Preview Questions Actuary | Role Specific Skill

Question 1: How would you interpret a mortality table where the mortality rate increases exponentially with age?

Which action should you take?

Choose only one option

The table is incorrectly constructed

The risk of death is increasing with age

The risk of death decreases with age

The risk of death is constant across all age groups

Question 2: When calculating the discount rate for a financial forecast, what is the primary factor that actuaries must consider?

Which action should you take?

Choose only one option

Inflation rate

Asset management fees

Historical growth rate of claims

The firm's cost of capital and risk-free rate

Question 3: What is the role of a "funding policy" in pension plan management?

Which action should you take?

Choose only one option

To determine the benefit formulas and payout structures

To outline the contribution rates and funding targets to ensure the pension plan remains adequately funded

To define the eligibility criteria for pension benefits

To establish the investment strategy for the pension fund

Question 4: How does "Discount Rate" affect the calculation of pension liabilities, and what challenges arise in choosing an appropriate discount rate for long-term pension projections?

Which action should you take?

Choose only one option

Discount rates are not used in pension liability calculations

The discount rate affects the present value of future pension obligations, with challenges arising from market volatility and long-term interest rate trends

Discount rates are irrelevant as pension liabilities are based on the future benefits, not market conditions

Discount rates should always be based on current market rates and do not need adjustments

Question 5: What is the role of "Asset-Liability Matching" (ALM) in pension fund management, and how do you model the relationship between assets and liabilities in pension plans?

Which action should you take?

Choose only one option

ALM is irrelevant in pension fund management and should be avoided

ALM ensures that pension plan assets and liabilities are aligned to minimize risk, and it is modeled by matching the duration of liabilities with the duration of assets

ALM is only used in banking, not pension fund management

ALM is only concerned with equity investments, not pension liabilities

Question 6: What is the difference between Type I and Type II errors in hypothesis testing, in the context of actuarial models?

Which action should you take?

Choose only one option

Type I error is failing to reject a false null hypothesis, while Type II is rejecting a true null hypothesis

Type I error occurs when the model is overfitted, while Type II occurs when the model is underfitted

Type I is rejecting a true null hypothesis, while Type II is failing to reject a false null hypothesis

Type I error is related to multicollinearity, while Type II is related to autocorrelation