Premium Bases Interest Rate MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Premium Bases Interest Rate, a fundamental topic in the field of IC 92 Actuarial Aspects of Product Development. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Premium Bases Interest Rate MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Premium Bases Interest Rate mcq questions that explore various aspects of Premium Bases Interest Rate problems. Each MCQ is crafted to challenge your understanding of Premium Bases Interest Rate principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 92 Actuarial Aspects of Product Development tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Premium Bases Interest Rate MCQs are your pathway to success in mastering this essential IC 92 Actuarial Aspects of Product Development topic.

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Premium Bases Interest Rate MCQs | Page 4 of 9

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Q31.
Which type of contracts require higher returns on investments to meet policyholders' expectations?

a.

With-profit contracts

b.

Without-profit contracts

c.

Limited premium payment contracts

d.

Variable life insurance contracts

Discuss
Answer: (a).With-profit contracts Explanation:With-profit contracts require higher returns on investments to meet the expectations of policyholders, as they involve potential capital appreciation, such as investments in equities and property.
Q32.
How does the nature and term of liabilities impact interest rate assumptions?

a.

Longer liabilities decrease interest rate risk

b.

Guaranteed liabilities require more cautious investment choices

c.

Short-term liabilities increase interest rate risk

d.

Nature of liabilities has no impact on interest rate assumptions

Discuss
Answer: (b).Guaranteed liabilities require more cautious investment choices Explanation:Guaranteed liabilities require more cautious investment choices due to the risk of falling returns, impacting interest rate assumptions.
Q33.
What factor determines the availability of matching investments for insurance contracts?

a.

Country's GDP

b.

Level of competition in the insurance market

c.

Liquidity and development of the equity market

d.

Exchange rate fluctuations

Discuss
Answer: (c).Liquidity and development of the equity market Explanation:The availability of matching investments depends on the liquidity and development of the equity market, as well as the availability of suitable bonds for matching purposes.
Q34.
In which scenario would it be risky to invest in equities for insurance contracts?

a.

When liabilities are guaranteed

b.

When liabilities have a short-term duration

c.

When equities offer higher returns

d.

When equities are listed on the stock exchange

Discuss
Answer: (a).When liabilities are guaranteed Explanation:It would be risky to invest in equities for insurance contracts when liabilities are guaranteed, as there is a risk of falling returns, necessitating more cautious investment choices.
Q35.
How does past experience of interest rates affect future interest rate assumptions?

a.

It has no impact on future interest rate assumptions

b.

It directly determines future interest rates

c.

It affects future yields to be earned and interest rate assumptions

d.

It leads to fluctuations in future interest rates

Discuss
Answer: (c).It affects future yields to be earned and interest rate assumptions Explanation:Past experience of interest rates affects future yields to be earned, thus influencing interest rate assumptions for future investments.
Q36.
How do investment expenses impact interest rate assumptions?

a.

They are deducted from the best estimate rates

b.

They have no impact on interest rate assumptions

c.

They are considered separately in cash flow projections

d.

They decrease the need for cautious investment choices

Discuss
Answer: (a).They are deducted from the best estimate rates Explanation:Investment expenses are deducted from the best estimate rates, affecting the net return on investment and influencing interest rate assumptions.
Q37.
How does taxation on investment income affect interest rate assumptions?

a.

It directly determines the type of assets to be invested in

b.

It has no impact on interest rate assumptions

c.

It impacts the net return earned on investment and the type of assets to be invested

d.

It decreases the need for considering inflation trends

Discuss
Answer: (c).It impacts the net return earned on investment and the type of assets to be invested Explanation:Taxation on investment income affects the net return earned on investment and influences the type of assets to be invested, thereby impacting interest rate assumptions.
Q38.
How does government monetary policy influence interest rates?

a.

It has no impact on interest rates

b.

It leads to fluctuations in interest rates

c.

It directly determines future interest rates

d.

It impacts current and future interest rate scenarios

Discuss
Answer: (d).It impacts current and future interest rate scenarios Explanation:Government monetary policy affects current and future interest rate scenarios, leading to fluctuations in interest rates based on the policy measures adopted.
Q39.
What effect does high inflation have on interest rates?

a.

It leads to lower interest rates

b.

It decreases the inflation risk premium of interest rates

c.

It has no impact on interest rates

d.

It leads to higher interest rates

Discuss
Answer: (d).It leads to higher interest rates Explanation:High inflation increases inflation risk premium of interest rates, resulting in higher interest rates to compensate for inflationary pressures.
Q40.
How does the level of reserve build-up vary based on the benefits provided by the product?

a.

Products with no maturity benefit have higher reserves

b.

Products with significant maturity benefits have lower reserves

c.

Reserve for term insurance increases as maturity nears

d.

Reserve for endowment products is usually maximum near maturity

Discuss
Answer: (d).Reserve for endowment products is usually maximum near maturity Explanation:Endowment products with significant maturity benefits typically have higher reserves, which are usually maximum near maturity when the funds are required to pay out the maturity benefit.
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