Name of the Organisation : Financial Planning Standards Board India – FPSB
Exam : Certified Financial Planner Certification CFPCM Examination
Subject : Risk Analysis And Insurance Planning
Document Type : Sample Paper
Website : https://india.fpsb.org/
Download Sample /Model Question Paper : https://www.pdfquestion.in/uploads/24231-RAIP.pdf
FPSB CFPCM RAIP Exam Sample Paper
The CFPCM Examination (also called Exam 5 based on Module VI-Advanced Financial Planning) is designed to assess the candidate’s ability to apply Financial Planning knowledge to real-life Financial Planning situations.
Related / Similar Question Paper :
FPSB CFP Certification Exam Question Paper Sample
By passing the CFPCM Certification Examination, the candidate demonstrates to the public that he/she has the required level of competency to practice Financial Planning.
Instruction
** The following Sample Paper consists of 39 question items.
** They span over the “Exam 1: Risk Analysis & Insurance Planning” and the “Module: Introduction to Financial Planning”.
** The actual Question Paper would consist of 77 items of total 150 marks out of which Introduction to Financial Planning items would be 17 items of 30 marks, thus representing 20% of marks in each of Exam 1, 2, 3 & 4. This Sample Paper is representative of the revised and restructured Exam effective from 1st February, 2013 as regards distribution and pattern of question items in respective Sections and their defined difficulty level.
** For more details, refer to the Revised Syllabus and Topic List.
** Suggested solutions to 3-mark and 4-mark problems are as per Working Notes alongside.
Risk Analysis And Insurance Planning
** Attempted Answers Are Checked and Displayed In Blue Color.
** Correct Answers are Displayed in Red Color after each Question.
Section – I
1 The principle of indemnity does not provide against one of the following: [1 Mark]
(a) Morale hazard
(b) Profiteering from insurance
(c) Escalation in value of insured goods
(d) Moral hazard
(e) Not Attempted
Correct Answer : Escalation in value of insured goods
2 Which of the following is not a characteristic of Insurance? [1 Mark]
(a) Insurance builds the risk capacity of businesses especially in large environmental projects
(b) Insurance allows financial security against future risk, accidents and uncertainty
(c) Insurance helps in reducing anxiety and fear before and after the loss occurs as the loss compensation is provided for
(d) Insurance protects and prevents the asset from loss due to the peril
(e) Not Attempted
Correct Answer : Insurance protects and prevents the asset from loss due to the peril
3 Which of the following cannot change while agreeing on the implementation responsibilities? [1 Mark]
(a) The scope of the engagement, as originally defined
(b) The sources of compensation and material relationships, previously disclosed
(c) The responsibility itself of implementing the recommendations
(d) The conflicts of interest, previously disclosed
(e) Not Attempted
Correct Answer : The responsibility itself of implementing the recommendations
4 What empirically is closest to Self Insurance? [1 Mark]
(a) One can buy insurance online
(b) An insurance company not reinsuring for excess risk covered
(c) Managing risk by investing a corpus to be used in case of loss
(d) One can retain the risk by not insuring against it
(e) Not Attempted
Correct Answer : Managing risk by investing a corpus to be used in case of loss
5 The principle of proximate cause helps in insurance in ascertaining _______. [1 Mark]
(a) the principal cause that sets in motion a chain of events inflicting the loss
(b) the most immediate cause which inflicts the loss irrespective of the chain of events
(c) the most severe cause in the chain of events leading to the loss
(d) the nearest cause in a chain of events which can be identified for admissibility of insurance claim
(e) Not Attempted
Correct Answer : the principal cause that sets in motion a chain of events inflicting the loss
Section – II
1 The deductible is _________. [1 Mark]
(a) the amount that is deducted from the premium as mortality charge
(b) the amount of unpaid premiums deducted from the amount of claim
(c) the sharing of costs incurred between the insurer and the insured according to a specific formula
(d) the expenses borne by the claimant before an insurer will pay any compensation
(e) Not Attempted
Correct Answer : the expenses borne by the claimant before an insurer will pay any compensation
2 Which of the following is not a regulatory objective of rate making? [1 Mark]
(a) Expanding insurance density
(b) Insurer solvency
(c) Non-discriminatory premiums
(d) Consumer protection
(e) Not Attempted
Correct Answer : Expanding insurance density
3 The Foreign Exchange (Forex) market does all of the following except: [1 Mark]
(a) It assists in curbing speculation in the value of currencies.
(b) It facilitates in transferring the currency risk from the risk averse to the risk takers.
(c) It determines the relative values of different currencies.
(d) It assists international trade and investment by enabling currency conversion.
(e) Not Attempted
Correct Answer : It assists in curbing speculation in the value of currencies.
4 Recession is defined as ____________. [1 Mark]
(a) a receding liquidity levels with the bankers due to an increased demand of money in the economy
(b) increased spending as a result of improved employment prospects and income levels
(c) a rise in the general price level of goods and services in an economy over a period of time
(d) a significant decline in the economic activity that lasts longer, from a few months to a few years
(e) Not Attempted
Correct Answer : a significant decline in the economic activity that lasts longer, from a few months to a few years
5 The classification of insurance contract as aleatory contract means that _____. [2 Marks]
(a) the value admissible as benefit or compensation to the insured are not equal even if the perilous event is same and simultaneous
(b) the entire book of business written by the insurer is based on the premise that the values exchanged by contracting parties are unequal
(c) the insured stands to benefit on a reducing scale if the perilous event is shifted away from the date of contract
(d) the values exchanged by the contracting parties are not necessarily equal and may change reciprocally in the event of loss
(e) Not Attempted
Correct Answer : the values exchanged by the contracting parties are not necessarily equal and may change reciprocally in the event of loss
Section – III
1. The following is not a factor when identifying the life insurance need of a client? [1 Mark]
(a) Non-earning dependents having definite life goals
(b) Tax saving potential
(c) Uncovered financial liabilities
(d) Existing financial and other assets
(e) Not Attempted
Correct Answer : Tax saving potential
2 The Internal Rate of Return (IRR) is ___________. [1 Mark]
(a) The real rate of return indicating the actual purchasing power derived from an investment
(b) The gross return obtained from an investment over the entire period of investment duration
(c) The rate of interest which is internally decided by an institution as desirable for evaluating the profitability of projects
(d) The discount rate that reduces to zero the net present value of a stream of income inflows and outflows
(e) Not Attempted
Correct Answer : The discount rate that reduces to zero the net present value of a stream of income inflows and outflows
3 The Economic Value of Human Life is best computed as _______. [2 Marks]
(a) Present value of net economic contribution till productive earning life discounted at a suitable rate of investment
(b) Present value of all future earnings till the expected life of an individual discounted at expected rate of inflation
(c) Present value of all future expenses till the expected life of an individual discounted at expected rate of inflation
(d) Future value of annual present earnings taken for all productive future years at a suitable rate of growth of income
(e) Not Attempted
Correct Answer : Present value of net economic contribution till productive earning life discounted at a suitable rate of investment
4. An executive purchased an annuity for a lump sum Rs. 85 lakh when he was of 53 years and had in dependents a non-working spouse of age 48 and a son of age 25. On reaching age 60, he expects at least one, himself or his spouse, to survive till 85 years and contracts an immediate life annuity with return of purchase price at Rs. 10.15 lakh p.a. vested against the purchase price of Rs. 1.61 crore. What return is expected from the vesting date? [3 Marks]
(a) 6.73% p.a.
(b) 5.76% p.a.
(c) 4.25% p.a.
(d) 5.17% p.a.
(e) Not Attempted
Correct Answer : 6.73% p.a.
5. Mr. A has invested in an instrument for three years. The instrument has produced a return of 11%,15% and 12% in the three years. You as Mr. A’s advisor have observed that the ruling inflation in these three years respectively was 4%,7% and 8%. You find the real rate of return which Mr. A has received as ______. [3 Marks]
(a) 5.65% p.a.
(b) 7.08% p.a.
(c) 5.96% p.a.
(d) 6.32% p.a.
(e) Not Attempted
Correct Answer : 5.96% p.a.
Section – IV
1 Under which of the following circumstances personal accident insurance benefit shall be accepted by the insurer? [1 Mark]
(a) Death due to gunshot
(b) Self injury due to insanity
(c) Breach of law with criminal intent
(d) Accident under the influence of drugs
(e) Not Attempted
Correct Answer : Death due to gunshot
2 Most health insurance policies cover pre-existing illnesses after______. Get Question [1 Mark]
(a) 12 months
(b) 24 months
(c) 48 months
(d) 3 months
(e) Not Attempted
Correct Answer : 48 months
3 Which of the following is in adherence with the professional responsibility of a CFP professional towards the client? [1 Mark]
(a) Competing with professionals in specialized services to internalize most deliverables
(b) Referring the client to other professionals for certain duration with transfer of liability
(c) Having legitimate difference of opinion on an issue from fellow professionals and the client
(d) Managing one’s own prejudices and desires to achieve a proper balance of interests
(e) Not Attempted
Correct Answer : Referring the client to other professionals for certain duration with transfer of liability
4. Under Financial Planner Code of Ethics and Professional Responsibility, the principle of Fairness is most appropriately interpreted to mean that a CFP professional would _______. [2 Marks]
(a) assess personal prejudices, feelings and desires in ascertaining the treatment he intended in a similar situation as the client’s
(b) owe the client all due services meant to be fairly provided, without prejudices and with proper balance of interests
(c) be fair in charging, besides the terms of payment, for the services to be rendered outside the scope of engagement
(d) treat all clients regarding the same service and deliverables fairly equally
(e) Not Attempted
Correct Answer : owe the client all due services meant to be fairly provided, without prejudices and with proper balance of interests
5 Which of the following does not portray a true proposition under Keyman Insurance? [2 Marks]
(a) The value of insurance is linked to the financials of the company and typically much larger than individual covers
(b) Premiums paid by the company would not be treated as perquisites in the hands of employees covered under the policy
(c) The insurance is taken by a business firm on the life of key employee(s) to protect the firm against possible financial losses due to their premature death
(d) The claim amount is exempt under Section 10 (10D) of the Income-tax Act, 1961 if the company is paying the premiums
(e) Not Attempted
Correct Answer : The claim amount is exempt under Section 10 (10D) of the Income-tax Act, 1961 if the company is paying the premiums
Section – V
1 Under _________ an insurance company notifies you that it has not lapsed your policy for non-payment of premiums, even though it had the right to do so. [1 Mark]
(a) Express Waiver
(b) Implied Waiver
(c) Waiver by Silence
(d) Estoppels
(e) Not Attempted
Correct Answer : Express Waiver
2 Which of the following is not barred to have played a role in case of a Free Consent? [1 Mark]
(a) Undue influence
(b) Fraud or Misrepresentation
(c) Mutual interest
(d) Coercion
(e) Not Attempted
Correct Answer : Mutual interest