Finance 341Class Assignment #10Sample ExamNames:_______________________ _______________________ _______________________These questions are designed to give you an idea of what to expect on the First Exam. Work on these questions in a team of 2-3 people.For the first exam, you may use either the State Farm Car Policy we used in Finance 260 or the Personal Auto Policy included as Appendix B in the text. To make sure you are graded fairly, please circle the policy you are using for this sample exam:State Farm Car PolicyPersonal Auto PolicyTrue/False and Multiple Choice Questions - Circle the appropriate answer (1 point each)1. Loss of earnings is a form of bodily injury damages. T F2. For a growing company, the Trade Basis Combined Ratio T Fwill be higher than the Statutory Combined Ratio.3. IBNR stands for Issued But Not Released T F4. Which types of agents have legal ownership of policy expirations?A. Exclusive agentsB. Direct writersC. Independent agentsD. None of the above5. You are driving your car and turning into your driveway when and you lose control of the car. You run into a tree in front of your house, damaging boththe car and destroying the tree. In this situation, which policy will pay for this loss?A. Only your Personal Auto Policy (or State Farm Car Policy) will payB. Only your Homeowners 3 Special Form will payC. Both policies will payD. Neither policy will payShort Answer/Calculation Questions (2 points each).6. Calculate pure premium based on the following information:Loss frequency 10%Loss severity 1,600Fixed expenses 40Variable expenses (including profit) 25% 7. CNA writes a $50 million property insurance policy on a store. CNA purchases two reinsurance policies. One is a quota share policy that cedes 60% of each loss. The other is a per-risk excess reinsurance policy of $15 million excess of $5 million. (The quota share policy "inures to the benefit of" the per-risk excess policy.) A $40 million covered loss occurs. Indicate how much each of the insurers will pay:CNA ________________Quota Share Reinsurer ________________Per-risk Excess Reinsurer ________________8. You are the underwriter of a multi-line insurance company. One of your auto policyholders has recently been involved in a serious accident that injured another person. Your insured is likely to be held liable for at least $100,000, the policy limits. Based on the original application, the policyholder has not had any other accidents over the last five years, and has never been cited for a traffic violation. This person has only been insured with your company for 1 year. The annual premium on the policy is$1000. This policyholder has no other insurance with your company. Whatwould you do on this policyholder?For questions 9-10, use the Cumulative Loss Payment data listed below to fill in the missing data on the next two tables. Assume that there is no further loss development after 48 months.Cumulative Loss PaymentsDevelopment Age (Months)Accident Year 12 24 36 481997 1000 1600 2000 21001998 2000 3000 34501999 3000 42002000 40009.Paid Loss Development FactorsLink FactorsAccident Year 12-24 24-36 36-481997 1.60 1.25 1.051998 ? 1.151999 1.40Average ? 1.20 1.05Age-Ultimate ? 1.26 1.0510.Estimated Loss Reserves Based on Average Paid Loss Development FactorsAccident Year Paid toDateAge toUltimateUltimateLossesLoss Reserve1997 2100 1.000 2100 01998 3450 1.050 3623 1731999 4200 1.260 ? ?2000 4000 ? ? ?Total 13750 - ?