business, but a company would:

Accepted Answer

A)  Usually carry this separation throughout all of its premium classifications 
B)  Do not carry this separation throughout all of its premium classifications 
A)  Usually carry this separation throughout all of its premium classifications 
B)  Do not carry this separation throughout all of its premium classifications

Question 9

Internal Control is:

Accepted Answer

A)  the process of controlling the impact of risk related events on a company 
B)  the process of planning the processes in order to avoid risk related events to a company 
C)  the process of designing the models to avoid risk related events on a company 
D)  All of the above 
A)  the process of controlling the impact of risk related events on a company 
B)  the process of planning the processes in order to avoid risk related events to a company 
C)  the process of designing the models to avoid risk related events on a company 
D)  All of the above

Question 10

Immunization theory says that:

Accepted Answer

A)  duration matching requires rebalancing the asset portfolio, but the theoretically correct answer is to rebalance continuously. 
B)  Investment matching requires rebalancing the liabilities portfolio, but the theoretically correct answer is to rebalance annually. 
C)  Performance matching requires rebalancing the expense portfolio, but the theoretically correct answer is to rebalance continuously as and when needed only. 
D)  Balance matching requires rebalancing the revenues portfolio, but the theoretically correct answer is to rebalance continuously. 
A)  duration matching requires rebalancing the asset portfolio, but the theoretically correct answer is to rebalance continuously. 
B)  Investment matching requires rebalancing the liabilities portfolio, but the theoretically correct answer is to rebalance annually. 
C)  Performance matching requires rebalancing the expense portfolio, but the theoretically correct answer is to rebalance continuously as and when needed only. 
D)  Balance matching requires rebalancing the revenues portfolio, but the theoretically correct answer is to rebalance continuously.

Question 11

A liability for premiums paid in advance can also arise when insurers allow policyholders to pay several years' premiums at one time. Since the insurer has the use of policyholder funds that are not yet due, it is customary for the insurer to:

Accepted Answer

A)  Credit Assets 
B)  Discount the value of such premiums and accept a lesser amount in cash 
C)  Discount the value of such premiums 
D)  Accept a lesser amount in cash 
A)  Credit Assets 
B)  Discount the value of such premiums and accept a lesser amount in cash 
C)  Discount the value of such premiums 
D)  Accept a lesser amount in cash

Question 12

An annuity contract provides:

Accepted Answer

A)  Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a minimum guaranteed amount for those annuities not having life contingencies 
B)  Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a minimum guaranteed amount for those annuities involving life contingencies 
C)  Either immediately or at some future date, perpetual income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a maximum guaranteed amount for those annuities involving life contingencies 
D)  Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain small number of payments 
A)  Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a minimum guaranteed amount for those annuities not having life contingencies 
B)  Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a minimum guaranteed amount for those annuities involving life contingencies 
C)  Either immediately or at some future date, perpetual income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a maximum guaranteed amount for those annuities involving life contingencies 
D)  Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain small number of payments

Question 13

Put Option is:

Accepted Answer

A)  A procedure that grants the holder the right but not the obligations to buy the main asset at the specified market price. 
B)  A strategy that grants the holder the right to sell the underlying asset at the actual price. 
C)  An instrument that grants the holder the right but not the obligations to sell the underlying asset at the specified strike price. 
D)  An activity that grants the holder the right to put obligations to the underlying asset at the specified strike price. 
A)  A procedure that grants the holder the right but not the obligations to buy the main asset at the specified market price. 
B)  A strategy that grants the holder the right to sell the underlying asset at the actual price. 
C)  An instrument that grants the holder the right but not the obligations to sell the underlying asset at the specified strike price. 
D)  An activity that grants the holder the right to put obligations to the underlying asset at the specified strike price.

Question 14

The subsequent measurement of the deposits is based upon whether the insurance and reinsurance contract:

Accepted Answer

A)  transfer only significant timing risk 
B)  transfer only significant underwriting risk 
C)  transfer neither significant timing nor underwriting risk 
D)  All of the above 
A)  transfer only significant timing risk 
B)  transfer only significant underwriting risk 
C)  transfer neither significant timing nor underwriting risk 
D)  All of the above

Question 15

Which of the following is NOT the way to make changes in variables that can be considered in the loss reserving process?

Accepted Answer

A)  selection of loss projection 
B)  adjustment of historical loss data 
C)  separate calculation of effect of variables 
D)  segregation of new data 
A)  selection of loss projection 
B)  adjustment of historical loss data 
C)  separate calculation of effect of variables 
D)  segregation of new data

Question 16

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date is called:

Accepted Answer

A)  face value 
B)  fair value 
C)  market value 
D)  transaction value 
A)  face value 
B)  fair value 
C)  market value 
D)  transaction value

Question 17

These are securities whose underlying assets consist of commercial mortgage loans. The commercial loans are pooled, which brings diversification and liquidity to the asset class. What are these?

Accepted Answer

A)  Conventional securities 
B)  CMBS 
C)  Subordinated securities 
D)  Securitization 
A)  Conventional securities 
B)  CMBS 
C)  Subordinated securities 
D)  Securitization

Question 18

The name of each Subsidiary, Controlled and Affiliated (SCA) entity and percentage of ownership of common stock must be put to disclosure when:

Accepted Answer

A)  For all investments in SCA entities that exceed 20 percent of the total admitted expenses of the insurer. 
B)  For all investments in SCA entities that exceed 15 percent of the total admitted liabilities of the insurer. 
C)  For half of the investments in SCA entities that exceed 6 percent of the total admitted assets of the insurer. 
D)  For all investments in SCA entities that exceed 10 percent of the total admitted assets of the insurer. 
A)  For all investments in SCA entities that exceed 20 percent of the total admitted expenses of the insurer. 
B)  For all investments in SCA entities that exceed 15 percent of the total admitted liabilities of the insurer. 
C)  For half of the investments in SCA entities that exceed 6 percent of the total admitted assets of the insurer. 
D)  For all investments in SCA entities that exceed 10 percent of the total admitted assets of the insurer.

Question 19

_________________ is a special variation on a second mortgage. In this form, the new lender assumes the original or first mortgage and has the responsibility of collecting all payments and remitting a portion of these payments to the first lender.

Accepted Answer

A)  Conventional Residential Loan 
B)  FHA loan 
C)  Wrap-around loan 
D)  VA loan 
A)  Conventional Residential Loan 
B)  FHA loan 
C)  Wrap-around loan 
D)  VA loan

Question 20

_______ include financial statements and notes, both on a consolidated and non consolidated basis.

Accepted Answer

A)  The annual Return 
B)  Provincial Adequacy Return 
C)  Constraints of self assessment 
D)  Static Capital Adequacy Test 
A)  The annual Return 
B)  Provincial Adequacy Return 
C)  Constraints of self assessment 
D)  Static Capital Adequacy Test

Exam 1: Accredited Financial Examiner