Investment of Insurance Companies And IRDA Regulations MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Investment of Insurance Companies And IRDA Regulations, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Investment of Insurance Companies And IRDA Regulations MCQs are designed to help you grasp the core concepts and excel in solving problems.

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Investment of Insurance Companies And IRDA Regulations MCQs | Page 5 of 16

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Q41.
How is the rate of return on an investment calculated for a period?

a.

[Annual income + Price at Beginning] / Price at End

b.

[Annual income + (Price at End - Price at Beginning)] / Price at Beginning

c.

[Annual income - (Price at End - Price at Beginning)] / Price at End

d.

[Annual income - Price at Beginning] / Price at End

Discuss
Answer: (b).[Annual income + (Price at End - Price at Beginning)] / Price at Beginning Explanation:The rate of return on an investment for a period is calculated using the formula: Rate of Return=Annual income+(Price at End−Price at Beginning)Price at BeginningRate of Return=Price at BeginningAnnual income+(Price at End−Price at Beginning)​
Q42.
What does Risk on Investment refer to?

a.

Probability of earning high returns

b.

Chance of loss of expected return on investment

c.

Marketability of investment

d.

Tax benefits on investment

Discuss
Answer: (b).Chance of loss of expected return on investment Explanation:Risk on Investment refers to the chance of loss of expected return on investment.
Q43.
How is Variance defined in the context of investment evaluation?

a.

Mean of the squares of the deviations of returns

b.

Sum of the squares of the deviations of returns

c.

Square root of the mean of the deviations of returns

d.

Average value of the deviations of returns

Discuss
Answer: (a).Mean of the squares of the deviations of returns Explanation:Variance is defined as the mean of the squares of the deviations of returns with reference to their average value.
Q44.
What is the significance of Beta in investment evaluation?

a.

Reflects volatility of return relative to market swings

b.

Measures marketability of investment

c.

Indicates liquidity of an investment

d.

Determines tax benefits on investment

Discuss
Answer: (a).Reflects volatility of return relative to market swings Explanation:Beta reflects the volatility of return on an investment relative to market swings.
Q45.
How should the accounting of investments be conducted according to Regulation 14(a)?

a.

Based on the insurer's preference

b.

According to the insurer's internal policies

c.

As per the guidelines issued under IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations 2000

d.

As per the insurer's financial advisors' recommendations

Discuss
Answer: (c).As per the guidelines issued under IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations 2000 Explanation:The accounting of investments should be as per the guidelines issued under IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations 2000.
Q46.
What authority does the IRDA have in modifying or changing regulations for insurers?

a.

No authority

b.

Authority to modify or change only on its own initiative

c.

Authority to modify or change only on application by insurers

d.

Authority to modify or change on its own or on application made to it

Discuss
Answer: (d).Authority to modify or change on its own or on application made to it Explanation:The IRDA may, by any general or special order, modify or change the application of certain regulations to any insurer either on its own or on an application made to it.
Q47.
What is the scope of dealing in financial derivatives for insurers according to Regulation 15(a)?

a.

Unlimited

b.

Only in the life insurance business

c.

Only in the general insurance business

d.

To the extent permitted and in accordance with guidelines issued by the Authority

Discuss
Answer: (d).To the extent permitted and in accordance with guidelines issued by the Authority Explanation:Insurers may deal in financial derivatives only to the extent permitted and in accordance with the guidelines issued by the Authority.
Q48.
How should margins or unamortized premiums paid in connection with financial derivatives be treated as per Regulation 15(b)?

a.

Always as "Approved Investments"

b.

Always as "Other than Approved Investments"

c.

As "Approved Investments" only when the derivatives position constitutes a hedge for the underlying investments or portfolio

d.

As "Other than Approved Investments" only when the derivatives position constitutes a hedge for the underlying investments or portfolio

Discuss
Answer: (c).As "Approved Investments" only when the derivatives position constitutes a hedge for the underlying investments or portfolio Explanation:Margins or unamortized premiums paid in connection with financial derivatives shall be treated as "Approved Investments" under certain conditions, specifically when the derivatives position constitutes a hedge for the underlying investments or portfolio.
Q49.
Which of the following is NOT considered an Approved Investment for Life Insurers?

a.

First mortgages on immovable property in another country

b.

Loans secured as required under the Act

c.

Bonds or debentures issued by companies rated AA or above

d.

Immovable property situated in another country

Discuss
Answer: (d).Immovable property situated in another country Explanation:Immovable property situated in another country is explicitly excluded as an Approved Investment for Life Insurers.
Q50.
What additional investments are deemed as approved by the Authority for Life Insurers under Section 27A of the Act?

a.

Only equity shares and preference shares

b.

Only bonds or debentures rated not less than AA

c.

Only loans secured as required under the Act

d.

Loans secured as required under the Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions recognized by RBI

Discuss
Answer: (d).Loans secured as required under the Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions recognized by RBI Explanation:Loans secured as required under the Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions recognized by RBI are deemed as approved investments by the Authority.
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