Actuary Certification ACTUARY Finance and Economics 2

Question 1

Which term describes the interest rate at which a central bank lends overnight funds to commercial banks?

Accepted Answer

Discount rate

Answer

Prime rate

Answer

LIBOR

Answer

Federal funds rate

Question 2

Under the Gordon Growth Model, if a stock pays a dividend of $3, the required return is 10%, and dividends grow at 4%, what is the stock's intrinsic value?

Accepted Answer

$50.00

Answer

$30.00

Answer

$75.00

Answer

$60.00

Question 3

A bond with a 6% coupon rate is trading at a premium. Which statement must be true?

Accepted Answer

The yield to maturity is less than 6%

Answer

The yield to maturity equals 6%

Answer

The yield to maturity exceeds 6%

Answer

The bond has a negative convexity

Question 4

Which economic indicator is considered a leading indicator of future economic activity?

Accepted Answer

Building permits

Answer

Unemployment rate

Answer

GDP growth

Answer

Consumer Price Index

Question 5

What is the primary purpose of the Efficient Market Hypothesis (EMH) in actuarial finance?

Accepted Answer

To assert that asset prices fully reflect all available information

Answer

To guarantee portfolio returns exceed inflation

Answer

To define optimal rebalancing strategies

Answer

To measure systematic risk in equity portfolios

Question 6

In macroeconomics, what does the multiplier effect describe?

Accepted Answer

The amplification of an initial change in spending on total economic output

Answer

The compounding of interest on government bonds

Answer

The leverage effect in derivatives markets

Answer

The impact of monetary policy on exchange rates

Question 7

Which measure of money supply includes currency in circulation plus demand deposits?

Accepted Answer

M1

Answer

M0

Answer

M2

Answer

M3