CAS Exam 6C Fall 2015, Question 27
Study guide: Exam 6C
A company has acquired a bond that is considered by the actuary to support the policy liabilities.
Part a (0.75 points)
For each category below, briefly describe the basis on which the bond is measured on the insurer's financial statements:
- i. Held-to-Maturity;
- ii. Available-For-Sale;
- iii. Held-for-Trading.
Part b (1 point)
Describe one advantage and one disadvantage of categorizing the bond as held-to-maturity.
Part c (0.5 points)
Assuming the bond is categorized as available-for-sale, describe the impact of a market rate decrease on the balance sheet.
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