AFE Online Practice Questions and Answers

Which of the following is NOT included when initial acquisition of Subsidiary, Controlled and Affiliated Entities (SCA) is recorded as the sum of?

A. any cash payment

B. the fair value of other assets distributed

C. the fair value of any expenses

D. any direct costs of the acquisition

Interest rates are a key element of any option pricing exercise because cash flows are discounted at interest.

A. True

B. False

Which control includes the procedures for system design, including the acquisition of software packages, should encourage active participation by the accounting department and internal auditors?

A. Organizations and operations control

B. System development control

C. Access control

D. Procedural control

Primary coverage involves policies written between an insurer and a customer directly.

A. True

B. False

For reinsurance assumed, the concepts analogous to attachment points and limits are referred to as

A. Severity Levels

B. Frequency Levels

C. Policy levels

D. Retention levels

A lower net retention level typically would translate into a higher v\variability of reserves.

A. True

B. False

Which of the following is Correct?

A. the financial position of an entity with a 2-to-1 reserve-to-surplus ratio is less affected by variability in its loss reserves than is an entity operating at 4-to-1 ratio.

B. the financial position of an entity with a 2-to-1 reserve-to-surplus ratio is more affected by variability in its loss reserves than is an entity operating at 4-to-1 ratio.

C. the financial position of an entity with a 4-to-1 reserve-to-surplus ratio is less affected by variability in its loss reserves than is an entity operating at 2-to-1 ratio.

D. the financial position of an entity with a 4-to-1 reserve-to-surplus ratio is more affected by variability in its loss reserves than is an entity operating at 2-to-1 ratio.

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

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 and B

D. Neither A nor B