Practice Exam Questions

cornedovcornedov
edited October 2024 in PRACTICE EXAM

I had a few questions after completing the practice exam:

Q14 - The practice exam has EPR as 60K and financial resources as 38.8K. How is this possible for EPR > financial resources if financial resources incudes EPR?

Q16 - Is cost of capital given an after-tax number unless otherwise specified? And for the purpose of the cost of capital method for risk adjustment we always want a pre-tax cost of capital, is this correct?

Also the sample answer for the RA here allocates the RA to individual lines proportionate to the size of line. Is this an appropriate allocation for the RA? I figured we would need to calculate the RA for each individual line at a certain level and then allocate RA based on that. If we simply allocate RA based on size of line this wouldn't capture the difference in risk between the lines, it would just capture the difference in size?

Q24 - 450 is labeled as the Coverage units at the beginning of the quarter. Based on how it is used in the calculation is this not the coverage units provided over the quarter?

Comments

  • sdeibertsdeibert

    I had the same question as above for #16, is it correct to assume CoC is an after tax rate and we want pre tax?

  • Staff-T1Staff-T1

    Yes, sample question 28 is a good example of this

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