CAS Exam 6C Fall 2016, Question 13
Study guide: Exam 6C
A property and casualty insurer was incorporated on January 1, 2016 and purchased the following three bonds. All amounts are in thousands of dollars ($000s).
| Asset | Classification | Coupon Received in 2016 | Amortized Value December 31, 2016 | Market Value December 31, 2016 |
|---|---|---|---|---|
| AAA Bond | Held for trading | 50 | 4,000 | 3,800 |
| BBB Bond | Available for Sale | 175 | 2,500 | 3,000 |
| CCC Bond | Held to maturity | 200 | 7,000 | 6,500 |
Assume the insurance company is an income-tax exempt organization.
Part a (0.5 points)
Calculate the total net investment income shown in the 2016 income statement.
Part b (0.75 points)
Identify the value of each bond to be recorded in the 2016 statement of financial position.
Part c (0.25 points)
Calculate the accumulated other comprehensive income for 2016.
Part d (1.5 points)
Assume the market interest rate increases on January 1, 2017. For each of the three asset classifications, identify the impact on net income and briefly explain your reasoning.
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution
Concepts tested
- Financial Asset Classification
- Comprehensive Income
- Net Income
- Financial Position
- Interest Rate Risk