CEBS - GBA 1 Exam -with 100% verified
solutions-2026
Eagle Assurance is expecting to pay total death benefits of $150,000 at the end of four years.
Assuming the interest rate is 6% per year compounded semiannually, what reserve level
must be held today to meet this future obligation?
$118,412: Use the present value formula or present value table to determine the reserve
level.
r = 6%/2
= 3%
and t = 4 x 2 = 8
PV = $150,000/(1 + 0.03)^8
PV = $118,412
OR
PV = CF8
= PVIF(3%,8)
PV = $150,000
= 0.78941 [from the present value interest factor (PVIF) table]
= $118,412.
What effective annual rate (EAR) is equivalent to a nominal rate of 18% per annum
compounded every month?
Effective annual rate = (1 + (Nominal annual rate/m))^m 1
1
= 19.56%
Which of the following statements correctly describes prospectively rated underwriting?
It bases premium rates in whole or in part on the group's own claims experience
Which of the following statements correctly describes the difference between mortality
tables and morbidity tables?
It is more difficult to predict morbidity than mortality, since there are fewer sources of
credible data (Changes in mortality show a steady and gradual downward trend; changes in
morbidity can be both positive and negative. Option C: Mortality tables are used to price
policies where claim amounts are specified in advance; the potential claim amount under a
policy based on morbidity tables is unknown. Option D: Mortality tables are used to forecast
,date of death and date of onset of the insured event; morbidity tables are used to forecast
date of death, date of onset and severity, size and duration of each claim.)
If the probability that a pregnant woman will bear twins is 0.10, triplets is 0.05, quadruplets
is 0.005 and quintuplets is assumed to be zero, what is the probability that a pregnant
woman will give birth to more than one child at the end of her pregnancy?
0.155 (Only one event can occur (i.e., cannot have both triplets and twins). P (twins or
triplets or quadruplets or quintuplets) = P(twins) + P(triplets) + P(quadruplets) +
P(quintuplets).)
First on Site is a new media company hiring 50 employees in the next few months. It
recognizes that a comprehensive benefits plan can contribute to attracting qualified
employees. Because the company is a start-up, cash flow is a bit unpredictable; it has limited
capacity to cover either fluctuating or large claim amounts. Which of the following funding
methods would BEST address First on Site's concerns?
Insured refund accounting with pooling arrangement (First on Site has an unstable cash flow
and limited capacity to pay fluctuating claims. Under an insured refund accounting
arrangement, they will assume less financial risk than under a self-insured arrangement.
With pooling, the risk of having to pay claims above a specified amount is transferred to the
insurer, so Option A, insured refund accounting with pooling, is the best choice for First on
Site.)
Under the functional approach to benefits plan design, one method for determining the
length of service required for benefit eligibility considers whether the benefit is protection-
¬oriented or accumulation-¬oriented. Under this method, which of the following types of
benefit plans is likely to have the longest required waiting period?
Stock bonus (accumulation-oriented benefits are more likely to have a shorter WP)
Aiesha invested $1,000 to accumulate simple interest at a rate of 6% annually. Reggie
invested $1,000 to accumulate compound interest at a rate of 6% compounded
semiannually. How much will they accumulate in total after two years?
FVAiesha = CF0 + (CF0 x r x t)
= $1,000 + ($1,000 x 0.06 x 2)
= $1,000 + $120
= $1,120
FVReggie =
CF0 + (1 + r)^t
= $1,000 x (1 + 0.03)^4
= $1,126
FVAiesha + FVReggie = $1,120 + $1,126
= $2,246.
, A group contract generally defines offsets used to reduce the benefit payable under a long-
term disability (LTD) plan. Which of the following statements correctly describes direct
offsets?
They include primary benefits payable under Canada/Quebec Pension Plan (C/QPP) disability
pensions and Workers' Compensation (WC) benefits
Which of the following statements correctly describes the premium renewal rating process?
The objective of renewal rating is to set future premium rates at a level that supports
projected claims charges and expenses
The purpose of one of the fundamental principles of group insurance underwriting is to
avoid adverse selection. Which of the following statements best addresses this principle?
The choice of benefits and amount of coverage must be restricted
Which of the following statements correctly describes a disabled life reserve?
It is the estimate of the current value of all future periodic payments to an LTD claimant
Which of the following statements correctly describes mortality tables?
A select mortality table is not used for group life insurance products, since evidence of
insurability is not usually required (An ultimate mortality table excludes mortality data
arising from the early years following the purchase of a life insurance product. Option C:
Neither select nor ultimate tables are used since evidence of insurability is not required for
group insurance. Option D: A valuation mortality table is used as the basis for calculating
minimum reserves.)
With respect to refund accounting plans, what is the possible initial source of funds for
offsetting a deficit for a particular accounting period?
Claims fluctuation reserve (CFR)
Which of the following statements correctly describes application of the Canadian Life and
Health Insurance Association (CLHIA) coordination-¬of¬-benefits (COB) guideline for out-of-
country/out-of-province/territory claims?
The first carrier is the insurer or plan administrator first contacted in the event of a claim
Which of the following statements correctly describes a multi-employer plan (MEP)?
Employer contributions to a MEP are typically a specified amount per hour worked per
employee
solutions-2026
Eagle Assurance is expecting to pay total death benefits of $150,000 at the end of four years.
Assuming the interest rate is 6% per year compounded semiannually, what reserve level
must be held today to meet this future obligation?
$118,412: Use the present value formula or present value table to determine the reserve
level.
r = 6%/2
= 3%
and t = 4 x 2 = 8
PV = $150,000/(1 + 0.03)^8
PV = $118,412
OR
PV = CF8
= PVIF(3%,8)
PV = $150,000
= 0.78941 [from the present value interest factor (PVIF) table]
= $118,412.
What effective annual rate (EAR) is equivalent to a nominal rate of 18% per annum
compounded every month?
Effective annual rate = (1 + (Nominal annual rate/m))^m 1
1
= 19.56%
Which of the following statements correctly describes prospectively rated underwriting?
It bases premium rates in whole or in part on the group's own claims experience
Which of the following statements correctly describes the difference between mortality
tables and morbidity tables?
It is more difficult to predict morbidity than mortality, since there are fewer sources of
credible data (Changes in mortality show a steady and gradual downward trend; changes in
morbidity can be both positive and negative. Option C: Mortality tables are used to price
policies where claim amounts are specified in advance; the potential claim amount under a
policy based on morbidity tables is unknown. Option D: Mortality tables are used to forecast
,date of death and date of onset of the insured event; morbidity tables are used to forecast
date of death, date of onset and severity, size and duration of each claim.)
If the probability that a pregnant woman will bear twins is 0.10, triplets is 0.05, quadruplets
is 0.005 and quintuplets is assumed to be zero, what is the probability that a pregnant
woman will give birth to more than one child at the end of her pregnancy?
0.155 (Only one event can occur (i.e., cannot have both triplets and twins). P (twins or
triplets or quadruplets or quintuplets) = P(twins) + P(triplets) + P(quadruplets) +
P(quintuplets).)
First on Site is a new media company hiring 50 employees in the next few months. It
recognizes that a comprehensive benefits plan can contribute to attracting qualified
employees. Because the company is a start-up, cash flow is a bit unpredictable; it has limited
capacity to cover either fluctuating or large claim amounts. Which of the following funding
methods would BEST address First on Site's concerns?
Insured refund accounting with pooling arrangement (First on Site has an unstable cash flow
and limited capacity to pay fluctuating claims. Under an insured refund accounting
arrangement, they will assume less financial risk than under a self-insured arrangement.
With pooling, the risk of having to pay claims above a specified amount is transferred to the
insurer, so Option A, insured refund accounting with pooling, is the best choice for First on
Site.)
Under the functional approach to benefits plan design, one method for determining the
length of service required for benefit eligibility considers whether the benefit is protection-
¬oriented or accumulation-¬oriented. Under this method, which of the following types of
benefit plans is likely to have the longest required waiting period?
Stock bonus (accumulation-oriented benefits are more likely to have a shorter WP)
Aiesha invested $1,000 to accumulate simple interest at a rate of 6% annually. Reggie
invested $1,000 to accumulate compound interest at a rate of 6% compounded
semiannually. How much will they accumulate in total after two years?
FVAiesha = CF0 + (CF0 x r x t)
= $1,000 + ($1,000 x 0.06 x 2)
= $1,000 + $120
= $1,120
FVReggie =
CF0 + (1 + r)^t
= $1,000 x (1 + 0.03)^4
= $1,126
FVAiesha + FVReggie = $1,120 + $1,126
= $2,246.
, A group contract generally defines offsets used to reduce the benefit payable under a long-
term disability (LTD) plan. Which of the following statements correctly describes direct
offsets?
They include primary benefits payable under Canada/Quebec Pension Plan (C/QPP) disability
pensions and Workers' Compensation (WC) benefits
Which of the following statements correctly describes the premium renewal rating process?
The objective of renewal rating is to set future premium rates at a level that supports
projected claims charges and expenses
The purpose of one of the fundamental principles of group insurance underwriting is to
avoid adverse selection. Which of the following statements best addresses this principle?
The choice of benefits and amount of coverage must be restricted
Which of the following statements correctly describes a disabled life reserve?
It is the estimate of the current value of all future periodic payments to an LTD claimant
Which of the following statements correctly describes mortality tables?
A select mortality table is not used for group life insurance products, since evidence of
insurability is not usually required (An ultimate mortality table excludes mortality data
arising from the early years following the purchase of a life insurance product. Option C:
Neither select nor ultimate tables are used since evidence of insurability is not required for
group insurance. Option D: A valuation mortality table is used as the basis for calculating
minimum reserves.)
With respect to refund accounting plans, what is the possible initial source of funds for
offsetting a deficit for a particular accounting period?
Claims fluctuation reserve (CFR)
Which of the following statements correctly describes application of the Canadian Life and
Health Insurance Association (CLHIA) coordination-¬of¬-benefits (COB) guideline for out-of-
country/out-of-province/territory claims?
The first carrier is the insurer or plan administrator first contacted in the event of a claim
Which of the following statements correctly describes a multi-employer plan (MEP)?
Employer contributions to a MEP are typically a specified amount per hour worked per
employee
