AFE Online Practice Questions and Answers

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:

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

An annuity contract provides:

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

What give the issuer the right to retire the bond at certain times, typically if prevailing market interest rates fall below the rate on the bond?

A. Call options

B. Prepayment provisions

C. Variable income statements

D. Investments modules

What is derived from its future cash flows, adjusted for risk as well as any other relevant economic characteristics?

A. Financial value

B. Future cost value

C. Liability fair value

D. Statutory cost value

Identification and documentation of the controls and policies which address the risk management issues for each of the Standards is the necessary step for:

A. Operational procedure

B. Guideline procedure

C. Organizational policy

D. Self-assessment process

The reason behind, when an insurance entity may request permission from the domiciliary state regulatory authority to use a specific accounting practice in the preparation of its statutory financial statements, may include:

A. the entity wishes to depart from Statutory Accounting Practices (SAP)

B. the prescribes SAP address the accounting for transaction

C. Both A and B

D. Neither A nor B

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

A. True

B. False

Adjusting and Others (AO) reserves are often provided for by using the calendar year paid-to-paid method rather than the accident year paid-to-paid method used for Inflation in Defense and Cost Containment (DCC) reserves.

A. True

B. False

The two most common types of dollar rolls are:

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

What represent legal agreements between buyers or sellers and represent commitments to buy or sell financial instruments at specified dates and prices?

A. Future contracts

B. Present contracts

C. Accounting contracts

D. Financial contracts