Question 1

The securities repurchased have the same stated interest rate as, and maturities similar to, the securities sold and are generally priced to result in substantially the same yield is known as:

Accepted Answer

The answer of The securities repurchased have the same stated...

Question 2

Liabilities are recognized for known claims when sufficient information has been developed to indicate the involvement of a specific insurance policy.

Accepted Answer

Liabilities are recognized when there is enough information to determine that a specific insurance policy is involved, indicating a probable obligation.

Question 3

What uses valuation techniques to convert future amounts to a single present amount?

Accepted Answer

The income approach uses valuation techniques to convert future cash flows or income to a present value by applying a discount rate.

Question 4

Valuation technique should be used to measure fair value and is consistent with:

Accepted Answer

The correct valuation techniques to measure fair value are the market approach, income approach, and cost approach. These are widely recognized methods in financial reporting and valuation standards.

Question 5

The maturity of which agreement is fixed by the contract and depends on the needs of the borrower and the willingness of the lender?

Accepted Answer

A repurchase agreement (repo) is a short-term borrowing for dealers in government securities. The maturity of a repo is fixed by the contract and depends on the needs of the borrower and the willingness of the lender.

Question 6

Dollar rolls differ from regular repurchase agreements due to which of the following characteristics in the securities sold and repurchased.

Accepted Answer

Dollar rolls differ from regular repurchase agreements because they generally have different principal amounts.

Question 7

National Association of Insurance Commissioners stated that, has no effect on the valuation of securities for statutory accounting purposes, provided the amount of the collateral at least equals the required collateral.

Accepted Answer

Securities lending involves the temporary transfer of securities to a borrower, with the agreement that the borrower will provide collateral. The National Association of Insurance Commissioners (NAIC) states that securities lending has no effect on the valuation of securities for statutory accounting purposes, as long as the collateral provided is at least equal to the required amount.

Question 8

The amount that currently would be required to replace the service capacity of an asset is called:

Accepted Answer

The cost approach estimates the amount needed to replace the service capacity of an asset, focusing on the cost to construct a similar asset.

Question 9

In what, securities involve in repos are not delivered on the settlement date of the agreement and the contract may be extended upon mutual agreement of the buyer-lender and seller-borrower.

Accepted Answer

In a rollover, the securities involved in repos are not delivered on the settlement date, and the contract can be extended upon mutual agreement of the parties involved.

Question 10

The maximum error in the population that the auditor is willing to accept is called:

Accepted Answer

The answer of The maximum error in the population that...

Question 11

The risk that the obligation will not be fulfilled and affects the value at which the liability is transferred is known as:

Accepted Answer

Nonperformance risk refers to the risk that an obligation will not be fulfilled, impacting the value at which a liability is transferred.

Question 12

Short-term portfolios are:

Accepted Answer

Short-term portfolios are portfolios consisting of assets with maturities of less than one year to meet liquidity needs.

Question 13

agreements may contain par cap provisions that could significantly alter the economics of the transactions.

Accepted Answer

The answer of agreements may contain par cap provisions that...

Question 14

The profitability of an insurance entity on a statutory basis is generally gauged by:

Accepted Answer

The answer of The profitability of an insurance entity on...

Question 15

As defined in Accounting Standards Codification, dollar purchase agreements are the agreements to sell and repurchase similar and identical securities.

Accepted Answer

The correct term is "repurchase agreements" or "repos," which involve selling securities with an agreement to repurchase them later, not "dollar purchase agreements."

Question 16

What technique uses a risk-adjusted discount rate and contractual, promised, or most likely cash flows?

Accepted Answer

The answer of What technique uses a risk-adjusted discount rate...

Question 17

In a yield-maintenance agreement:

Accepted Answer

The answer of In a yield-maintenance agreement:
...

Question 18

Audit risk consists of:

Accepted Answer

Audit risk consists of both the risk of material misstatement and the risk that the auditor will not detect such misstatement. Therefore, the correct answer is C.

Question 19

The estimated liability includes the amount of money that will be used for future payments of:

Accepted Answer

The estimated liability for an insurer includes amounts for reported claims, claims related to insured events, and claim adjustment expenses, as all these factors contribute to future payment obligations.

Question 20

The difference between the purchase price and the repurchase price, or sale price, plus accrued interest on the security represents:

Accepted Answer

The difference between the purchase price and the repurchase price, plus accrued interest, represents investment income, as it reflects the earnings from the investment over the period.

Exam 1: Accredited Financial Examiner