Question 1

Schedule rating:

Accepted Answer

A)  starts with a real standard, frequently the judgmental rate, and adjusts such standard rates according to an evaluation of greater or lesser exposure to risk. 
B)  starts with an assumed standard, frequently the manual rate, and adjusts such standard rates according to an evaluation of greater or lesser exposure to risk. 
C)  starts with an assumed standard, frequently the class rate, and adjusts such standard rates according to an evaluation of greater or lesser exposure to risk. 
D)  starts with a real standard, frequently the individual rate, and adjusts such standard rates according to an evaluation of greater or lesser exposure to risk.

Question 2

Risk retention group is:

Accepted Answer

A)  A public entity formed by the members of the public pool primarily to provide business risk competency to the members. 
B)  A business entity formed by the members of the private pool primarily to provide commercial asset insurance to the members. 
C)  An insurance entity formed by the members of the private pool primarily to provide commercial liability insurance to the members. 
D)  An insurance entity formed by the members of the public pool primarily to provide commercial expense insurance to the members.

Question 3

With traditional whole life insurance:

Accepted Answer

A)  an interest rate on reserves is implicit in the premium rate and is unlocked at time of policy issuance 
B)  an expense rate on reserves is explicit on the premium rate and is locked in at time of policy issuance 
C)  an interest rate on reserves is implicit in the premium rate and is locked in at time of policy issuance 
D)  a debt rate on reserves is implicit in the premium rate and is unlocked at time of policy issuance

Question 4

In a yield-maintenance agreement:

Accepted Answer

A)  the securities repurchased may have a different stated interest rate from that of the securities sold and are generally priced to result in substantially the same yield. 
B)  the securities repurchased may have the same stated interest rate from that of the securities sold and are generally priced to result in substantially the same yield. 
C)  the securities repurchased may have a different stated interest rate from that of the securities sold and are generally priced to result in substantially the different yield. 
D)  the securities repurchased may have a same stated interest rate from that of the securities sold and are generally priced to result in substantially the different yield.

Question 5

The return on an instrument over a period of time is a combination of the cash flow it generates and the change in its value.

Accepted Answer

A) True 
 B)False

Question 6

The nature and extent of interest rate risk, credit risk, reinsurance risk and other significant risks should be disclosed is required for:

Accepted Answer

A)  Actuarial revenues 
B)  Actuarial assets 
C)  Actuarial liabilities 
D)  Actuarial expenses

Question 7

Which investments held by life insurance enterprises should be carried in the balance sheet at amortized cost?

Accepted Answer

A)  Appraisal-term acts 
B)  Variable-term portfolio 
C)  Fixed-term portfolio 
D)  Revenue-earned portfolio

Question 8

The SEC rules clarify that management's assessment and report is limited to internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 9

Accounting for escrow funds is difficult because of the large number of transactions related to such funds. A separate bank account or a trust bank account may be opened, with all escrow receipts deposited into it to prevent:

Accepted Answer

A)  Commingling of escrow funds with a company's operating funds 
B)  Commingling of escrow funds with a company's liabilities 
C)  Commingling of escrow funds with a company's mortgage funds 
D)  Commingling of escrow funds with a company's fixed funds

Question 10

According to Securities and Exchange Commission (SEC), "the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise" is called:

Accepted Answer

A)  Control 
B)  Influence 
C)  Activity 
D)  Entitlement

Question 11

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. The Investment Department is responsible for promptly supplying the Accounting Department with:

Accepted Answer

A)  Accounting data on new loans 
B)  Resolving few exceptions reported to it by the Accounting Department, i.e., when a borrower defaults on a loan payment 
C)  Data related to changes in existing loans, which affects the accounting function 
D)  Alerting the Investment Department promptly whenever an exception to the normal processing routine occurs

Question 12

Dynamic hedging requires that:

Accepted Answer

A)  the price or value sensitivities of the hedge portfolio and the assets are in alignment 
B)  the price or value sensitivities of the hedge portfolio and the liabilities are in alignment 
C)  the price or value sensitivities of the hedge portfolio and the expenses are in alignment 
D)  the price or value sensitivities of the hedge portfolio and the revenues are in alignment

Question 13

The operating ratio is the combined ratio less than the ratio of investment income, to earned premiums.

Accepted Answer

A) True 
 B)False

Question 14

The potential for loss resulting from changes in market interest rates are known as:

Accepted Answer

A)  Interest rate risk 
B)  Interest rate loss 
C)  Change rate risk 
D)  Change rate loss

Question 15

An instrument that grants the holder the right but not the obligation to buy the underlying asset at a specified strike price is known as:

Accepted Answer

A)  Sell Option 
B)  Call Option 
C)  Buy Option 
D)  None of the above

Question 16

It refers to items such as interest paid on proceeds from the date due to the date actually disbursed, and to interest on premium deposit funds. These interest items are reflected by the increase in reserves or liability, from one year to the next. What is it?

Accepted Answer

A)  Interest contract funds 
B)  Interest on policy 
C)  Contract funds 
D)  B or C

Question 17

Liabilities are recognized for known claims when sufficient information has been developed to indicate the involvement of a specific insurance policy.

Accepted Answer

A) True 
 B)False

Question 18

The Appointed Actuary has a responsibility to express an opinion on the appropriateness of certain actuarially determined amounts in the financial statements.

Accepted Answer

A) True 
 B)False

Question 19

Evidences the fair market value of the property that is security for the mortgage loan. The appraisal value is used to determine that the loan to market value ratio is in compliance with regulatory requirements. It also is used to determine any non-admitted mortgage loan amount. Appraisals are obtained from:

Accepted Answer

A)  Independent, qualified appraisers 
B)  The company's own qualified appraisers 
C)  Federal Housing Administration 
D)  Any one out of A and B

Question 20

From what the most direct value-based requirements arise which are present in account value accumulation products?

Accepted Answer

A)  profit margins 
B)  policy holding rates 
C)  implicit interest rates 
D)  withdrawal provisions

Exam 1: Accredited Financial Examiner

Schedule rating:

Risk retention group is:

With traditional whole life insurance:

In a yield-maintenance agreement:

The return on an instrument over a period of time is a combination of the cash flow it generates and the change in its value.

The nature and extent of interest rate risk, credit risk, reinsurance risk and other significant risks should be disclosed is required for:

Which investments held by life insurance enterprises should be carried in the balance sheet at amortized cost?

The SEC rules clarify that management's assessment and report is limited to internal control over financial reporting.

Accounting for escrow funds is difficult because of the large number of transactions related to such funds. A separate bank account or a trust bank account may be opened, with all escrow receipts deposited into it to prevent:

According to Securities and Exchange Commission (SEC) , "the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise" is called:

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. The Investment Department is responsible for promptly supplying the Accounting Department with:

Dynamic hedging requires that:

The operating ratio is the combined ratio less than the ratio of investment income, to earned premiums.

The potential for loss resulting from changes in market interest rates are known as:

An instrument that grants the holder the right but not the obligation to buy the underlying asset at a specified strike price is known as:

It refers to items such as interest paid on proceeds from the date due to the date actually disbursed, and to interest on premium deposit funds. These interest items are reflected by the increase in reserves or liability, from one year to the next. What is it?

Liabilities are recognized for known claims when sufficient information has been developed to indicate the involvement of a specific insurance policy.

The Appointed Actuary has a responsibility to express an opinion on the appropriateness of certain actuarially determined amounts in the financial statements.

From what the most direct value-based requirements arise which are present in account value accumulation products?