Answer Happy

QUESTION 221
According to multiple of earnings method, the rule of thumb used by many insurance agents is that your insurance coverage should be equal to 5 to 10 times your current income. For example, if you currently earn $70,000 a year, using the multiple of earning method then you need between:

A. $300,000and$700,000lifeinsurance B. $400,000and$700,000lifeinsurance C. $390,000 and $800,000 life insurance D. $350,000 and $700,000 life insurance
Correct Answer: D Section: (none) Explanation


Explanation/Reference:
QUESTION 222
Need analysis method is a more detailed approach than multiple-of-earnings method. This method considers both financial obligations and financial resources of the insured and his or her dependents. Which of the following steps is/are involved in this method?
A. Estimatethetotaleconomicresourcesneedediftheindividualweretodie
B. Determineallfinancialresourcesthatwouldbeavailableafterdeath,includingexistinglifeinsuranceandpensionplandeathbenefits C. Subtract available resources from the amount needed to determine how much additional life insurance is required
D. All of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 223
Insurance that provides only death benefits, for a specified period, and does not provide accumulation of cash value is called:
A. Straighttermpolicy
B. T erm life insurance
C. Decreasing term policy
D. Renewability
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 224
It is a term life policy written for a given number of years with coverage remaining unchanged throughout the effective period. What is it?
A. Straighttermpolicy B. Term life insurance


C. Decreasing term policy D. Renewability
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 225
It is a term life policy provision allowing the insured to renew the policy at the end of its term without having to show evidence of insurability
A. Straighttermpolicy
B. T erm life insurance
C. Decreasing term policy
D. Renewability
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 226
Decreasing term policy is:
A. Aterminsurancepolicythatmaintainsalevelpremiumthroughoutallperiodsofcoveragewhiletheamountofprotectiondecreases
B. Aterminsurancepolicythatmaintainsalevelpremiumthroughoutallperiodsofcoveragewhiletheamountofprotectionincreases
C. A term insurance policy that maintains a level premium throughout all periods of coverage while the amount of protection remains unchanged D. None of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference:


QUESTION 227
__________ is the accumulated refundable value of an insurance policy; results from the investment earnings on paid-in insurance premiums.
A. Cashvalue
B. Nonforefeitureright
C. Decreasing term policy D. Continuous premium
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 228
Three major types of whole life policies are available. Which of the following is/are Not out of those?
A. ContinuousPremium B. LimitedPremium
C. Single premium
D. None of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 229
Whole life insurance is a life insurance designed to offer ongoing insurance coverage over the course of an insured’s entire life. The noteworthy advantage of whole life insurance is:
A. Premiumpaymentscontributetowardsbuildinganestate B. Onecanbudgetpremiumpaymentsforalongperiod
C. It’s a low-load life insurance
D. Thesearesoldonlybyagents


Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 230
Group health insurance is the health insurance consisting of contracts written between a group, (employer, union, etc.) and the health care provider. Most health insurance plans fall into one of two categories. Which one of the following set represents those two categories?
A. TraditionalindemnityandPPO
B. Traditionalindemnityandmanagedcareplans
C. Fee-for-service indemnity and managed care plans D. BothBandC
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 231
A form of HMO in which subscribers receive services from physicians practicing from their own offices and from community hospitals affiliated with the IPA.
A. Individualpracticeassociation B. Preferredproviderorganization C. Exclusive provider organization D. Point-of-service plan
Correct Answer: A Section: (none) Explanation
Explanation/Reference:


QUESTION 232
It’s a managed care plan that is similar to a plan that is similar to a PPO but reimburses members only when affiliated providers are used. What is it?
A. Individualpracticeassociation B. Preferredproviderorganization C. Exclusive provider organization D. Point-of-service plan
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 233
____________ is a hybrid form of HMO that allows members to go outside the HMO network for care and reimburses them at a specified percentage of the cost.
A. Individualpracticeassociation B. Preferredproviderorganization C. Exclusive provider organization D. Point-of-service plan
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 234
If you have caused an accident, which type of automobile insurance would cover damage to your own car?
A. Term
B. Collision
C. Comprehensive D. Liability


Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 235
Many savings programs are protected by the federal government against loss. Which of the following is Not?
A. Abondissuedbyoneofthe50states B. AU.S.Treasurybond
C. A U.S. savings bond
D. A certificate of deposit at the bank
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 236
Which of the following instruments is NOT typically associated with spending?
A. Cash
B. Creditcard
C. Debit card
D. Certificate of deposit
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 237
Doug must borrow $12,000 to complete his college education. Which of the following would NOT be likely to reduce the finance charge rate?


A. Ifhisparentstookoutanadditionalmortgageontheirhousefortheloan B. Iftheloanwasinsuredbythefederalgovernment
C. If he went to a state college rather than a private college
D. If his parents co-signed the loan
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 238
If you had a savings account at a bank, which of the following would be correct concerning the interest that you would earn on this account?
A. Salestaxmaybechargedontheinterestthatyouearn
B. Youcannotearninterestuntilyoupassyour18thbirthday
C. Earnings from savings account interest may not be taxed
D. Income tax may be charged on the interest if your income is high enough
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 239
Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income?
A. Whensomeclothesyoulikegoonsale
B. Whentheinterestontheloanisgreaterthantheinterestyougetonyoursavings C. When you need to buy a car to get a much better paying job
D. When you really need a weeklong vacation
Correct Answer: C Section: (none)


Explanation Explanation/Reference:
QUESTION 240
Retirement income paid by a company is called:
A. RentsandProfits B. Socialsecurity C. 401(k)
D. Pension
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 241
Many people put aside money to take care of unexpected expenses. If John and Jenny have money put aside for emergencies, in which of the following forms would it be of LEAST benefit to them if they needed it right away?
A. Stocks
B. Savingaccount
C. Invested in a down payment in the house D. Checking account
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 242
Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage?


A. Youngpeopledon'tneedhealthinsurancebecausetheyaresohealthy
B. Youcontinuetobecoveredbyyourparents'insuranceaslongasyouliveathome,regardlessofyourage C. You are covered by your parents' insurance until you marry, regardless of your age
D. If your parents become unemployed, your insurance coverage may stop, regardless of your age
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 243
If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to federal law?
A. Nothing B. $50
C. $500 D. $1000
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 244
Kelly and Pete just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?
A. AU.S.governmentsavingsbond B. Asavingsaccount
C. A checking account
D. Stocks
Correct Answer: D Section: (none)


Explanation Explanation/Reference:
QUESTION 245
Maria worked her way through college earning $20,000 per year. After graduation, her first job pays $40,000. The total dollar amount Maria will have to pay in federal income taxes in her new job will:
A. Staythesameaswhenshewasincollege
B. Belowerthanwhenshewasincollege
C. Double, at least, from when she was in college D. Go up a little from when she was in college
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 246
A voluntary program under Medicare that provides payments for services not covered under basic hospital insurance is called:
A. Supplementarymedicalinsurance B. Medicare
C. National health care
D. Blue cross
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 247
Prescription drug coverage is:


A. Avoluntaryprogram
B. Astate-runpublicassistedprogram
C. Needs co-payments and co-insurances D. Both A and C are correct
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 248
A universal life insurance provides two types of death protections, i.e. Type A and B. As with any insurance policy, universal life insurance has its own pros and cons. There are two principle advantages. Which of the followings is/are out of those advantages?
A. Flexibility
B. Flexibilityandsavingsfeature C. Flexibilityandvariability
D. Variability and savings feature
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 249
It is an insurance plan designed to supplement the basic coverage of hospitalization, surgical and physician expenses; used to finance more catastrophic medical costs. What is it?
A. Majormedicalplan
B. Coveredmedicalservices
C. Comprehensive major medical insurance D. None of these
Correct Answer: A Section: (none)


Explanation Explanation/Reference:
QUESTION 250
______________ is a health insurance plan that combines into a single policy the coverage for basic hospitalization, surgical, and physician expenses along with major medical protection.
A. Majormedicalplan
B. Coveredmedicalservices
C. Comprehensive major medical insurance D. None of these
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
QUESTION 251
Most of the major types of health plans are sufficient to meet the protection needs of most individuals and families. But, insurance companies offer other options that provide limited protection against certain types of perils. Which one of the following is the example of those limited types of protections?
A. Accidentprotection
B. Homeincomepolicies
C. Comprehensive medical insurance D. BothAandB
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 252
It is the initial amount not covered by an insurance policy and thus the insured’s responsibility; it’s usually determined on a calendar-year basis or on a per-illness or eraccident basis. We may call it as:


A. Participationclause B. Deductible
C. Internal limits
D. Co-insurance
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 253
A participation or co-insurance clause stipulates that the company will pay some portion of the covered loss in excess of the deductible rather than the entire amount. How much portion of the covered loss may be paid by the company?
A. 60%-70%
B. 70%-90%
C. 80%-90%
D. Anyoneofthese
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
QUESTION 254
There is a feature which is commonly found in health insurance policies that limit the amount that will be paid for certain specified expenses, even if the claim does not exceed overall policy limit. What is that feature?
A. Internallimits B. Externallimits C. Credit limits
D. Insurance limits
Correct Answer: A


Section: (none) Explanation
Explanation/Reference: QUESTION 255
Several insurance provisions affect a health insurance plan’s value to you. Some important provisions address:
A. Thepersonsandplacescovered B. Cancellation
C. Re-existing conditions
D. Rehabilitation coverage
Correct Answer: ABD Section: (none) Explanation
Explanation/Reference: QUESTION 256
_____________ is an insurance specialist who works for the insurance company as an independent adjustor or for an adjustment bureau, to investigate claims.

A. Personalliabilityumbrella B. Captiveagent
C. Independent agent
D. Claims adjuster
Correct Answer: A Section: (none) Explanation


Explanation/Reference: QUESTION 257
What is that form of investing in which future value and expected returns are highly uncertain?
A. Hedging
B. Speculating
C. Short-term investment D. Long-term investment
Correct Answer: AB Section: (none) Explanation
Explanation/Reference: QUESTION 258
__________ is a statement, preferably written, that specifies how investment capital will be invested to achieve a specific goal.
A. InvestmentLine
B. Investmentplan
C. Investment direction D. Investment goal
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 259
People often put money aside, sometimes for years, to save up enough to make just one major expenditure. Here are some common ones. Which of the following is Not out of those expenditures:
A. Thedownpaymentonahome B. Anregularvacation


C. Some capital for going into business D. Funds for retirement
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 260
Securities market is a market place in which stocks, bonds, and other financial instruments are traded. Such markets can be:
A. Physicalbusinesses
B. Electronicbusinesses
C. Having outstanding securities D. All of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 261
A document made available to prospective security buyers that describes the firm and a new security issue. ___________ are responsible for ensuring that all the information in the prospectus accurately represents the facts.
A. Federalagencies B. Privateparties
C. Local governments D. State government
Correct Answer: A Section: (none) Explanation
Explanation/Reference:


QUESTION 262
Which of the following is least likely to be considered a short-term marketable security?
A. Anoriginalissue30-yearcorporatebondwithone-yearremaininguntilfinalmaturity B. Anoriginalissue30-yeargovernmentbondwithone-yearremaininguntilfinalmaturity C. A90-dayTreasurybill
D. Short-term corporate debt instruments with a 9-month original maturity
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 263
The optimal balance of marketable securities held to take care of probable deficiencies in the firm's cash account is referred to as the __________ segment in the one’s portfolio of short-term marketable securities.
A. Readycash
B. Controlledcash
C. Free cash
D. Cash and cash equivalent
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 264
The marketable securities available for unassigned purposes at the current time is referred to as the __________ segment in the one's portfolio of short-term marketable securities.
A. Readycash
B. Controlledcash


C. Free cash
D. Cash and cash equivalent
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 265
Which of the following is not a standard method of transferring funds when using concentration banking?
A. Depositorytransfercheck
B. Automatedclearinghouseelectronictransfer C. Wire transfer
D. Payable through draft (PTD)
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 266
Which of the following marketable securities is issued by the U.S. federal government?
A. Commercialpapers
B. Negotiablecertificatesofdeposit C. Repurchase agreement
D. T-bills
Correct Answer: D Section: (none) Explanation
Explanation/Reference:


QUESTION 267
Which of the following was not suggested by John Maynard Keynes as a reason for holding cash?
A. Speculativemotive B. Investmentmotive C. Precautionarymotive D. Transaction motive
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 268
Which of the following statements most accurately describes the modern approach to cash management?
A. Cashmanagementinvolvestheefficientdisbursementofcash
B. Cashmanagementinvolvestheefficientcollectionanddisbursementofcash
C. Cash management involves the efficient processing, collection, and depositing of cash D. Cash management involves the efficient processing and depositing of cash
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 269
Collection float is the __________.
A. Totaltimebetweenthemailingofthecheckbythecustomerandtheavailabilityofcashtothereceivingfirm B. Timeconsumedinclearingthecheckthroughthebankingsystem
C. Time the check is in the mail
D. Time during which the check received by the firm remains uncollected


Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 270
Deposit float is the __________.
A. Totaltimebetweenthemailingofthecheckbythecustomerandtheavailabilityofcashtothereceivingfirm B. Timeconsumedinclearingthecheckthroughthebankingsystem
C. Time the check is in the mail
D. Time during which the check received by the firm remains uncollected
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 271
Availability float is the __________.
A. Totaltimebetweenthemailingofthecheckbythecustomerandtheavailabilityofcashtothereceivingfirm B. Timeconsumedinclearingthecheckthroughthebankingsystem
C. Time the check is in the mail
D. Time during which the check received by the firm remains uncollected
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 272
Eurodollars are best described as __________.


A. ThenewcurrencyoftheEuropeanUnion
B. AU.S.dollar-denominateddeposit--generallyinabanklocatedoutsidetheUnitedStates--thatisnotsubjecttoU.S.bankingregulations C. Acurrencydepositedoutsideitscountryoforigin
D. A foreign-denominated deposit subject to U.S. banking regulations
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 273
Which of the following statements concerning remote disbursement and controlled disbursement is correct?
A. Thesetwotermsmeanthesamething--justlikeworkingcapitalmeansthesamethingascurrentassets
B. Remotedisbursementisviewedasanethicaldisbursementprocedure,whereascontrolleddisbursementisoftenviewedasanunethicaldisbursement procedure
C. Both remote and controlled disbursement are generally perceived as unethical practices and, therefore, their use is in decline
D. Remote disbursement is often viewed as an unethical disbursement procedure, whereas controlled disbursement is not viewed in such a negative light
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 274
The field of Electronic Commerce (EC) is awash with acronyms (i.e., a word formed from the initial letter or letters of a series of successive words). Which of the following acronyms does not belong with the other Electronic Commerce-related acronyms?
A. SWIFT
B. CHIPS
C. SPECTRE D. EDI
Correct Answer: C


Section: (none) Explanation
Explanation/Reference: QUESTION 275
Under which measurement scale is data categorized, but not ranked?
A. Anordinalscale. B. Anominalscale. C. Anintervalscale. D. None of these
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
QUESTION 276
The joint probability of events A and B is 32 percent with the probability of event A being 60 percent and the probability of event B being 50 percent. Based on this information, the conditional probability of event A given event B has occurred is closest to:
A. 30.0% B. 53.3% C. 64.0% D. 56.6%
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 277
An analyst is developing net present value (NPV) profiles for two investment projects. The only difference between the two projects is that Project 1 is expected to


receive larger cash flows early in the life of the project, while Project 2 is expected to receive larger cash flows late in the life of the project. The slope of the NPV profile for Project 1 when compared to the slope of the NPV profile for Project 2 is most likely:
A. Equal B. Flatter C. Steeper D. Unequal
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 278
An equity analyst working for a growth oriented mutual fund has a tendency to misvalue the stocks of popular companies that she has previously recommended and the fund already owns. Her behavior is most likely consistent with which of the following biases?
A. Escalationbias B. Prospecttheory C. Confirmation bias D. Probabilitybias
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
QUESTION 279
A portfolio manager is evaluating investments in mortgage securities as part of a portfolio to fund long term liabilities. If she wants to minimize prepayment risk in her portfolio she is most likely to invest in:
A. Mortgageloans
B. Mortgagepassthroughsecurities C. Collateralized mortgage obligations D. Investment evaluation


Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 280
Compared to investors with long investment time horizons, investors with short investment time horizons most likely require:
A. Lessliquidityandlessemphasisoncapitalappreciation
B. Moreliquidityandlessemphasisoncapitalappreciation
C. Less liquidity and greater emphasis on capital appreciation D. More liquidity and greater emphasis on capital appreciation
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 281
A primary motivation for investment in commodities is most likely the:
A. Positivecorrelationofcommoditieswithunexpectedinflation
B. Positivecorrelationofcommoditieswithstockandbondinvestments
C. Positive volatility of commodities relative to stock and bond investments D. Positive correlation of commodities relative to stock and bond investments
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 282


The private pools can fall in which two categories:
A. Riskretentionandsalegroups
B. Riskretentionandpurchasinggroups C. Public and purchasing groups
D. None of the above
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 283
Risk retention group is:
A. Apublicentityformedbythemembersofthepublicpoolprimarilytoprovidebusinessriskcompetencytothemembers.
B. Abusinessentityformedbythemembersoftheprivatepoolprimarilytoprovidecommercialassetinsurancetothemembers.
C. Aninsuranceentityformedbythemembersoftheprivatepoolprimarilytoprovidecommercialliabilityinsurancetothemembers. D. Aninsuranceentityformedbythemembersofthepublicpoolprimarilytoprovidecommercialexpenseinsurancetothemembers.
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 284
Insurance agents act as contractors in groups who express one or more entity with express authority to act for the entity in dealing with insured.
A. True B. False
Correct Answer: B Section: (none) Explanation


Explanation/Reference: QUESTION 285
The methods used for the premium rates establishment are:
A. Manual,judgmentalandpremiumrating B. Commercial,judgmentalandmeritrating C. Manual, experimental and merit rating D. Manual, judgmental and merit rating
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 286
Spreading of risks among insurance entities is called:
A. Reinsurance B. Syndication
C. Consortium act D. Risk Diffusion
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 287
The entity transferring the risk is called the ceding entity and the entity to which the risk is transferred is called the assuming entity.
A. True B. False


Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 288
What is applied to the sale of all or a block of an entity’s insurance in force of another entity?
A. Insuranceimpede
B. PortfolioReinsurance C. Poly-holder insurance D. Syndicated insurance
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 289
When no tax deductions are allowed if risks are not transferred, whereas premiums paid to insurers are tax deductible, this leads to the formation of:
A. Portfolio B. Claims C. Captives D. Fronting
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 290
Insurance entities establish ___________ to investigate and settle some or all of the claims of the member companies.


A. Companycompetency B. Claim opportunities
C. Corrective strategies D. Adjustment bureaus
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 291
Principal objectives of state statutes are:
A. restrictinvestmentsofinsuranceentities
B. prescribemethodsofadmittedassetrecovery C. acquisition of risk-based capitals
D. BothB&C
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 292
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. theentitywishestodepartfromStatutoryAccountingPractices(SAP) B. theprescribesSAPaddresstheaccountingfortransaction
C. BothA&B
D. Neither A nor B
Correct Answer: A


Section: (none) Explanation
Explanation/Reference: QUESTION 293
Short-duration contracts provide insurance protection for fixed period and can cancel the contract at the end of any contract period.
A. True B. False
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 294
The contracts that are not subject to unilateral changes in its provision and requires the performance of various functions and services for an extended period is called:
A. Short-duration B. Long-duration
C. Medium-duration D. Fixed-duration
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 295
SAP stresses measurement of emerging earnings of a business from period to period while GAAP stresses measurement of the ability to pay claims in the future. A. True


B. False
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 296
Audit risk consists of:

A. Riskofmaterialmisstatement B. detectionofrisk
C. BothA&B
D. Neither A nor B
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 297
The maximum error in the population that the auditor is willing to accept is called:
A. Riskofmaterialmisstatement B. detectionofrisk
C. BothA&B
D. Neither A nor B
Correct Answer: C


Section: (none) Explanation
Explanation/Reference: QUESTION 298
Which risk assessment procedures are used to obtain an understanding of the entity and its environment, including its internal control?
A. Inquiriesofmanagement B. Analyticalprocedures
C. Observation
D. All of the above
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 299
The profitability of an insurance entity on a statutory basis is generally gauged by:
A. combinedratioanditsoperatingratio
B. singlemoduleratioanditsoperatingratio C. Net ratio
D. Gross ration and actual ratio
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 300
The combined ratio is the sum of it:


A. lossratio
B. Expenseratio C. Dividend ratio D. All of the above
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 301
The operating ratio is the combined ratio less than the ratio of investment income, to earned premiums.
A. True B. False
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 302
The auditor should obtain a sufficient understanding by performing risk assessment procedures to:
A. Evaluatethedesignofcontrolsnotrelevanttoauditoffinancialstatement B. Determinewhetherdesignofcontrolshavebeenimplemented
C. BothA&B
D. Neither A nor B
Correct Answer: B Section: (none) Explanation
Explanation/Reference:


QUESTION 303
A process designed to provide reasonable assurance about the achievement of the entity’s objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations is called:
A. Externalcontrol B. Internalauditing C. Internal control
D. None of the above
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 304
Which of the following is NOT the interrelated component of internal control?
A. Controlenvironment B. Risk assessment
C. Control activities
D. Planning control
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 305
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. Organizationsandoperationscontrol B. Systemdevelopmentcontrol
C. Access control


D. Procedural control
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 306
Final approval should be obtained prior to placing a new system into operation is the activity that can be fall into which control?
A. Organizationsandoperationscontrol B. Systemdevelopmentcontrol
C. Access control
D. Procedural control
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 307
An attitude that includes a questioning mind and a critical assessment of audit evidence is called:
A. Operationalskepticism B. Auditskepticism
C. Professional skepticism D. None of the above
Correct Answer: C Section: (none) Explanation
Explanation/Reference:


QUESTION 308
Which are the types of misstatements relevant to the auditor’s consideration of fraud in a financial statement audit?
A. Misstatementsarisingfromfraudulentfinancialreporting B. Misstatementsarisingfrommisappropriationsofassets C. BothA&B
D. Neither A nor B
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 309
Which of the following may Not involve a high degree of management judgment and subjectivity and may present risks of material misstatement due to fraud?
A. Investments
B. Deferredacquisitioncosts C. Reinsurance
D. keyestimates
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 310
An estimate due to time lags in the receipt of reports from cendants is called reinsurance.
A. True B. False
Correct Answer: A Section: (none) Explanation


Explanation/Reference: QUESTION 311
The auditor responds to risks of material misstatements due to fraud in which of the following ways?
A. Aresponsethathasanoveralleffectonhowtheauditisconducted
B. Aresponsetoidentifiedrisksinvolvingthenature,timingandextentofauditingprocedurestobeperformed
C. A response involving the performance of certain procedures to further address the risk of material misstatement due to fraud involving management override of controls
D. All of the above
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 312
The Module Rule requires the insurer to provide:
A. Totheinsurancecommissionerofthestateofdomicile,acopyofnotificationofadversefinancialcondition B. Totheauditor,evidencethatthenotificationhasbeenprovidedtotheorganization
C. BothA&B
D. Neither A nor B
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 313
The SEC rules clarify that management’s assessment and report is limited to internal control over financial reporting. A. True


B. False
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 314
___________ is an unmanaged fund designed to replicates closely as possible the performance of a specified index of market activity.
A. Indexfund
B. Reservefund C. Mutual fund D. Pension fund
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 315
Short-term portfolios are:
A. Portfoliosconsistingofliabilitieswithmaturitiesofoneyeartomeetdollarneeds.
B. Portfoliosconsistingofcombinedrevenuesoflessthanoneyeartomeetliquidityneeds.
C. Portfolios consisting of assets with maturities of less than one year to meet liquidity needs.
D. Portfolios consisting of expenses with maturities of less than or equal to one year to meet dollar needs.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:


QUESTION 316
Audit regulatory is more reliable when it is obtained from knowledgeable independent sources inside the entity.
A. True B. False
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 317
____________ is provided by original documents is more reliable than audit evidence provided by photocopies or facsimiles.
A. Enterpriseevidence B. Propertyevidence C. Audit evidence
D. Regulatoryevidence
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 318
When policy periods expire, the premiums written are earned and are recognized as __________.
A. Liabilities
B. Expenses
C. Revenues
D. None of the above
Correct Answer: C Section: (none) Explanation


Explanation/Reference:
QUESTION 319
The pro rata portion of premiums written allocable to unexpired policy periods represents unearned premiums, which are reflected as ___________ in the balance sheet.
A. Liabilities
B. Expenses
C. Revenues
D. None of the above
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 320
Tax Act states that:
A. Alifeinsurerissubjecttoaninvestmentincometaxof15percentonits‘netCanadianlifeinvestmentincome B. Alifeinsurerissubjecttoaninvestmentincometaxof25percentonits‘netCanadianlifeinvestmentincome C. A life insurer is subject to an investment income tax of 35 percent on its ‘net Canadian life investment income D. A life insurer is subject to an investment income tax of 45 percent on its ‘net Canadian life investment income
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 321
An investment is the current commitment of dollars for a period of time in order to derive future payments that will compensate the investor for: A. Thetimethefundsarecommitted


B. Theexpectedrateofinflationduringthistimeperiod C. The uncertainty of future payments
D. All of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 322
If you commit $200 to an investment at the beginning of the year, what is your rate of return for the period?
A. 1.10 B. 1.50 C. 1.00 D. 1.70
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 323
Insurance coverage provides protection against other uncertainties. Health insurance helps to pay medical bills. Disability insurance provides _____________.
A. Continuingincome
B. Monthlyexpenses
C. Income after death
D. Benefits on Quarterly basis
Correct Answer: A Section: (none) Explanation
Explanation/Reference:


QUESTION 324
The process of managing a portfolio never stops. Once the funds are initially invested according to the plan, the real work begins in:
A. Evaluatingtheportfolio’sperformance
B. Updatingtheportfoliobasedonchanges
C. Examining current and projected financial goals D. AandBboth
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 325
A sound portfolio statement helps to protect the client against a portfolio manager’s:
A. Financialbehavior
B. Inappropriateinvestment C. Unethical behavior
D. Hedging
Correct Answer: BC Section: (none) Explanation
Explanation/Reference:
QUESTION 326
The investor’s objectives are his or her investment goals expressed in terms of both risk and returns. The relationship between risk and returns requires that goals not be expressed only interms of returns. Expressing goals only in terms of returns can lead to:
A. Churning
B. Inappropriateinvestmentpracticesbytheportfoliomanager C. Hedging


D. Over the counter trading
Correct Answer: AB Section: (none) Explanation
Explanation/Reference: QUESTION 327
Risk tolerance is more than a function of an individual’s psychological makeup; it is affected by other factors such as:
A. Person’scurrentinsurancecoverageandcashreserves
B. Natureofjob
C. An individual’s family situation (for example, marital status and the number and ages of children) and by his or her age D. Person’s current assets at a specified time period
Correct Answer: AC Section: (none) Explanation
Explanation/Reference:
QUESTION 328
___________ means that investors want to minimize their risk of loss, usually in real terms: They seek to maintain the purchasing power of their investment. In other words, the return needs to be no less than the rate of inflation.
A. Capitalpreservation B. Capitalappreciation C. Capital depreciation D. Capita budgeting
Correct Answer: A Section: (none) Explanation
Explanation/Reference:


QUESTION 329
Capital appreciation is an appropriate objective when the investors want the portfolio to grow in real terms over time to meet some future need. Under this strategy, growth mainly occurs through capital gains. This is an
A. Possessivestrategy
B. Riskaversestrategy
C. Aggressive strategy
D. Risk acceptance strategy
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
QUESTION 330
The objective for the __________ strategy is similar to that of capital appreciation; namely, the investors want the portfolio to grow over time to meet a future need. Whereas the capital appreciation strategy seeks to do this primarily through capital gains, this strategy seeks to increase portfolio value by both capital gains and reinvesting current income.
A. T otal invest
B. T otal return
C. High risk investment
D. Low risk investment
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 331
Assume our typical 65-year-old investor likewise has adequate insurance coverage and a cash reserve. Let’s also assume she is retiring this year. This individual will want less risk exposure than the 25-year-old investor, because her earning power from employment will soon be ending; she will not be able to recover any investment losses by saving more out of her paycheck. Depending on her income from social security and a pension plan, she may need some current income from her retirement portfolio to meet living expenses. Given that she can be expected to live an average of another 20 years, she will need protection against inflation. A risk-averse investor will choose:


A. Acombinationofcurrentincomeandcapitaldepreciationinanattempttohaveprincipalgrowthoutpaceinflation B. Acombinationofcurrentincomeandcapitalpreservationstrategy
C. A combination of current income and capital appreciation in an attempt to have principal growth outpace inflation D. A combination of current income and total return in an attempt to have principal growth outpace inflation
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 332
Assume our typical 65-year-old investor likewise has adequate insurance coverage and a cash reserve. Let’s also assume she is retiring this year. This individual will want less risk exposure than the 25-year-old investor, because her earning power from employment will soon be ending; she will not be able to recover any investment losses by saving more out of her paycheck. Depending on her income from social security and a pension plan, she may need some current income from her retirement portfolio to meet living expenses. Given that she can be expected to live an average of another 20 years, she will need protection against inflation. A risk-averse investor will choose a combination of current income and capital preservation strategy; a more risk-tolerant investor will choose:
A. Acombinationofcurrentincomeandcapitaldepreciationinanattempttohaveprincipalgrowthoutpaceinflation B. Acombinationofcurrentincomeandcapitalpreservationstrategy
C. A combination of current income and capital appreciation in an attempt to have principal growth outpace inflation D. A combination of current income and total return in an attempt to have principal growth outpace inflation
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 333
Which of the following is not the correct technical indicator?
A. MovingAverageConvergence/Divergence B. Relativestrengthindex
C. On balance volume
D. Broadening formation


Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 334
Buying power of an investor is calculated as:
A. Assets-liabilities
B. Equity-debtbalances
C. Short term debt-long term debt D. Current assets-current liabilities
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 335
Which of the following is the right to sell?
A. System option B. Strategicoption C. Call option
D. Put option
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 336


Individuals can invest in REITs:
A. Bypurchasingtheirsharesdirectlyonanopenexchange
B. Byinvestinginamutualfundthatspecializesinpublicrealestate C. Both A&B
D. Either A or B; it depends
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 337
Securities products include: 1. Trusts
2. Annuities
3. Derivatives
4. Stocks
5. Bonds
6. Commodities
7. Mutual Funds
8. Pension Funds
9. Term Loans
10. Asset Management
11. Money Market Products
A. Only1,2,3,4,5,10,11 B. Only1,3,5,10
C. Allexcept8,9
D. Allexcept8,9,10
Correct Answer: C Section: (none) Explanation
Explanation/Reference:


QUESTION 338
The objective/s of a trust department audit is/ are to:
A. Detectandpreventirregularitiessuchaserrorsandfraud
B. Accessadequacyofaccounting,operating,andadministrativecontrolsandprocedures C. Determine the quantity of account administration
D. all of the above
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 339
The objective/s of trust department’s administration of corporate trust accounts include:
I. Policies and producers ensure compliance with governing instruments, applicable law and accepted fiduciary principles II. Deficiencies are identified and corrective action is promptly initiated
III. There is sufficient management and staff expertise to administer these accounts
IV. Effective policies, procedures and internal controls have been established
V. The legitimate needs of security holders and other interested parties are met in a professional and timely manner

A. IIIandIV B. I,IIandIV C. II,IIIandV D. All of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference:


QUESTION 340
Personal trust accounts may be:
A. Livingortestamentary B. Revocableorirrevocable C. Both of these
D. None of these
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 341
Trust under will is a term referred to:
A. Livingtrust
B. T estamentary trust
C. Revocable trust
D. None of these
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 342
The administration of personal trust accounts is primarily controlled by all of the following EXCEPT:
A. T erms of Governing instrument
B. A will
C. Trust agreement
D. Court order


Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 343
Which one of the following is not commonly granted trustee’s powers?
A. Pertainingtotheretention,purchaseandsaleofassets B. Thosepertainingtodistributionsofprincipal
C. Those pertaining to make dealings
D. None of these
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 344
Defined benefits & defined contribution plans and individual retirement accounts are commonly administered:
A. CorporateTrusts
B. CharitableTrusts
C. Estate Administrations D. Employee benefit trusts
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 345


Performance as _____________ is normally the only true trust relationship administered by a corporate trust department.
A. Trusteeunderabondindenture B. Bankunderabondindenture C. Trust under a bond indenture D. None of these
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 346
Charitable trust that is an irrevocable trust and that may be testamentary or inter-vivos (Between living persons) is called:
A. Foundations
B. CharitableRemainderUnitrust
C. Charitable Remainder Annuity Trust D. None of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 347
The duties of a guardian in guardianship arrangements are similar to those of a trustee. Specifically, the guardian is obligated to:
1) Protect and preserve the assets
2) Submit an inventory and appraisal to the court
3) Retain or divest assets
4) Use principal and income for the benefit of the ward 5) Submit an annual accounting to the court
A. Only1.3,4


B. Allofthese C. Only1,2 D. Allexcept3
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 348
The responsibility of setting an estate includes:
A. Takingpossessionofthepropertyincludedwithinthedescedent’sestate B. Valuingtheestate’sproperty
C. Paying any debts of the descedent’s
D. All of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 349
Unlike trust, there is no conveyance of title to the account assets. When the ________ relationship is established; legal title to the property remains with the principal.
A. Guardianship
B. Estate Administration C. AgencyServices
D. None of these
Correct Answer: C Section: (none) Explanation


Explanation/Reference:
QUESTION 350
To server as family and/or financial planning tool To provide for retirement
To obtain favorable tax treatment
These are the primary reasons
A. Forestablishingatrust
B. Fornaminganinstitutionastrustee C. of Safekeeping
D. of Custodial
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 351
Relief from administrative details and continuity are the major reasons for:
A. Trustacceptance
B. Trusteetermination
C. Naming a financial institution as a trustee
D. Convenience and complete services of trusts
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 352
The trustee is responsible for producing a schedule of distribution which includes information as:


A. Assetsandtheircurrentfairmarketvalue
B. Themethodofdistribution
C. Each beneficiary’s share of assets and the trust’s liability D. All of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 353
The accumulation phase in annuities can last from as long as:
A. Onedaytofiveyears B. Onedaytodecades C. Ten days to ten years D. All of these
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 354
Annuities can be purchased through the following methods EXCEPT:
A. Singlepaymentdeferred B. Periodicpaymentdeferred C. Immediate payment
D. Single payment accrued
Correct Answer: D Section: (none) Explanation


Explanation/Reference: QUESTION 355
The benefits of tax deferral will out weigh the costs of a variable annuity only if the investor holds it as:
A. Long-Term investment B. Short-Term investment C. Credit-Risk investment D. Annuityinvestment
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 356
I. Surrender Changes
II. Mortality and Expense risk change
III. Administrative Fees
IV. Underlying funds expenses
V. Fees charges for other features
These are the charges which investors pay when they invest in:
A. Variableannuity
B. Fixedannuity
C. Mixed annuity
D. Both B & C depends upon situation
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 357


Guaranteed investment contracts are contracts between:
A. Abankandinsurancecompany
B. Aninsurancecompanyandacorporateretirementplan C. A retirement plan and a brokerage house
D. None of these
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 358
When one buys a cash instrument, for example 100 shares of ABC Inc., the payoff is linear (disregarding the impact of dividends). If share are purchased at $50 and the price appreciated to $75, we have ________ on a mark-to-mark basis.
A. Made$2500 B. Lost$2500
C. Made $2500 D. None of these
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 359
A derivative with a convex payoff-profile at some point before the option’s maturity is a simple plan vanilla option. As the option becomes progressively more-in-the money, the rate at which the position makes money increases until a sympathetically approaches the linear payoff of the future. Similarly, as the option becomes progressively more out-of – the money, the rate at which the position loses money decreases until that rate becomes zero. This is an example of:
A. Spotrate
B. Nonlinearderivate C. Linear derivate
D. None of these


Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 360
One of the largest components of the global derivative markets and natural adjunct to the fixed income markets is the:
A. Volatility
B. InterestsrateSwaps C. CommoditySwaps D. BothB&C
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 361
A gold producer wants to hedge his loses attributable to a fall in the price of gold for his current gold currency. This is an example of:
A. CurrencySwaps
B. CommoditySwaps C. Interests rate Swaps D. All of these
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 362


I- A gold producers wants to hedge his losses attributable to a fall in the price of gold for his current gold inventory.
II- A cattle farmer wants to hedge his exposure to changes in the price of his livestock These are the examples of __________ who need to manage their exposure to fluctuations in the prices of their commodities.
A. Hedgers
B. Producers
C. Speculators D. None of these
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 363
End users need to hedge the prices at which they can purchase these commodities for instance:
A. AUniversitymightwanttolockinthepriceatwhichitpurchaseselectricitytosupplyitsairconditioningunitsforupcomingsummermonths B. Anairlinewantstolockinthepriceofthejetfuelitneedstopurchaseinordertosatisfythepeakinseasonaldemandfortravel
C. A cotton producer wants to hedge his exposure to changes in the price of fertilizers or his end product (cotton)
D. OnlyAandB
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 364
Money market funds bond funds (also called “fixed income” funds), and stock funds (also called equity funds) are the categories of:
A. Mutualfunds
B. Professionallymanagedportfolio C. Hedge funds
D. None of these


Correct Answer: A Section: (none) Explanation
Explanation/Reference: