Accredited Financial Examiner (AFE) Practice Test

Questions # 21:

What confirms the hypothesized interest rate sensitivities and shows that the two lines of business are fairly complementary?

Options:

Harmonizing graph

Balance curve

Price behavior curve

List pricing graph

Questions # 22:

Short-term portfolios are:

Options:

Portfolios consisting of liabilities with maturities of one year to meet dollar needs.

Portfolios consisting of combined revenues of less than one year to meet liquidity needs.

Portfolios consisting of assets with maturities of less than one year to meet liquidity needs.

Portfolios consisting of expenses with maturities of less than or equal to one year to meet dollar needs.

Questions # 23:

Which counterparts of duration and convexity are the first- and second order sensitivities of an equity market instrument to changes in the price of the underlying?

Options:

Delta and gamma

Gamma and theta

Theta and rho

Alpha and Vega

Questions # 24:

An increase in loss reserves may lead to offset by a reduction in premiums and a decrease in loss reserves may be a receivable for additional premiums.

Options:

True

False

Questions # 25:

A package of coverage including most property and liability coverage except workers’ compensation, automobile insurance and surely bonds is called:

Options:

Single peril

Multiple peril

Property lines

professional property

Questions # 26:

The methods used for the premium rates establishment are:

Options:

Manual, judgmental and premium rating

Commercial, judgmental and merit rating

Manual, experimental and merit rating

Manual, judgmental and merit rating

Questions # 27:

What seeks to identify and exploit existing or potential synergies in a company’s diverse business activities?

Options:

Appropriate business decisions

Holistic techniques

Collateral strategies

Reimbursement activities

Questions # 28:

In case of supplementary contracts, the amount of each payment is computed on the basis of the assumed (or guaranteed) interest rate and the number and frequency of payments selected. For example:

Options:

The higher the assumed interest rate, the larger the amount of each payment

The lower the assumed interest rate, the larger the amount of each payment

The higher the assumed interest rate, the smaller the amount of each payment

The higher the actual interest rate, the larger the amount of each payment

Questions # 29:

What is the purpose of consolidated financial statements?

Options:

These statements are intended to reflect the financial position and results of operations of an economic entity rather than a legal entity.

These statements are intended to ignore the financial position and results of operations of an economic entity rather than an unofficial entity.

These statements are intended to reflect the financial position and results of operations of a credited entity rather than a supplemental entity.

None of the above

Questions # 30:

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

Options:

selection of loss projection

adjustment of historical loss data

separate calculation of effect of variables

segregation of new data

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