CPCU 410 Practice Exam 2


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1. InsureCo is a property and casualty insurer licensed to sell insurance in the state of Montana. Management has set aggressive profit goals for the company, and as a result, the company filed for a rate increase on its homeowners’ line of insurance. The filed rate increase was not approved by the state insurance department, causing InsureCo to miss its profit goals for the year. This is an example of which one of the following external constraints on achieving insurer goals?

2. Which one of the following statements is correct regarding the rights and duties of a bailee?

3. Which one of the following represents a type of premium audit in which the auditor examines the insured’s books and records at the insured’s premises?

4. Donna said to her friend Ron, “I will not sell my property for less than $5,000.” Ron then replied, “I accept your offer.” In this situation, a contract:

5. A company wants to purchase a machine for $60,000. The cash inflows from the use of the machine are expected to be:

Timing of Payment

Cash Inflows

End of year 1


End of year 2


End of year 3


If the discount rate is 8%, what is the net present value of the project?

6. The owners of a proprietary stock insurer may receive a dividend from the company. The funds used to pay these dividends arise from:

7. The two most prominent actuarial functions are:

8. RonCo recently raised capital by selling their common stock in an initial public offering. They also issued debt securities. After the issue, the stock and debt securities trade in the:

9. The store manager for Scott’s Furniture called Lamps Inc. and said, “Send me 100 of your brown lamps.” Lamps agreed but did not specify a price for the lamps. For the last three years, Lamps has charged Scott’s $20 per brown lamp. The lamps arrived at Scott’s store. The store manager signed the shipping invoice which listed the number of lamps but not the price. Which one of the following statements is correct regarding this scenario?

10. Mary mails an offer to rent equipment to Robert, stating, “Send me a yes or no answer. If l do not hear from you by noon on Thursday, I will conclude that your answer is no.” Robert mails an acceptance, but Mary does not receive the letter until after noon on Thursday. Which one of the following statements is correct?