CAS Exam 6C Fall 2013, Question 25
Study guide: Exam 6C
An insurance company was incorporated on January 1, 2012 and purchased the following three bonds in 2012 to support its liabilities:
| Asset | Classification | Coupon received in 2012 ($000s) | Amortized value as at December 31, 2012 ($000s) | Market value as at December 31, 2012 ($000s) |
|---|---|---|---|---|
| AAA Bond | Held to Maturity | 75 | 1,800 | 1,500 |
| BBB Bond | Available for Sale | 200 | 7,000 | 7,500 |
| CCC Bond | Held for Trading | 125 | 3,000 | 2,900 |
Assume the company is an income-tax exempt organization.
Part a (0.5 points)
Calculate the investment income shown in the 2012 Income Statement.
Part b (0.75 points)
Determine the value of each bond to be recorded in the 2012 financial statement.
Part c (0.25 points)
Determine the total Accumulated Other Comprehensive Income for 2012.
Part d (1.5 points)
Assuming that market interest rates decrease in 2013, indicate the impact on Net Income for each of the three asset classifications. Briefly describe your reasoning for each answer.
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