CPCU 410 Practice Exam 1


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1. Which one of the following statements is correct regarding an insurer’s loss reserves?

2. Which one of the following represents the risk that an asset cannot be sold on short notice without incurring a loss?

3. A credit card company sold its receivables to David for cash. The interest and principal repayments on the credit cards will be passed directly to David after passing through the credit card company. David has purchased a(n):

4. A binder is a temporary written or oral agreement to provide property-casualty insurance coverage until a formal written policy is issued. To be effective, a property-casualty binder must contain:

5. Two years ago, Juan loaned $200,000 to his friend, Jeffrey, so Jeffrey could purchase a home. The loan was established as a fixed 5% interest-only loan for 10 years. At the end of the 10th year, Jeffrey must repay the $200,000 of loan principal to Juan. For the last two years, Juan was able to invest the $10,000 ($200,000 principal balance x 5% interest rate) of annual interest income collected from Jeffrey in a savings account that was paying him 5% annually. Currently, the savings account is paying an annual interest rate of only 3%. Which one of the following risks to Juan does this represent?

6. Marybeth would like to accumulate $5,000 at the end of 12 months. Assuming she can earn a 5% rate of return on her savings, compounded quarterly, how much does she need to set aside today to achieve her goal?

7. Which one of the following is the determining factor as to whether a security is being traded in the primary or secondary market?

8. Which one of the following types of analysis determines the percentage change in values for financial statement items between consecutive years in the period being considered?

9. Which one of the following would represent a private nuisance?

10. Adam, a long-term employee of ABC Company, was fired without just cause exactly one month before becoming eligible for retirement benefits. He did not have an employment contract with ABC Company. Assuming all of the following exceptions to the employment at will doctrine are accepted in Adam’s state of employment, and state law does not address termination prior to retirement, which one of the following exceptions would most likely allow Adam to be successful in a lawsuit against ABC Company?