AFE Exam Questions and Answers | Exam-Dumps (Page: 6)

QUESTION: 41

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:

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

Answer(s): A

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________________ are contracts with the insurer which provide for periodic payments over a specified period or in specified amounts. In most respects they are administered and accounted for much like supplementary contracts without life contingencies since there are no mortality or morbidity considerations that affect the amount to be paid.

Mixed stream
Annuities certain
Annuities due
Ordinary Annuities

Answer(s): B

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QUESTION: 43

Structured settlements are agreements characterized by the periodic payment of fixed amounts to a claimant in connection with the settlement of a legal claim. Such payments may last for the lifetime of the payee or they may be for a particular period of time, depending upon the terms of the settlement. The party responsible for making structured settlement payments may make payments:

Directly
To a claimant
Any one of these
None of these

Answer(s): C

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QUESTION: 44

When a retained asset account is established in the place of a cash settlement, an interest bearing account is created by the insurer for the beneficiary. The beneficiary receives a checkbook with which to draw upon funds in the new account. The account holder can make:

Partial or total withdrawal of the account balance as needed and has total control over the account
Partial withdrawal of the account balance as needed and has total control over the account
Total withdrawal of the account balance as needed and has total control over the account
25% withdrawal of the account balance as needed and has total control over the account.

Answer(s): A

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QUESTION: 45

A liability for premiums paid in advance can also arise when insurers allow policyholders to pay several years' premiums at one time. Since the insurer has the use of policyholder funds that are not yet due, it is customary for the insurer to:

Credit Assets
Discount the value of such premiums and accept a lesser amount in cash
Discount the value of such premiums
Accept a lesser amount in cash

Answer(s): B

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QUESTION: 46

A logical first step toward understanding _________________ of a life and health insurance company and the related financial reporting considerations is to review the manner in which different interested parties view the end result of the accounting process for capital and surplus transactions, for example, the adequacy of the resulting balances.
Key interested parties include:

· Policyholders
· Agents
· Stockholders
· Insurance regulators
· Rating agencies
· Management

The capital and surplus accounts
Supplementary loan agreements
Mortgage loans
Risk-based capital investments

Answer(s): A

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QUESTION: 47

The value of the capital stock shown in the stock life insurance company's statutory basis balance sheet equals the par value per share multiplied by the number of issued shares. In the case of no-par stock:

The stated value per share is used (or liquidation value, for no-par preferred capital stock)
The Total value of shares is used (or liquidation value, for par preferred capital stock)
The market value per share is used (or liquidation value, for no-par preferred capital stock)
Capital stock may be sold to the public for an amount greater than par or stated value

Answer(s): A

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QUESTION: 48

Special surplus funds are portions of surplus allocated or appropriated for a specific purpose. Special surplus funds usually are allocated voluntarily but also may be required by an insurance regulator. Which one the following is NOT an example of special funds:

Group contingency reserve
Group annuity contingency reserve
Participation is separate accounts
Guarantee Loan

Answer(s): D

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Financial AFE Exam (page: 6)
Financial Accredited Examiner (AFE)
Updated on: 25-Dec-2025

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Financial AFE Exam (page: 6) Financial Accredited Examiner (AFE) Updated on: 25-Dec-2025

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Financial AFE Exam (page: 6)
Financial Accredited Examiner (AFE)
Updated on: 25-Dec-2025