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Free Financial AFE Exam Questions

In case of supplementary contracts, the amount of each payment is computed on the basis of the assumed (or guaranteed) interest rate and the number and frequency of payments selected. For example:

  1. The higher the assumed interest rate, the larger the amount of each payment
  2. The lower the assumed interest rate, the larger the amount of each payment
  3. The higher the assumed interest rate, the smaller the amount of each payment
  4. The higher the actual interest rate, the larger the amount of each payment

Answer(s): A



________________ are contracts with the insurer which provide for periodic payments over a specified period or in specified amounts. In most respects they are administered and accounted for much like supplementary contracts without life contingencies since there are no mortality or morbidity considerations that affect the amount to be paid.

  1. Mixed stream
  2. Annuities certain
  3. Annuities due
  4. Ordinary Annuities

Answer(s): B



Structured settlements are agreements characterized by the periodic payment of fixed amounts to a claimant in connection with the settlement of a legal claim. Such payments may last for the lifetime of the payee or they may be for a particular period of time, depending upon the terms of the settlement. The party responsible for making structured settlement payments may make payments:

  1. Directly
  2. To a claimant
  3. Any one of these
  4. None of these

Answer(s): C



When a retained asset account is established in the place of a cash settlement, an interest bearing account is created by the insurer for the beneficiary. The beneficiary receives a checkbook with which to draw upon funds in the new account. The account holder can make:

  1. Partial or total withdrawal of the account balance as needed and has total control over the account
  2. Partial withdrawal of the account balance as needed and has total control over the account
  3. Total withdrawal of the account balance as needed and has total control over the account
  4. 25% withdrawal of the account balance as needed and has total control over the account.

Answer(s): A



A liability for premiums paid in advance can also arise when insurers allow policyholders to pay several years' premiums at one time. Since the insurer has the use of policyholder funds that are not yet due, it is customary for the insurer to:

  1. Credit Assets
  2. Discount the value of such premiums and accept a lesser amount in cash
  3. Discount the value of such premiums
  4. Accept a lesser amount in cash

Answer(s): B



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