AFC CERTIFICATION |ACTUAL QUESTIONS AND
VERIFIED ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
Maria's husband passed away recently. Maria has been notified that she can receive the
$500,000 death benefit in a variety of ways. Maria is 75-years old and lives in a paid-for
home, has social security and receives all the money she needs from a pension plan. What
is likely the best settlement option for Maria?
a. Income for a specific period
b. Lump sum
c. Interest income at 2.5% interest
d. Income for life
CORRECT ANSWER
The correct answer is:
Lump sum
Why a lump sum? Maria has all the money she needs, so she doesn't need an income-
for-life or a specific period, nor does the interest option make sense.
A lump sum allows Maria to use it for whatever she wants - home improvements, a
vacation, an investment property, a newer car, etc.
Question 2
A client has a call option to purchase a stock at $20 by June 1. On May 25 the stock price
jumps to $75 a share. If your client chooses to exercise that option, how much will they
pay per share?
a. $20
b. $75
1
,c. $47.50 (the average of $20 and $75)
d. The answer cannot be determined from the included information
CORRECT ANSWER
16.6a Options Allow You to Buy or Sell an Asset at a Predetermined Price
The correct answer is:
$20
Question 3
An investor wants to avoid any "risky", alternative investments. Which of the following
would be most inappropriate to recommend?
a. Purchasing 16 ounces of gold each quarter
b. Investing in a technology fund
c. Purchasing a small condo in a good area with steady renters
d. Investing in a utilities fund
CORRECT ANSWER
The correct answer is:
Purchasing 16 ounces of gold each quarter
Question 4
Which of the following is not a time that clients should review their insurance coverage?
a. When they have a new child
b. Monthly
c. When they buy a new vehicle
d. Annually
CORRECT ANSWER
The correct answer is:
2
, Monthly
Question 5
Which of the following is not a peril?
a. Driving a car
b. Wind
c. Theft
d. A car collision
CORRECT ANSWER
The correct answer is:
Driving a car
Question 6
Which of the following tax credits or deductions can often be paid to a person monthly
instead of when taxes are filed?
a. The Earned Income Tax Credit
b. Mortgage interest deduction
c. Adoption credit
d. Medical expenses over 7.5% of AGI
CORRECT ANSWER
The correct answer is:
The Earned Income Tax Credit
Question 7
3
, Jeff has been wanting a new car, but can't afford it. He leaves his windows down and the
key in plain sight. What type of hazard is this?
a. Moral hazard
b. Health hazard
c. Physical hazard
d. Morale hazard
CORRECT ANSWER
Physical Hazard is a characteristic of the insured person or property that increases the
chance of loss, such as high cholesterol in a person covered by health insurance.
Morale hazard is indifference to loss. The intent is not to make a gain, but since they
know it is covered the person may be less careful. An example of this is not locking the
door on your car since any loss would be covered.
Moral hazard is when someone wants or even causes a peril to occur in order to benefit
from it.
The correct answer is:
Moral hazard
Question 8
Which type of health insurance is a pre-paid managed care plan meant to catch any
medical problems early?
a. Health Maintenance Organization (HMO)
b. Indemnity Plan
c. Accountable Care Organization (ACO)
d. Preferred Provider Organization (PPO)
CORRECT ANSWER
The correct answer is:
Health Maintenance Organization (HMO)
4
VERIFIED ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
Maria's husband passed away recently. Maria has been notified that she can receive the
$500,000 death benefit in a variety of ways. Maria is 75-years old and lives in a paid-for
home, has social security and receives all the money she needs from a pension plan. What
is likely the best settlement option for Maria?
a. Income for a specific period
b. Lump sum
c. Interest income at 2.5% interest
d. Income for life
CORRECT ANSWER
The correct answer is:
Lump sum
Why a lump sum? Maria has all the money she needs, so she doesn't need an income-
for-life or a specific period, nor does the interest option make sense.
A lump sum allows Maria to use it for whatever she wants - home improvements, a
vacation, an investment property, a newer car, etc.
Question 2
A client has a call option to purchase a stock at $20 by June 1. On May 25 the stock price
jumps to $75 a share. If your client chooses to exercise that option, how much will they
pay per share?
a. $20
b. $75
1
,c. $47.50 (the average of $20 and $75)
d. The answer cannot be determined from the included information
CORRECT ANSWER
16.6a Options Allow You to Buy or Sell an Asset at a Predetermined Price
The correct answer is:
$20
Question 3
An investor wants to avoid any "risky", alternative investments. Which of the following
would be most inappropriate to recommend?
a. Purchasing 16 ounces of gold each quarter
b. Investing in a technology fund
c. Purchasing a small condo in a good area with steady renters
d. Investing in a utilities fund
CORRECT ANSWER
The correct answer is:
Purchasing 16 ounces of gold each quarter
Question 4
Which of the following is not a time that clients should review their insurance coverage?
a. When they have a new child
b. Monthly
c. When they buy a new vehicle
d. Annually
CORRECT ANSWER
The correct answer is:
2
, Monthly
Question 5
Which of the following is not a peril?
a. Driving a car
b. Wind
c. Theft
d. A car collision
CORRECT ANSWER
The correct answer is:
Driving a car
Question 6
Which of the following tax credits or deductions can often be paid to a person monthly
instead of when taxes are filed?
a. The Earned Income Tax Credit
b. Mortgage interest deduction
c. Adoption credit
d. Medical expenses over 7.5% of AGI
CORRECT ANSWER
The correct answer is:
The Earned Income Tax Credit
Question 7
3
, Jeff has been wanting a new car, but can't afford it. He leaves his windows down and the
key in plain sight. What type of hazard is this?
a. Moral hazard
b. Health hazard
c. Physical hazard
d. Morale hazard
CORRECT ANSWER
Physical Hazard is a characteristic of the insured person or property that increases the
chance of loss, such as high cholesterol in a person covered by health insurance.
Morale hazard is indifference to loss. The intent is not to make a gain, but since they
know it is covered the person may be less careful. An example of this is not locking the
door on your car since any loss would be covered.
Moral hazard is when someone wants or even causes a peril to occur in order to benefit
from it.
The correct answer is:
Moral hazard
Question 8
Which type of health insurance is a pre-paid managed care plan meant to catch any
medical problems early?
a. Health Maintenance Organization (HMO)
b. Indemnity Plan
c. Accountable Care Organization (ACO)
d. Preferred Provider Organization (PPO)
CORRECT ANSWER
The correct answer is:
Health Maintenance Organization (HMO)
4
