SOFE AFE Exam Practice Test Instant Access

Question 1

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:

AThe stated value per share is used (or liquidation value, for no-par preferred capital stock)

BThe Total value of shares is used (or liquidation value, for par preferred capital stock)

CThe market value per share is used (or liquidation value, for no-par preferred capital stock)

DCapital stock may be sold to the public for an amount greater than par or stated value

Answer : A

Question 2

Reinsurance is defines as:

Ato pay another party to assume a stream of contingent expenses, for a premium over the expected cost

Bto pay another party to assume a stream of contingent revenues, for an interest over the expected cost

Cto sell another party to assume a stream of contingent assets, for a premium over the actual cost

Dto sell another party to assume a stream of contingent expenses, for a discount over the expected cost

Answer : A

Question 3

The difference between the carrying value of the parent's investment in subsidiary and the amount received is treated as a gain or loss in the:

Aparent's income statement

Bsubsidiary's revenue statement

Cparent's financial statement

Dsubsidiary's income statement

Answer : A

Question 4

When premium income less return premiums arising from policies issued or other contracts entered into to reinsure other insurance entities that provide the related primary coverage are called:

AIndirect premiums

BDirect premiums

CAssumed reinsurance premiums

DReal reinsurance premiums

Answer : C

Question 5

What may leave more risk than a company should prudently assume due to the riskexacerbating features of a particular product?

AFeasible investment strategy

BDesign strategy

CRisk strategy

DProduct risk strategy

Answer : A

Question 6

Subrogation is:

Alegal right of the distributer to recover from vendors who may be wholly responsible for the loss paid under the terms of the agreement.

Blegal right of the insurer to recover from a third party who may be wholly or partly responsible for the loss paid under the terms of the policy.

Clegal right of the claimer to recover from the organization that may be wholly or partly responsible for the loss paid under the terms of the company's policy.

Dlegal right of the business to recover from a third party who may be wholly responsible for the loss paid under the terms of the policy.

Answer : B

Question 7

Evidences the fair market value of the property that is security for the mortgage loan. The appraisal value is used to determine that the loan to market value ratio is in compliance with regulatory requirements. It also is used to determine any non-admitted mortgage loan amount. Appraisals are obtained from:

AIndependent, qualified appraisers

BThe company's own qualified appraisers

CFederal Housing Administration

DAny one out of A and B

Answer : D

SOFE Accredited Financial Examiner AFE Exam Practice Test