SOFE SOFE Certification SOFE-CFE Questions & Answers

• Question 81:

  What must be calculated by using a prescribed method that usually results in amounts different from the Annual Statement?

  A. credits

  B. obligations

  C. reserves

  D. taxation

  Correct Answer: C

• Question 82:

  To qualify as a life insurer for federal income tax purposes, what percent of the mean of the company's reserves must constitute life insurance reserves?

  A. 25

  B. 50

  C. less than 50

  D. more than 50

  Correct Answer: D

• Question 83:

  ____________ has been unwilling to accept the Annual Statement method of accounting as inherently binding.

  A. Provisionary

  B. Treasury

  C. Union coded

  D. Illusionary

  Correct Answer: B

• Question 84:

  Which insurance arrangement, which involved insurance of a loss that had previously occurred, similarly was found not to be insurance for federal income tax purposes?

  A. annual statement

  B. retroactive

  C. reserved

  D. Tax reserves

  Correct Answer: B

• Question 85:

  What relies on the insurer to use reasonable judgments to determine the types and percentages of assets being acquired?

  A. Tracking performance

  B. Percentage investment

  C. Prudent Person method

  D. None of the above

  Correct Answer: C

• Question 86:

  Any company more than half of the business of which during the taxable year is the issuing of insurance or annuity contracts or the reinsuring of risks is referred to as:

  A. taxable company

  B. non-life insurance company

  C. insurance company

  D. Provision Company

  Correct Answer: C

• Question 87:

  An option to buy a particular stock at a fixed price within a stated period of time is known as:

  A. put

  B. call

  C. hedge

  D. Capital gain

  Correct Answer: B

• Question 88:

  Which taxes are not reported as part of investment income, but are instead reported as a component of surplus through unrealized gains and losses?

  A. Depreciated

  B. Deferred

  C. Limited

  D. Venture

  Correct Answer: B

• Question 89:

  What defines and sets guidelines for the types and percentages of invested assets that insurers are permitted to own?

  A. Defined Limits method

  B. Investment holder

  C. Policy holder

  D. Valuation asset method

  Correct Answer: A

• Question 90:

  Which of the following is Correct?

  A. The insurance company transfers to the seller of a call option the opportunity for capital loss-if the stock rises by an amount exceeding the exercise price, plus the cost of the option (premium).

  B. The insurance company transfers to the buyer of a call option the opportunity for capital gain-if the stock rises by an amount exceeding the exercise price, plus the cost of the option (premium).

  C. The insurance company transfers to the seller of a call option the opportunity for capital loss-if the stock decreases by an amount exceeding the exercise price, plus the cost of the option (premium).

  D. The insurance company transfers to the buyer of a floor option the opportunity for option gain-if the stock rises by an amount exceeding the exercise price, plus the cost of the option (premium).

  Correct Answer: B