CPCU 540: Multiple Choice Exam | Questions with
100% Correct Answers | Verified | Latest Update
2026/2027
Save
Terms in this set (208)
What effect, if any, will a reduction in It will increase both net income and policyholders'
an insurer's loss reserves have on net surplus.
income and policyholders' surplus in
3 multiple choice options
the year that any such adjustment is
made?
Krista was reviewing the statement of Cash flows from financing activities
cash flows for Goshen Insurance.
3 multiple choice options
Which one of the following
describes a section of the statement
of cash flows?
Payment of dividends is one way to Repurchase corporate stock.
distribute income to company 3 multiple choice options
owners. An additional way to
distribute income to company
owners is to
Based on the coefficient of variation, Mean return of 10%; standard deviation of 25%
which one of the following
3 multiple choice options
investment portfolios has the lowest
relative risk?
,Insurers can use reinsurance in Providing surplus relief.
several ways to manage their capital. 3 multiple choice options
Commissions paid by the reinsurer to
the primary insurer to cover part or
all of the primary insurer's policy
acquisition expenses help manage
capital by
In evaluating underwriting The portion of written premiums that corresponds
profitability, the analyst usually to the coverage that has already been provided.
compares losses and loss adjustment
3 multiple choice options
expense amounts to
Risky Insurance Company has a risk- Is required to place Risky Insurance Company
based capital (RBC) level of 65% of under regulatory control.
the authorized control level. At this 3 multiple choice options
level, the regulator
Financial theory assumes that When faced with a choice of investments that have
investors are risk averse. Which one the same potential payoff, a risk-adverse investor
of the following statements best will choose the one with the least risk.
describes risk averse behavior? 3 multiple choice options
If insurer loss reserves are too low, Policyholders' surplus will be overstated.
3 multiple choice options
Grayson Insurers is looking for The higher rate paid on catastrophe bonds
innovative approaches to finance the compensates investors for assuming additional risk.
risk it undertakes. Which one of the 3 multiple choice options
following will Grayson most likely
discover?
, To determine profitability, an insurer Inadequate insurance rates
should consider whether growth
3 multiple choice options
resulted from rate increase or new
policies. Insurers should be
concerned with growth due to which
one of the following?
Which one of the following ratios Combined ratio
presents a clear picture of an
3 multiple choice options
insurer's overall underwriting
performance?
An insurer's liquidity depends on its Cash inflows and outflows.
3 multiple choice options
The basic account equation on which Assets = Liabilities + Net Worth
the balance sheet is structured is
3 multiple choice options
Which one of the following methods Average value method
of establishing case reserves is used 3 multiple choice options
most often when there are small
variations in loss size for a particular
type of claim?
Which one of the following It will increase both net income and policyholders'
describes what effect, if any, a surplus.
reduction in an insurer's loss reserves 3 multiple choice options
will have on net income and
policyholder's surplus in the year
that any adjustment is made?
100% Correct Answers | Verified | Latest Update
2026/2027
Save
Terms in this set (208)
What effect, if any, will a reduction in It will increase both net income and policyholders'
an insurer's loss reserves have on net surplus.
income and policyholders' surplus in
3 multiple choice options
the year that any such adjustment is
made?
Krista was reviewing the statement of Cash flows from financing activities
cash flows for Goshen Insurance.
3 multiple choice options
Which one of the following
describes a section of the statement
of cash flows?
Payment of dividends is one way to Repurchase corporate stock.
distribute income to company 3 multiple choice options
owners. An additional way to
distribute income to company
owners is to
Based on the coefficient of variation, Mean return of 10%; standard deviation of 25%
which one of the following
3 multiple choice options
investment portfolios has the lowest
relative risk?
,Insurers can use reinsurance in Providing surplus relief.
several ways to manage their capital. 3 multiple choice options
Commissions paid by the reinsurer to
the primary insurer to cover part or
all of the primary insurer's policy
acquisition expenses help manage
capital by
In evaluating underwriting The portion of written premiums that corresponds
profitability, the analyst usually to the coverage that has already been provided.
compares losses and loss adjustment
3 multiple choice options
expense amounts to
Risky Insurance Company has a risk- Is required to place Risky Insurance Company
based capital (RBC) level of 65% of under regulatory control.
the authorized control level. At this 3 multiple choice options
level, the regulator
Financial theory assumes that When faced with a choice of investments that have
investors are risk averse. Which one the same potential payoff, a risk-adverse investor
of the following statements best will choose the one with the least risk.
describes risk averse behavior? 3 multiple choice options
If insurer loss reserves are too low, Policyholders' surplus will be overstated.
3 multiple choice options
Grayson Insurers is looking for The higher rate paid on catastrophe bonds
innovative approaches to finance the compensates investors for assuming additional risk.
risk it undertakes. Which one of the 3 multiple choice options
following will Grayson most likely
discover?
, To determine profitability, an insurer Inadequate insurance rates
should consider whether growth
3 multiple choice options
resulted from rate increase or new
policies. Insurers should be
concerned with growth due to which
one of the following?
Which one of the following ratios Combined ratio
presents a clear picture of an
3 multiple choice options
insurer's overall underwriting
performance?
An insurer's liquidity depends on its Cash inflows and outflows.
3 multiple choice options
The basic account equation on which Assets = Liabilities + Net Worth
the balance sheet is structured is
3 multiple choice options
Which one of the following methods Average value method
of establishing case reserves is used 3 multiple choice options
most often when there are small
variations in loss size for a particular
type of claim?
Which one of the following It will increase both net income and policyholders'
describes what effect, if any, a surplus.
reduction in an insurer's loss reserves 3 multiple choice options
will have on net income and
policyholder's surplus in the year
that any adjustment is made?
