Pricing of Products II MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Pricing of Products II, 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 Pricing of Products II 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 Pricing of Products II mcq questions that explore various aspects of Pricing of Products II problems. Each MCQ is crafted to challenge your understanding of Pricing of Products II 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 Pricing of Products II MCQs are your pathway to success in mastering this essential IC 92 Actuarial Aspects of Product Development topic.

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Pricing of Products II MCQs | Page 2 of 6

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Q11.
Which method of determining price is best suited for complex products?

a.

Formula method

b.

Cash flow method

c.

Both methods are equally suited

d.

None of the above

Discuss
Answer: (b).Cash flow method Explanation:The cash flow method is best suited for complex products where expected incomes and outflows are projected into the future to determine the best premium rate or charges.
Q12.
What is the primary principle underlying the formula method of determining premiums?

a.

Present value of premiums = Present value of benefits - Present value of expenses

b.

Present value of premiums = Present value of benefits + Present value of expenses

c.

Present value of premiums = Future value of benefits - Present value of expenses

d.

Present value of premiums = Future value of benefits + Future value of expenses

Discuss
Answer: (b).Present value of premiums = Present value of benefits + Present value of expenses Explanation:The primary principle underlying the formula method is that the present value of premiums equals the present value of benefits plus the present value of expenses.
Q13.
What does äx represent in actuarial terms?

a.

Present value of 1 payable every year to a life aged x as long as the life is alive

b.

Present value of 1 payable every year to a life aged x as long as the life is alive before age x+n

c.

Present value of 1 payable every year to a life aged x as long as the life is alive, with the first payment made at the commencement of the contract

d.

Present value of 1 payable every year to a life aged x as long as the life is alive before age x+n, with the first payment made at the commencement of the contract

Discuss
Answer: (c).Present value of 1 payable every year to a life aged x as long as the life is alive, with the first payment made at the commencement of the contract Explanation:äx represents the present value of 1 payable every year to a life aged x as long as the life is alive, with the first payment made at the commencement of the contract.
Q14.
What is the formula for calculating Premium payable every year by a life aged x in a Whole life contract?

a.

Px = Ax / äx

b.

Px = Ax / äx: nืš

c.

SP = Ax

d.

Px = Ax: nืš / äx:tืš

Discuss
Answer: (a).Px = Ax / äx Explanation:The formula for calculating Premium payable every year by a life aged x in a Whole life contract is Px = Ax / äx.
Q15.
In a Term assurance contract, what does Px represent?

a.

Premium payable every year for a limited period of n years

b.

Premium payable every year as long as the life is alive before age x+n

c.

Premium payable every year for a limited period of n years, with the first payment made at the commencement of the contract

d.

Premium payable every year as long as the life is alive, with the first payment made at the commencement of the contract

Discuss
Answer: (a).Premium payable every year for a limited period of n years Explanation:In a Term assurance contract, Px represents the Premium payable every year for a limited period of n years.
Q16.
What is the formula for calculating Premium payable in a Pure endowment contract?

a.

Px = Ax: nืš

b.

Px = Ax: nืš / äx

c.

SP = Ax: n

d.

SP = Ax: n 1

Discuss
Answer: (b).Px = Ax: nืš / äx Explanation:The formula for calculating Premium payable in a Pure endowment contract is Px = Ax: nืš / äx.
Q17.
In an Endowment assurance contract, what does Px:nืš represent?

a.

Premium payable every year for t years

b.

Premium payable every year for a limited period of n years

c.

Premium payable every year for a limited period of t years, with the first payment made at the commencement of the contract

d.

Premium payable every year for a limited period of t years, with the first payment made at the end of the contract

Discuss
Answer: (a).Premium payable every year for t years Explanation:In an Endowment assurance contract, Px:nืš represents the Premium payable every year for t years.
Q18.
What are some limitations of the formula method for determining premiums?

a.

The formulae are flexible and adaptable to various economic changes.

b.

Formulae take into account all possible risks while calculating premiums.

c.

Formulae are not constant and can be adjusted over time.

d.

Formulae are very rigid and do not consider other risks, and they remain constant for many years without considering economic changes.

Discuss
Answer: (d).Formulae are very rigid and do not consider other risks, and they remain constant for many years without considering economic changes. Explanation:Some limitations of the formula method for determining premiums include that the formulae are very rigid and do not consider other risks, and they remain constant for many years without considering economic changes.
Q19.
What are office premiums in insurance?

a.

Premiums paid by policyholders for office expenses

b.

Premiums calculated by adding present value of benefits and present value of expenses

c.

Premiums paid for claims settlement

d.

Premiums for insurance products sold in the office

Discuss
Answer: (b).Premiums calculated by adding present value of benefits and present value of expenses Explanation:Office premiums are premiums calculated by adding the present value of benefits and the present value of expenses in insurance calculations.
Q20.
How is the Single Premium (SP) calculated for an Endowment assurance product considering office premiums?

a.

SP = Ax: nืš + 0.02 SP + I + K Ax: + c ax: n-1ืš

b.

SP = Ax: nืš + 0.40 AP + I + K Ax: + c ax: n-1ืš

c.

SP = Ax: nืš + 0.01 r Px

d.

SP = Ax: nืš + 0.01 r Px + (Dx+1 / Dx) x 0.01 r1 Px äx+1:n-1ืš

Discuss
Answer: (a).SP = Ax: nืš + 0.02 SP + I + K Ax: + c ax: n-1ืš Explanation:The Single Premium (SP) for an Endowment assurance product considering office premiums is calculated using the formula SP = Ax: nืš + 0.02 SP + I + K Ax: + c ax: n-1ืš.
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