11.
ASSERTION
Under the individual aggregate
actuarial cost method, there is
never an unfunded actuarial
liability.
BECAUSE
REASON
Under the individual aggregate
actuarial cost method, at inception
of the plan, there is no actuarial
liability for past service.
COURSE 5: Fall 2004 - 14 - GO ON TO NEXT PAGE
Morning Session
12. Rank the following pricing strategies in ascending order (lowest to highest) of price:
I. Predatory pricing
II. Skim pricing
III. Neutral pricing
IV. Penetration pricing
(A)
I
<
IV
<
III
<
II
(B)
II
<
I
<
III
<
IV
(C)
II
<
III
<
IV
<
I
(D)
IV
<
I
<
II
<
III
(E)
IV
<
II
<
I
<
III
COURSE 5: Fall 2004 - 15 - GO ON TO NEXT PAGE
Morning Session
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COURSE 5: Fall 2004 - 16 - GO ON TO NEXT PAGE
Morning Session
13. For a block of one-year term policies you are given:
Earned premium for 2004 3,401
Rate increase November 1, 2003 7%
Rate increase September 1, 2004 5%
Policies Uniformly distributed
Calculate the earned premium at current rates for 2004 using the parallelogram method.
(A) 3,458
(B) 3,561
(C) 3,564
(D) 3,644
(E) None of the above.
COURSE 5: Fall 2004 - 17 - GO ON TO NEXT PAGE
Morning Session
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COURSE 5: Fall 2004 - 18 - GO ON TO NEXT PAGE
Morning Session
14. For a pension plan you are given the following:
Actuarial cost method: Traditional unit credit
Normal retirement benefit: $30 per month per year of service
Early retirement benefit:
Accrued benefit reduced by 5% for each year before
age 65
Actuarial assumptions:
Interest rate 7%
Pre-retirement decrement other than early retirement None
(12)
a64 9.25
(12)
a65 8.75
Retirement age assumption
Age x Retiring rate at age x
64 0.4
65 1.0
Data for the sole participant
Age at hire 40
Age at January 1, 2004 62
Calculate the actuarial liability as of January 1, 2004.
(A) 58,257
(B) 59,537
(C) 60,633
(D) 65,095
(E) 80,885
COURSE 5: Fall 2004 - 19 - GO ON TO NEXT PAGE
Morning Session
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COURSE 5: Fall 2004 - 20 - GO ON TO NEXT PAGE
Morning Session