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View Instructions
You got 24 out of 32 answers correct (75%)
Congratulations! You have passed the Business Awareness Module test.
1. Please mention your IAI membership ID:
Your response:
2250
(This question is not included in the score.)
2. One form of research used with consumers to explore their needs is called Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value of different attributes
of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the product or service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A. Conjoint means 'CONsiderJOINTly and is devised to help people explain what trade-offs they
would make between attributes.
3. Which one of the following statements is correct?
Your answer (in bold):
A. A contract for the sale of goods needs to be in writing.
B. A contract of employment needs to be in writing.
C. A contract for the provision of services needs to be in writing.
D. A contract for the sale of land needs to be in writing.
Correct
The correct answer is D. The Alienation of Land Act 68 of 1981 says so. There is nothing in the common law or
statute which requires for the other types of contracts to be in writing.
4. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is needed.
B. Decide on the form of analysis, establish the right questions, discover the facts.
C. Ask the right question, decide what analysis to undertake, collect the relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an analysis.
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Correct
The answer is C in accordance with the 'problem-solving' tutorial.
5. Which of the following Committee/Committees is/are mandated by the Actuaries Act 2006
I.
Finance and Strategic Affairs Committee
II.
External Affairs Committee
III.
Professional Affairs Committee
IV.
Disciplinary Committee
Your answer (in bold):
A. I only
B. I, III and IV
C. IV only
D. III and IV
Correct
Correct Answer: C
6. In a contract of sale, Basil thought he was buying a computer from Agatha and Agatha thought that
she was selling a computer. However, the box in fact contained a television and was clearly labelled
‘television.’
Which of the following statements is correct?
Your answer (in bold):
A. The contract would be void due to common mistake as the error is material.
B. The contract would be void due to mutual mistake as the error is material.
C. The contract would not be void due to common mistake as the error is not reasonable.
D. The contract would be voidable due to mutual mistake as the error is reasonable.
Incorrect
Answer A is correct. If both parties are mistaken about the same thing, this would be a common mistake. If both
parties are mistaken about different aspects of a contract, this would be mutual mistake. In the above case, both
parties laboured under a common mistake as regards the contents of the box. Both thought that the box contained a
computer, when in fact it contained a television. The result of this common mistake is that the contract of sale is void.
For common mistake there is no requirement for the mistake to be reasonable in order for the contract to be rendered
void. Therefore, the fact that the box was clearly labelled is neither here nor there when it comes to determining
whether the contract is void.
7. One source of competitive advantage is 'strategic relationships'.
If you were running a well-known Advertising Agency, select the one option in the list below relating to
the agency's relationships that you would consider as offering a sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a diverse range of industries.
C. The only parent company in the agency world whose policy is to invest centrally in
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building capabilities it then shares across business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful business, it is option C that is said to be an
exception, as it's harder to copy than the other options.
8. Which one of the following statements is false?
Your answer (in bold):
A. Life insurance market in India was tariffed until very recently, which limited the role
that actuaries can play in product pricing and development.
B. IRDA has recently issued product related regulations, resulting is majority of life insurance
products offered by life insurers to be re-developed and re-priced.
C. Solvency II has been mandated by IRDA for life insurance companies, but not general insurance
companies in India.
D. None of the above.
Incorrect
Correct Answer: C
9. The Actuarial Society of India was established in?
Your answer (in bold):
A. 1945
B. 1944
C. 1947
D. 1946
Correct
Correct Answer: B
10. Choose the correct statement:
Your answer (in bold):
A. Once delictual liability has been determined, it follows that damages will always be
awarded.
B. Once delictual liability has been determined, the court will not require the innocent party to take
steps to mitigate his/her losses. The mitigation of losses rule is only applicable in the law of
contract.
C. Once delictual liability is determined, the court will award damages if the damages sustained by
the innocent party were foreseeable by the wrongdoer.
D. Once delictual liability is determined, the court will award damages if the innocent party
sustained any losses whatsoever.
Incorrect
The answer is C. Just because someone has proven that a delict has been committed against him or her does not
mean he or she will be awarded damages as of right. Firstly, he or she has to prove the loss that was suffered.
Secondly, there is the requirement to mitigate one’s losses where this is possible. Thirdly, the damages must not be
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too remote. This means that the damages must be foreseeable to the defendant.
11. Which one of the following lists contains items that are all included in Maslow's hierarchy of needs?
Your answer (in bold):
A. Self-actualisation; financial; social.
B. Safety; psychological; esteem.
C. Working; physiological; financial.
D. Social; safety; esteem.
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under the 'identifying consumer
needs' tutorial.
12. If you were classifying a company in terms of how it made decisions when responding to changing
market conditions, which one of the following descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming complacent. Will
raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to improve
ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait around for
detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong returns and
visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs defending from
others seeking to steal market share from them. They have resources they can use to attack competitors. Sometimes
their relative strength can make them over confident. D - describes Fast Follower organisations who are less happy
with high risk than Innovators, but can often achieve greater returns and visibility than Innovators gain. B - describes a
combination of Defenders, Innovators and Fast Followers. C - describes Innovators.
13. In the business game, The Way Forward, if your company made a new issue of 1,000,000 shares
and the issue price was £3.25, how much money would your company receive?
Your answer (in bold):
A. £32,500,000.
B. £750,000.
C. £325,000.
D. £3,250,000.
Correct
The correct answer is D. £3.25 times 1,000,000 shares which equals £3,250,000.
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14. Which of the following is not an issue / challenge for actuaries working in life insurance companies
in India?
Your answer (in bold):
A. Treating customers fairly.
B. Fast changing regulations resulting in business challenges.
C. Move towards risk based and market consistent reporting and valuation techniques.
D. Ensuring policyholders are adequately serviced.
Correct
Correct Answer: D
15. In case of a conflict of interest arising between two or more clients of an actuary’s firm which of
the following options should an actuary exercise?
Your answer (in bold):
A. The actuary must withdraw from providing advice to both/all clients thereby avoiding the conflict
of interest
B. The actuary must consider only the nature of the conflict and whether it makes it improper for
the actuary to provide advice to one or both the clients involved in the conflict
C. The actuary must consider the nature and extent of the conflict and whether it makes
it improper for the actuary to provide advice to one or both the clients involved in the
conflict
D. None of them
Correct
Correct Answer: C
16. Thandi lives in Cape Town. She is offered employment by a firm of actuaries in Sandton, Gauteng.
She receives the offer of employment by email. A week later she emails the Sandton firm and informs
them that she has decided to accept their offer. The email is successfully sent. A few hours after
sending the acceptance email, she has a change of heart and decides to email the Sandton firm to
withdraw her acceptance.
In terms of the Electronic Communications and Transactions Act of 2002, which of the following
statements is correct?
Your answer (in bold):
A. The moment Thandi sends the acceptance email Thandi is deemed to have accepted
the employment offer and a valid contract comes into being.
B. If Thandi can prove that the recipient of the email had not read the acceptance email before she
sent the withdrawal email, no contract comes into being.
C. Acceptance of the offer of employment would be deemed to have occurred when Thandi’s
acceptance email successfully reaches the email inbox of the recipient (offeror) and is capable of
being retrieved, even though the recipient has not had a chance to read it. However, if the
recipient reads the withdrawal email before reading the acceptance email, the withdrawal email
will automatically cancel the acceptance email and accordingly, no contract comes into
existence.
D. None of the above.
Incorrect
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Answer D is correct. In terms of the Electronic Communications and Transactions Act of 2002, acceptance of an email
contract occurs when the offeree’s acceptance reaches the email inbox of the offeror. The offeror need not have read
the email for the contract to come into existence. One cannot withdraw an acceptance after the acceptance has
reached the offeror’s inbox, because a valid contract has already come into existence. Withdrawal of the acceptance
would be tantamount to repudiation of the contract, which would entitle the offeror to sue the offeree for breach of
contract.
17. You are the new Managing Director of Korsan, a city-based chain of medium-priced hotels catering
primarily for late-night business travellers. Trade is reasonable, and you have a high level of repeat
business (and thus good projected future occupancy), but costs seem high and profits slim, particularly
for the hotel's restaurant. It serves few customers at night, although the chefs have done innovative
things to the menus to increase their appeal. A rival chain - Luxuria - is also setting up its high-class
hotels for discerning travellers in the same cities, and your board is panicking that significant business
will be lost. They present some recent research showing that customers' core needs are a good night's
sleep and a convenient location. They also present a large dossier of suggestions for maximising the
value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning travellers) to
Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential customers for
Korsan.
C. Invest in a major marketing campaign to promote the location benefits of Korsan to new
customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a city-based
restaurant for your customers to have discounted evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers (sleep and location) Korsan can reduce
unnecessary overheads and increase value captured. The deal with a city restaurant will also be attractive to those
customers wanting to eat in the evening. Korsan's target audience is different to Luxuria, and there is no evidence to
suggest that Luxuria's target audience would be attracted, even with a refurbished hotel. A - could be a costly error. B
- would require investment by way of a marketing campaign to get it off the ground, and there is no guarantee that
non-hotel customers would be attracted. Korsan has high repeat business and high projected future occupancy, so a
campaign to attract new customers (C) would be wasteful.
18. In order to achieve a business plan, strategy and tactics must be considered. Tactics is defined
as...
Your answer (in bold):
A. the work undertaken by customer-facing staff.
B. the human resources needed for the plan.
C. the means by which the plan is implemented.
D. the competitive advantages the company will aspire to in order to achieve its strategy.
Correct
The answer is C in accordance with the strategy vs. tactics explore diagram under the 'creating and capturing value'
tutorial.
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19.
Which of the following described in options A, B, C or D is used to self-regulate the actuarial
profession?
I. Promoting good practice
II. Preventing poor rules and regulations
III. Intervention when necessary
Your answer (in bold):
A. I and III
B. II and II
C. II and III
D. All of them
Incorrect
Correct Answer: A
20. Choose the correct answer:
Your answer (in bold):
A. Supervening impossibility of performance renders a contract void.
B. Supervening impossibility of performance renders a contract voidable.
C. Supervening impossibility of performance gives rise to delictual damages.
D. Supervening impossibility of performance constitutes a breach of contract.
E. Supervening impossibility of performance gives rise to mora debitoris.
Correct
The answer is A. Supervening impossibility of performance renders a contract void. Consequently, restitution has to
take place with no possibility of delictual liability.
21. You are the lead agency working for a motor manufacturer, whose new 'technology-enhanced' car
- the Mobilo - has an inbuilt computer and telephone system to enable smarter working on the move.
However, the Mobilo is not selling as well as expected into the company's core customer segments.
Recent research has revealed that the core segments are seeking mobile efficiency as well as
enhanced status for being 'early adopters' in this market.
Which of the company's advantages would you use as the core of a campaign to increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which has an unrivalled
reputation for new ideas in mobile living/working.
B. The strong relationships the company has with its suppliers, who provide highly-reputed
technological components.
C. The speed of delivery, fulfilling orders faster than any of the competition, to supply early
adopters.
D. The Mobilo brand name, which has topped industry polls for awareness three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency as well as their need to be early adopters in
the market. Customers will value the highly-reputed technological components (B), but alone they do not meet
customer needs for mobile efficiency. Speed of delivery (C) will help in getting the products to customers early, to
support them being early adopters, but it does not match their need for innovation. There is little benefit in purely
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having high awareness of the company brand (D), if this product campaign is not communicating the benefits relevant
to the target groups.
22. Your company is assessing whether to enter new markets and has asked you to carry out a check
on one of these to gain a clearer picture of its potential profitability.
Which one of the following frameworks might you apply to structure your thinking for this purpose?
Your answer (in bold):
A. A 'competitive forces' analysis.
B. A 'PEST' analysis.
C. An analysis of your company's business system.
D. A 'competitive advantage' analysis of your strategic assets, capabilities and
relationships.
Incorrect
Correct Answer: A. The purpose of analysing the strength of the combined power of the competitive forces that bear
on an industry or market segment is to first, assess how much pressure they will exert and hence squeeze profits on
companies trying to operate in that industry or market. Having assessed that, a company should next consider what it
could do to push back against these forces to see if the market is viable for it. The other frameworks only provide you
with elements of the information you need.
23.
Which of the following described in options A, B, C or D is not in itself criteria used for the issuance of
an Actuarial Practice Standard or a Guidance Note?
I. Consistent with public interest
II. Consistent with Professional Conduct Standards
III. Unambiguous
Your answer (in bold):
A. I only
B. II only
C. III only
D. None of them
Correct
Correct Answer: C
24. You are an actuary who has been engaged to provide professional services to a client. No letter of
engagement/mandate has been issued.
Which one of the following statements is incorrect?
Your answer (in bold):
A. You can contractually bind yourself to a client without a written contract.
B. The law will imply a term into the contract to the effect that you will carry out the service with
reasonable care and skill.
C. The only obligation you owe your client is a duty of care in delict.
D. There can be a contract without any express terms.
Correct
The correct answer is C. You have an oral contract with your client, so you would owe contractual duties. A is wrong
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because you can bind yourself to a contract orally. B is wrong because the common law implies such a term. D is
wrong because there can be oral express terms.
25. As an executive in a major oil company, you work for the division where responsibilities cover its
network of petrol stations serving the public. You've received details from the directors of the
strategic, financial, and non-financial objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme you run for customers.
B. Pledge to protect the environment by increasing new policies and processes.
C. Leverage distribution network more effectively by establishing shops on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the financial objectives in D. A is
tactical rather than strategic, and B is non-strategic and non-financial (although often it is difficult to draw a clear-cut
line between profits and social responsibility). D is financial - it is a specific goal with specific timeframe.
26. Which of the following options describes a function outside the purview of the Quality Review
Board?
Your answer (in bold):
A. Fix standards for the services provided by the members of the Institute
B. Review the quality of services provided by the members including actuarial audit services
C. Promote the status of the Actuarial profession
D. Guide members of the Institute to improve the quality of services and adherence to the various
statutory and other regulatory requirements
Correct
Correct Answer: C
27. In the business game, The Way Forward, if a company sold a simple but very effective product
that was designed many years ago, which one of the following words would be the most appropriate to
use in its advertising?
Your answer (in bold):
A. Distinctive.
B. Fashionable.
C. Green.
D. Reliable.
Incorrect
The correct answer is D as ‘reliable' would suggest a non-complicated product that has stood the test of time.
‘Distinctive' would suggest a more modern product that has been specially designed to be different from other
available products. ‘Fashionable' would suggest a very recently designed product. ‘Green' is a modern phenomenon
and would not be a product designed many years ago.
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28. As part of a 'PEST' analysis of external factors that might affect your industry, which of the
following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST framework that is used to
scan for external influences impacting an industry.
29. Moving from an existing strategy to a new one can be challenging with complicated changes to
implement. Trying to do everything at once can stretch resources. It is usually best to progress in
manageable steps with each step representing a sustainable strategy in itself. Such steps are a
strategic staircase.
In what order are the steps on Komatsu's strategic staircase, starting at the bottom?
Your answer (in bold):
A. Cost; quality; diversification; differentiation.
B. Differentiation; quality; cost; diversification.
C. Quality; cost; differentiation; diversification.
D. Differentiation; diversification; quality; cost.
Correct
The answer is C in accordance with the 'Komatsu's strategic staircase'. Explore item in 'the strategic staircase'
tutorial.
30.
Thabo wanted to impress his girlfriend by giving her a diamond bracelet as a gift. While looking at
bracelets in the window at a Jewellery store at the V & A Waterfront, he spotted a diamond bracelet
priced at R10. Realising that this was a bargain (all the other bracelets were priced above R10 000),
Thabo entered the store, approached the sales assistant and told her that he wanted to buy the
diamond bracelet in the window priced at R10. The shop assistant told him that none of the bracelets
were priced that low and that there must be a mistake. It transpired that the price was incorrect and
that the correct price was R10 000. Thabo insists that he is entitled to buy the bracelet for R10.
Which of the following statements is correct?
Your answer (in bold):
A. Thabo is correct, as by putting the bracelet in the window, and attaching the price, an offer was
made to him, which he accepted by telling the shop assistant that he wanted to buy that
bracelet.
B. Thabo is not correct, as the shop assistant had made a counter-offer to him of R10 000 and he
would have to consider the counter-offer.
C. The shop assistant has to sell the bracelet to Thabo at the price of R10 as the price was
misrepresented to Thabo.
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D. Thabo is not correct. By putting the jewellery in the window, the store is merely
inviting business and it is the customer, in this case, Thabo, who makes the offer to
purchase.
Correct
Answer D is correct. According to our common law, an advertisement is simply an invitation to do business. An
advertisement does not constitute an offer. When Thabo sees the bracelet in the window with the price attached, the
display does not constitute an offer. This means that when he goes into the shop, he cannot insist that the bracelet be
sold to him for the stated price. According to the common law, if he decides to purchase the bracelet, his willingness
to purchase the bracelet will constitute an offer to purchase, which the sales person may either accept or reject. In this
case, the sales person is entitled to reject his offer because of the mistake with the price in the window.
31. When can a firm practice as Actuaries?
Your answer (in bold):
A. All the partners are Fellow of Institute of Actuaries of India (FIAI)
B. Some of the partners are FIAI while some can be members of other professional
bodies
C. Some of the partners are FIAI while some can be Associates of Institute of Actuaries of India
D. Professional qualification of partners doesn’t matter
Incorrect
Correct Answer: A
32. You have been asked to define the competitive positioning for your business unit, a supplier of
laser printers.
Which one of the following statements would NOT represent a component of the business unit's
competitive position?
Your answer (in bold):
A. Supply affordable laser printers and related supplies.
B. Target Home Office computer users.
C. Taking a phased approach to expanding the distribution network.
D. Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of either product/service, target customers, or
channels, all of which are competitive positioning decisions. Answer C is more concerned with timing and resource
decisions for building the company.
33. Dr Maritz is a collector of vintage motor cars. His patient and close friend, Jan, possesses a
vintage car which Dr Maritz has always admired. When Dr Maritz is suddenly required to perform an
emergency operation on Jan, he persuades Jan outside the operating theatre to sell him the car at a
very low price. After Jan's recovery, Dr Maritz informs him that he has bought a similar car at a lower
price from someone else and that he is no longer interested in buying Jan's car.
Which of the following statements is correct?
Your answer (in bold):
A. The contract between Jan and Dr Maritz is invalid, because Jan was very ill when he entered into
the contract.
B. The contract is not enforceable because there was no consensus between Jan and Dr Maritz.
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C. Dr Maritz cannot set the contract aside because he (Dr Maritz) was not unduly
influenced to enter into the agreement.
D. Jan can set the contract aside because Dr Maritz made an innocent misrepresentation.
Correct
Answer C is correct. Undue influence does not affect contract formation. A valid contract can come into existence
even if there is undue influence. However, undue influence renders a contract voidable. The decision to set aside a
contract on the basis of undue influence resides with the innocent party. On the above facts, if there was anyone who
would have been capable of setting aside the contract on the basis of undue influence, it would have been Jan and
not Dr Martiz. If Jan elects not to set the contract aside, the contract remains in force. If Dr Maritz refuses to proceed
with the sale, Jan can sue him for breach of contract. In this case, there was no misrepresentation, innocent or
otherwise.
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View Instructions
You got 28 out of 32 answers correct (88%)
Congratulations! You have passed the Business Awareness Module test.
1. Please mention your IAI membership ID:
Your response:
10794
(This question is not included in the score.)
2. If you were classifying a company in terms of how it made decisions when responding to
changing market conditions, which one of the following descriptions would define a
'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses
to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait
around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong
returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs
defending from others seeking to steal market share from them. They have resources they can use to
attack competitors. Sometimes their relative strength can make them over confident. D - describes Fast
Follower organisations who are less happy with high risk than Innovators, but can often achieve greater
returns and visibility than Innovators gain. B - describes a combination of Defenders, Innovators and Fast
Followers. C - describes Innovators.
3. A construction contract contains the following clause: ‘It is specifically recorded that the
project must be completed by 31 January 2011. For every day that the project remains
incomplete after the aforementioned date, the construction company will be liable to the
developer for the sum of R15 000 per day.’
Which of the following statements is correct?
Your answer (in bold):
A. The aforementioned clause is called a penalty clause and is permitted in
terms of the Conventional Penalties Act of 1962.
B. The aforementioned clause is called a penalty clause. Penalty clauses in contracts
are not permitted in terms of the Conventional Penalties Act of 1962.
C. The aforementioned clause is called a penalty clause and is considered illegal as it is
said to be unconscionable in terms of the common law.
D. The aforementioned clause is called a penalty clause and is considered void in the
present case because the penalty is in excess of the recognised amount for
penalties stipulated by the Minister of Justice and Constitutional Development in the
Government Gazette. The amount is currently set at R10 000.
Correct
Answer A is correct. The Conventional Penalties Act recognises and endorses penalty clauses inserted
into contracts. A penalty clause usually entrenches a pre-estimate of damages in the event that a
contract is breached. If the penalty is unduly harsh, the party affected by the clause can apply to court to
reduce the penalty. However, until the party applies to court for a reduction of the penalty, the penalty
stands. There is no limitation as regards what a penalty could be. Depending on the circumstances of a
case and the nature of the contract, the penalty could be a few hundred, thousands, or evens millions of
rands. In the above case, the penalty clause stands.
4. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget.
B. Object A has a button.
C. Object A is a green striped widget with a button.
D. Object A has a button and green stripes.
Correct
The answer is D as all you know for sure is that Object A has a button and green stripes. This is in
accordance with the deductive synthesis exercise under the 'synthesis' tutorial.
5.
Which of the following options A, B, C or D is correct?
I.
II.
III.
The actuarial profession does not have an obligation to serve the public interest
Advice given to an actuarial colleague does not have to meet the same standards as
external advice
A member has a duty to the profession and must not act in a manner that denigrates its
reputation
Your answer (in bold):
A. I and III
B. II and III
C. II only
D. III only
Correct
Correct Answer: D
6. On 15 January Richard entered into a written contract of agency with Diana in
terms of which Richard authorised his professional assistant Diana to purchase a
vacant plot of land from Golf Mead (Pty) Ltd, a private golf estate development
company. Richard instructed Diana that she must not pay more than R3 million for a
vacant plot. Diana, on behalf of Richard, entered into a written contract with Golf
Mead (Pty) Ltd for the purchase of a vacant plot on a golf estate. In terms of the
contract of sale the purchase price for the vacant plot was R2.5 million. In addition,
Diana, professing to act on Richard’s behalf, bought a golf cart at the price of R150
000 from Golf Mead (Pty) Ltd. Although Richard at no stage provided Diana with
either express or implied authority to purchase the golf cart, Diana fraudulently
represented that she had authority to purchase the golf cart on Richard’s
behalf. Furthermore, Richard did not impliedly or expressly ratify Diana’s purchase of
the golf cart (in fact he has never even seen it), nor did he, at any time, give the
impression that Diana was authorised to purchase the golf cart.
Which of the statements is correct?
Your answer (in bold):
A. Richard is bound to Golf Mead under the law of contract of sale for the
purchase of the vacant plot, and will be liable under the implied warranty of
authority for the golf cart.
B. Richard is not bound under the law of contract of sale for the purchase of the
vacant plot as Diana exceeded her authority in respect of the purchase of the
golf cart. Diana may, however, be liable to Golf Mead for contractual damages
arising from the sale of the plot and the golf cart because she exceeded her
authority in this regard.
C. Richard is liable to Golf Mead in terms of the law of contract of sale for
the purchase of the vacant plot, and Diana will be liable to Golf Mead
for the golf cart in terms of the implied warranty of authority.
D. Richard is bound to Golf Mead for the sale of the vacant piece of land and the
golf cart, as the cumulative value of the purchases did not exceed R3 million.
Correct
Answer C is correct. An agent must act in terms of the mandate given by the principal. If the agent
exceeds her mandate, the principal is still bound to fulfil those transactions that were undertaken in
terms of the mandate, but may refuse to fulfil those transactions that were undertaken in excess of
the given mandate. As regards those transactions which were undertaken by the agent in excess
of the mandate, the agent will be liable. There are times, however, when the principal will be liable
even for those transactions exceeding the express mandate. This will occur where the principal
has acted in a way so as to give the other party a reasonable impression that the agent was
authorised to enter into those transactions which were not covered by the mandate. In the case
above, the agent acted in terms of the mandate for the procurement of the property, but exceeded
her authority as regards the purchase of the golf cart. Accordingly, the principal, Richard, will be
liable to perform in terms of the sale agreement for the vacant plot of land. However, Diana will be
liable for the purchase price of the golf cart as she exceeded her authority and Richard did nothing
to create an impression in the mind of the seller that he had authorised this transaction.
7. All except two of the following would be appropriate criteria to test whether a
potential segment should be a viable target.
Select the two which are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require some
adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a long
time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although it is
vital to have channels of communication and distribution they do not have to be exclusive. E - a
long established segment is likely to be served already and using this criterion would in any case
eliminate interesting emerging segments.
8. Which one of the following would not be a current issue for Health insurance
companies in India?
Your answer (in bold):
A. Fast changing regulations resulting in business challenges.
B. Move towards market consistent and risk based reporting techniques.
C. High claim ratio in group health insurance segment.
D. Increase in loss ratio with maturing policies in retail segment.
Correct
Correct Answer: B
9. Actuaries Act 2006 provide for the constitution of various Committees.
These Committees report to?
Your answer (in bold):
A. President of the Institute
B. The Council
C. The Prosecuting Director
D. The member appointed by the Government of India to the Council
Correct
Correct Answer: B
10. The sale of a collection of guns is illegal if a permit has not been granted allowing
such a sale. Bob and Sam enter into an agreement for the purchase and sale of a
collection of guns, without the required permit. Bob, the seller, knows that a permit is
required whereas Sam, the purchaser, does not. Sam pays the purchase price, but
Bob refuses to deliver the guns to Sam.
Which of the following statements is correct?
Your answer (in bold):
A. Because Sam was unaware of the requirement of a permit, he may legally
compel Bob to deliver the guns.
B. Sam may not legally compel Bob to deliver the guns, because all
performance is halted in an illegal contract.
C. Sam may not recover the purchase price, because of the rule that 'the position
of the possessor is the stronger'.
D. Sam may not recover the purchase price, because of the rule that 'ignorance
of the law is no excuse'.
Correct
Answer B is correct. An illegal contract is void. Once the illegality becomes known, all outstanding
performance may be halted. Where performance has already been made, the general rule is that
the possessor of the performance is not required to return the performance made. However, the
general rule can be overridden if it can be shown that the party who is out of pocket was innocent
of the illegality. Bob is thus not obliged to deliver the guns. The principle ‘the position of the
possessor is stronger’ will not apply in this case because Sam was innocent of the illegality.
11. In order to achieve a business plan, strategy and tactics must be considered.
Tactics is defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff.
B. the human resources needed for the plan.
C. the means by which the plan is implemented.
D. the competitive advantages the company will aspire to in order to achieve its
strategy.
Correct
The answer is C in accordance with the strategy vs. tactics explore diagram under the 'creating
and capturing value' tutorial.
12. You are considering opening a record store in a major shopping area. As there are
other record stores located nearby, you will have to find sources of competitive
advantage.
Only one of the following would be a real source of competitive advantage - which is
it?
Your answer (in bold):
A. An award-winning advertising campaign.
B. Exclusive promotional relationship with a major record label.
C. An unusual store design and internal layout.
D. Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built on a strategic
relationship that cannot be copied or imitated. All of the other answers represent something that is
easy to imitate, and are not built upon superior assets, distinctive capabilities or strategic
relationships.
13. In the business game, The Way Forward, which one of the following defines the
‘cost of sales' in the Profit and Loss Account?
Your answer (in bold):
A. The purchase cost of all the items purchased by a team in the time period.
B. The purchase cost of all the items sold by a team in the time period.
C. The cost of all the items currently held in stock by a team.
D. The total costs incurred in marketing, selling and distribution of the items sold
in the period.
Correct
The correct answer is B. The cost of sales was defined as the amount a team had to pay for all the
items that it sold during the period.
14. Which of the following is not a main practice area for actuaries working in life
insurance?
Your answer (in bold):
A. Pricing.
B. Reserving and valuations.
C. Risk Management.
D. Marketing.
Correct
Correct Answer: D
15. Which of the following options describes a function outside the purview of the
Quality Review Board?
Your answer (in bold):
A. Fix standards for the services provided by the members of the Institute
B. Review the quality of services provided by the members including actuarial
audit services
C. Promote the status of the Actuarial profession
D. Guide members of the Institute to improve the quality of services and
adherence to the various statutory and other regulatory requirements
Correct
Correct Answer: C
16. Sam buys a computer from Funeka. Ownership passes when...
Your answer (in bold):
A. the parties conclude the sale agreement.
B. Funeka hands over the computer to Sam.
C. Sam pays Funeka for the computer.
D. Sam inspects the computer, indicates that he is satisfied, and then pays for it.
Incorrect
Answer B is correct. For movable property, delivery is a prerequisite for the transfer of ownership.
The purchaser has to be placed either in physical possession of the property, or there has to be
constructive delivery (i.e. handing over the keys of a car). In the case at hand, ownership of the
computer will pass when the computer is delivered to the purchaser and not when the agreement
of sale is concluded, or when payment takes place, or when inspection occurs.
17. As part of a 'PEST' analysis of external factors that might affect your industry,
which of the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST
framework that is used to scan for external influences impacting an industry.
18. The Value Chain shows the activities required to deliver value to...
Your answer (in bold):
A. shareholders.
B. customers.
C. products.
D. the economy.
Correct
The answer is B in accordance with 'the business system' tutorial.
19. Which of the following constitutes professional guidance by the Institute of
Actuaries of India?
Your answer (in bold):
A. Professional guidance consists of the Professional Conduct Standards only
B. Professional guidance consists of the Professional Conduct Standards
and Actuarial Practice Standards
C. Professional guidance consists of all Guidance Notes and Standards of Practice
issued by the International Actuarial Association
D. Professional guidance consists of the Professional Conduct Standards, all
Actuarial Practice Standards and all Guidance Notes
Incorrect
Correct Answer: D
20. William buys a house from Sue-Ellen. Ownership passes when...
Your answer (in bold):
A. William and Sue-Ellen sign the deed of sale.
B. Sue-Ellen hands over the keys of the house to William.
C. the house is registered in William’s name in the deeds registries.
D. William’s bank approves the bond and pays the purchase price into Sue-Ellen’s
bank account.
Correct
Answer C is correct because ownership of immovable property passes when registration of
transfer takes place in the deeds registries. The conclusion of the contract, payment of the
purchase price etc. only create a personal right to receive transfer of the property, but not real right
of ownership.
21. You are the new Managing Director of Korsan, a city-based chain of mediumpriced hotels catering primarily for late-night business travellers. Trade is reasonable,
and you have a high level of repeat business (and thus good projected future
occupancy), but costs seem high and profits slim, particularly for the hotel's
restaurant. It serves few customers at night, although the chefs have done innovative
things to the menus to increase their appeal. A rival chain - Luxuria - is also setting
up its high-class hotels for discerning travellers in the same cities, and your board is
panicking that significant business will be lost. They present some recent research
showing that customers' core needs are a good night's sleep and a convenient
location. They also present a large dossier of suggestions for maximising the value of
the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning
travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential
customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of
Korsan to new customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with
a city-based restaurant for your customers to have discounted evening
meals.
Correct
Answer D is correct. By only serving the needs most desired by customers (sleep and location)
Korsan can reduce unnecessary overheads and increase value captured. The deal with a city
restaurant will also be attractive to those customers wanting to eat in the evening. Korsan's target
audience is different to Luxuria, and there is no evidence to suggest that Luxuria's target audience
would be attracted, even with a refurbished hotel. A - could be a costly error. B - would require
investment by way of a marketing campaign to get it off the ground, and there is no guarantee that
non-hotel customers would be attracted. Korsan has high repeat business and high projected
future occupancy, so a campaign to attract new customers (C) would be wasteful.
22. The main purpose of a business strategy is...
Your answer (in bold):
A. to follow every opportunity available.
B. to determine how best to use management talent.
C. to decide on the best way to promote the business to customers.
D. to maximise the value of the company.
Correct
The answer is D in accordance with the 'creating and capturing value' tutorial.
23.
Which of the following circumstances may warrant an actuary to disclose their client’s
confidential information?
I.
II.
III.
By virtue of statutory or other judicial authority
Disclosure of confidential information is in the public interest
Client did not get the actuary to sign a non disclosure agreement
Your answer (in bold):
A. I and III
B. I and II
C. II and III
D. All of above
Correct
Correct Answer: B
24. Marie has long admired a beautiful cloth that Lee bought while on holiday in
Mali. One day Lee offers to sell it to Marie for R500, and Marie accepts. Unbeknown
to either of the parties, at the time they enter into the contract of sale, Lee’s house
had just been burgled, and the cloth stolen. Your advice to them both is that...
Your answer (in bold):
A. the contract is void for reason of initial impossibility of performance.
B. the contract is void for reason of supervening impossibility of performance.
C. the contract is not void, because the impossibility is subjective.
D. the contract is not void. Although it is impossible for Lee to deliver the cloth,
Marie is still obliged to pay the agreed purchase price.
Correct
Answer A is correct. It is possible for a contract to come into existence and then for circumstances
to arise which make performance in terms of the contract impossible. When that happens, the
debtor is no longer required to perform, provided that the circumstances giving rise to the
impossibility of performance were not created by the debtor herself. A distinction is therefore
drawn between objective impossibility (not caused through the fault of the debtor) and subjective
impossibility (caused through the fault of the debtor). Objective impossibility will be condoned, but
subjective impossibility will not. In the above case, there is impossibility of performance and
furthermore, the impossibility is objective as the theft was not something Lee had any control over.
However, because the impossibility existed at the time when the contract was concluded, we are
not dealing with supervening impossibility, but initial impossibility. The consequence of this is that
the contract is void.
25. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've received
details from the directors of the strategic, financial, and non-financial objectives going
forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme you
run for customers.
B. Pledge to protect the environment by increasing new policies and processes.
C. Leverage distribution network more effectively by establishing shops
on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the financial
objectives in D. A is tactical rather than strategic, and B is non-strategic and non-financial
(although often it is difficult to draw a clear-cut line between profits and social responsibility). D is
financial - it is a specific goal with specific timeframe.
26. Which one is the powerful tool of memory?
Your answer (in bold):
A. Textbooks
B. Audio
C. Video
D. Visual
Correct
Correct Answer: D
27. In the business game, The Way Forward, which one of the following is the
primary purpose of the Profit and Loss Account?
Your answer (in bold):
A. So that a team knows how much money it has got.
B. So that a team knows whether it traded profitably or not in the period
concerned.
C. So that a team knows its overhead costs in relation to its turnover.
D. So that a team knows how much money to set aside for Corporation Tax.
Incorrect
The correct answer is B. The prime purpose of a Profit and Loss Account is to show the trading
profit or loss for the period of the accounts.
28. You have just joined a new company, and you have already been asked to make
a recommendation on what you think is a strategic, high-impact decision. Your
recommendation will be made direct to the Chief Executive. You have looked for
someone able to help you with this, but not found anyone with the right qualifications
or experience. You had intended to do a detailed analysis, but a colleague has
informed you there is not enough time to do that, and suggested you should "use
your instinct."
What type of organisational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C. Newly-formed companies are frequently power-based and tend to involve little structure
or formality, high risk-taking, and the decision-making power concentrated in a few people. In a
hierarchy (B) you would expect a big decision to go through a more formal process of approval,
and in a matrix organisation (C) you would expect more people to be involved in the process
bringing their own views and expertise.
29. Which one of the following lists contains items that are all included in Maslow's
hierarchy of needs?
Your answer (in bold):
A. Self-actualisation; financial; social.
B. Safety; psychological; esteem.
C. Working; physiological; financial.
D. Social; safety; esteem.
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under the
'identifying consumer needs' tutorial.
30. Assume that in The Institute and Faculty of Actuaries there are two respected
bodies of opinion as to how to tackle a particular task (methods 1 and 2). You choose
method 1. In the event it turns out that using method 2 would have been more
beneficial to the client.
Which one of the following statements is correct?
Your answer (in bold):
A. You are in breach of duty.
B. You are not in breach of duty.
C. You are in breach of duty, but damages will be reduced as you acted
reasonably.
D. You are in breach of duty, but the client’s damages will be reduced as the
client was guilty of contributory negligence by allowing you to choose method
1.
Incorrect
The correct answer is B. A is wrong because if there are two respected bodies of opinion you are
not in breach of duty by choosing one of them. C is wrong because you are not in breach of duty if
you follow a recognised body of opinion and there is no basis for claiming a reduction of damages.
D is wrong because you are not in breach of duty by choosing a recognised body of opinion and
there is no basis for holding the client negligent.
31. The Actuarial Society of India was established in?
Your answer (in bold):
A. 1945
B. 1944
C. 1947
D. 1946
Correct
Correct Answer: B
32. One form of research used with consumers to explore their needs is called
Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value of
different attributes of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the product
or service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A. Conjoint means 'CONsiderJOINTly and is devised to help people explain what
trade-offs they would make between attributes.
33.
XYZ Ltd is a Cape Town based company that develops computer software programs
required by financial institutions. Recently two of its employees resigned. The first
employee, Ms Winter, was the secretary of the managing director of XYZ Ltd. As part
of her work she sent letters to the clients. She however had no personal and direct
contact with the clients during her time as employee of XYZ Ltd. The other employee
that resigned was Mr Matshaba. He was part of the team that developed the actual
software products.
Mr Matshaba decided to resign in order to start his own software development
company in Johannesburg that would develop products for both the Institute and
Faculty of Actuaries and financial institutions. Mr Matshaba is of the opinion that he
gained enough experience with XYZ Ltd to successfully start such business. He
agreed to employ Ms Winter as his personal assistant.
XYZ Ltd found out about Mr Matshaba's plans. XYZ Ltd is of the opinion that Mr
Matshaba and Ms Winter cannot start up this new business. According to XYZ Ltd
there would be a breach of the restraint of trade clauses that were contained in their
employment contracts with XYZ Ltd. The restraint of trade clauses stated that the
employees undertook not to start up any business in competition with XYZ Ltd
anywhere in India for a period of 10 years after termination of their employment
contracts.
Which of the following statements is correct?
Your answer (in bold):
A. This agreement is so obviously unreasonable that the courts will declare it void
unless XYZ Ltd can prove that it is in the public interest that the restraint is
enforced.
B. This agreement is valid and enforceable and if Mr Matshaba and Ms
Winter want to get out of it, they will bear the onus of proving that it
is unreasonable.
C. This agreement is valid but unenforceable and if XYZ Ltd would like to enforce
it they bear the onus of proving that it is reasonable.
D. None of the above.
Correct
Answer B is correct. A restraint of trade agreement is valid and not against public policy. However,
it can be set aside if the contract in question is unreasonable. The party seeking to set a restraint
of trade aside bears the onus of proving that the terms of the restraint are unreasonable having
regard to the circumstances of the case. In the above case, it would be for Mr Matshaba and Ms
Winter to prove, on a balance of probabilities, that the restraint of trade is unreasonable.
Quiz Feedback
View Instructions
You got 28 out of 32 answers correct (88%)
Congratulations! You have passed the Business Awareness Module test.
1. Please mention your IAI membership ID:
Your response:
3765
(This question is not included in the score.)
2. The sustainability of a competitive advantage is driven in part by whether the advantage
is likely to last for a long time and is hard to substitute. You can 'test' if an advantage is
likely to be sustainable by asking if it has certain attributes. The following list describes the
attributes of a sustainable advantage - but one of them is not correct.
Which one does NOT represent an attribute of sustainable advantage?
Your answer (in bold):
A. A competitive advantage is likely to be sustainable if it is based upon a scarce
resource.
B. A competitive advantage is likely to be sustainable if it is difficult to imitate.
C. A competitive advantage is likely to be sustainable if it is hard to transfer.
D. A competitive advantage is likely to be sustainable if it is based on
technology.
E. A competitive advantage is likely to be sustainable if it hard to identify or
understand.
Correct
Answer D is correct. Unless the technology is proprietary, and therefore hard to imitate, or otherwise
hard to identify or understand, technology often represents an advantage that is easily eroded by others
attaining the same, or similar, technology. All the other options are ways you can 'test' if an advantage is
likely to be sustainable for a reasonable length of time because if an advantage is hard to imitate,
transfer or identify/understand the implication is competitors won't have the capability to replicate it.
3. On 15 January Richard entered into a written contract of agency with Diana in terms of
which Richard authorised his professional assistant Diana to purchase a vacant plot of land
from Golf Mead (Pty) Ltd, a private golf estate development company. Richard instructed
Diana that she must not pay more than R3 million for a vacant plot. Diana, on behalf of
Richard, entered into a written contract with Golf Mead (Pty) Ltd for the purchase of a
vacant plot on a golf estate. In terms of the contract of sale the purchase price for the
vacant plot was R2.5 million. In addition, Diana, professing to act on Richard’s behalf,
bought a golf cart at the price of R150 000 from Golf Mead (Pty) Ltd. Although Richard at
no stage provided Diana with either express or implied authority to purchase the golf cart,
Diana fraudulently represented that she had authority to purchase the golf cart on
Richard’s behalf. Furthermore, Richard did not impliedly or expressly ratify Diana’s
purchase of the golf cart (in fact he has never even seen it), nor did he, at any time, give
the impression that Diana was authorised to purchase the golf cart.
Which of the statements is correct?
Your answer (in bold):
A. Richard is bound to Golf Mead under the law of contract of sale for the purchase of
the vacant plot, and will be liable under the implied warranty of authority for the
golf cart.
B. Richard is not bound under the law of contract of sale for the purchase of the
vacant plot as Diana exceeded her authority in respect of the purchase of the golf
cart. Diana may, however, be liable to Golf Mead for contractual damages arising
from the sale of the plot and the golf cart because she exceeded her authority in
this regard.
C. Richard is liable to Golf Mead in terms of the law of contract of sale for the
purchase of the vacant plot, and Diana will be liable to Golf Mead for the
golf cart in terms of the implied warranty of authority.
D. Richard is bound to Golf Mead for the sale of the vacant piece of land and the golf
cart, as the cumulative value of the purchases did not exceed R3 million.
Correct
Answer C is correct. An agent must act in terms of the mandate given by the principal. If the agent
exceeds her mandate, the principal is still bound to fulfil those transactions that were undertaken in terms
of the mandate, but may refuse to fulfil those transactions that were undertaken in excess of the given
mandate. As regards those transactions which were undertaken by the agent in excess of the mandate,
the agent will be liable. There are times, however, when the principal will be liable even for those
transactions exceeding the express mandate. This will occur where the principal has acted in a way so
as to give the other party a reasonable impression that the agent was authorised to enter into those
transactions which were not covered by the mandate. In the case above, the agent acted in terms of the
mandate for the procurement of the property, but exceeded her authority as regards the purchase of the
golf cart. Accordingly, the principal, Richard, will be liable to perform in terms of the sale agreement for
the vacant plot of land. However, Diana will be liable for the purchase price of the golf cart as she
exceeded her authority and Richard did nothing to create an impression in the mind of the seller that he
had authorised this transaction.
4. The Value Chain shows the activities required to deliver value to...
Your answer (in bold):
A. shareholders.
B. customers.
C. products.
D. the economy.
Correct
The answer is B in accordance with 'the business system' tutorial.
5.
Which of the following described in options A, B, C or D is not in itself criteria used for
the issuance of an Actuarial Practice Standard or a Guidance Note?
I.
II.
III.
Consistent with public interest
Consistent with Professional Conduct Standards
Unambiguous
Your answer (in bold):
A. I only
B. II only
C. III only
D. None of them
Correct
Correct Answer: C
6. An insurance company employs Edward, an actuary. Whilst acting within the course
and scope of his employment, he negligently misstates information to a client. By
relying on this information the client suffers loss.
Which of the following statements is correct?
Your answer (in bold):
A. The client can sue the insurance company in the law of delict for the loss that
it (the client) suffered.
B. The client can hold the insurance company liable on the basis of the
principle of vicarious liability.
C. The insurance company is not liable; only the actuary is, as the company was
not at fault.
D. A and B above.
Incorrect
Answer D is correct. According to the principle of vicarious liability an employer can be held liable
for the delicts of its employee provided that the employee was acting within the course and scope
of his employment.
7. All except two of the following would be appropriate criteria to test whether a
potential segment should be a viable target.
Select the two which are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require some
adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a long
time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although it is
vital to have channels of communication and distribution they do not have to be exclusive. E - a
long established segment is likely to be served already and using this criterion would in any case
eliminate interesting emerging segments.
8. Which of the following are the aspects about your employing company that you
should understand?
Your answer (in bold):
A. What is the market in which the company operates?
B. What are the product / service it offers?
C. Ultimate corporate objectives – its mission, vision, values and strategy?
D. All of above.
Correct
Correct Answer: D
9. The Actuarial Society of India was established in?
Your answer (in bold):
A. 1945
B. 1944
C. 1947
D. 1946
Correct
Correct Answer: B
10.
The University of Cape Town’s Zoology Department requires all students (or their
guardians) to sign the following indemnity form:
‘I understand that all zoology excursions are undertaken at my (or my child’s) own
risk. I indemnify the Department and its staff against any claims arising, whether
from negligence, gross negligence, or otherwise.’
On a recent zoology excursion a 19 year old student was injured (incurring medical
expenses in the amount of R5 000) in a motor vehicle accident as a result of gross
negligence on the part of the UCT bus driver, an employee in the Zoology
Department.
In view of the wording of the indemnity, your advice to the student would be:
Your answer (in bold):
A. The indemnity is likely not to be valid as the court will adopt a narrow
interpretation to the word "excursions" and the UCT Zoology Department will
be liable to pay the R5000.
B. UCT will not be liable because one can exclude liability for gross negligence in
terms of the Consumer Protection Act of 2008 as long as the person who
suffers the loss is not a minor and has personally entered into the contract.
C. UCT will be liable because the indemnity for gross negligence is invalid
as one cannot exclude liability for gross negligence in terms of the
Consumer Protection Act of 2008.
D. The UCT Zoology Department will be liable, but can ask the court to apportion
damages between itself and the student.
Correct
Answer C is correct. In terms of the Consumer Protection Act of 2008 one cannot exclude liability
for gross negligence. There are no exceptions to this rule.
11. If you have a major surprise to impart to your colleagues concerning the
business, the way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week before the
meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to the meeting.
Correct
The answer is A in accordance with the 'no surprises' tutorial.
12. As part of a 'PEST' analysis of external factors that might affect your industry,
which of the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST
framework that is used to scan for external influences impacting an industry.
13. In the business game, The Way Forward, which one of the following mix of
strategies would you expect to be the most successful?
Your answer (in bold):
A. Modern; high quality product; medium price; conservative brand image.
B. Traditional product; high price; modern brand image.
C. Fashionable product; high price; prestigious image.
D. Sturdy basic product, high price, traditional image.
Correct
The correct answer is C. The three features of C, taken together, offer a consistent strategy. In
each of A, B and D the three features are not consistent.
14. The key issues that an actuary will encounter in any business area in which
he/she is working are:
Your answer (in bold):
A. Balancing the interests of all stakeholders
B. Treating customers fairly
C. Statutory & regulatory compliances
D. All of above
Correct
Correct Answer: D
15. When can a firm practice as Actuaries?
Your answer (in bold):
A. All the partners are Fellow of Institute of Actuaries of India (FIAI)
B. Some of the partners are FIAI while some can be members of other
professional bodies
C. Some of the partners are FIAI while some can be Associates of Institute of
Actuaries of India
D. Professional qualification of partners doesn’t matter
Correct
Correct Answer: A
16. Dr Maritz is a collector of vintage motor cars. His patient and close friend, Jan,
possesses a vintage car which Dr Maritz has always admired. When Dr Maritz is
suddenly required to perform an emergency operation on Jan, he persuades Jan
outside the operating theatre to sell him the car at a very low price. After Jan's
recovery, Dr Maritz informs him that he has bought a similar car at a lower price from
someone else and that he is no longer interested in buying Jan's car.
Which of the following statements is correct?
Your answer (in bold):
A. The contract between Jan and Dr Maritz is invalid, because Jan was very ill
when he entered into the contract.
B. The contract is not enforceable because there was no consensus between Jan
and Dr Maritz.
C. Dr Maritz cannot set the contract aside because he (Dr Maritz) was not
unduly influenced to enter into the agreement.
D. Jan can set the contract aside because Dr Maritz made an innocent
misrepresentation.
Correct
Answer C is correct. Undue influence does not affect contract formation. A valid contract can come
into existence even if there is undue influence. However, undue influence renders a contract
voidable. The decision to set aside a contract on the basis of undue influence resides with the
innocent party. On the above facts, if there was anyone who would have been capable of setting
aside the contract on the basis of undue influence, it would have been Jan and not Dr Martiz. If
Jan elects not to set the contract aside, the contract remains in force. If Dr Maritz refuses to
proceed with the sale, Jan can sue him for breach of contract. In this case, there was no
misrepresentation, innocent or otherwise.
17. You are the Marketing Director for Svenson, a technology manufacturer. You have
just introduced a new 'mobile entertainment' device, which will offer users the
opportunity to play videos, take digital photographs, send emails and text messages,
play music and communicate via telephone. It has state-of-the-art features, allowing
compatibility with all the top service providers. The Svenson brand is relatively new,
yet it already has a reputation for being innovative, cool and funky. The Svenson 'mini
entertainer' is priced at $600. You now have information from your Customer
Management team showing the profiles of your key customer segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good disposable
income, increasingly mobile for work and leisure, take huge interest in
gadget advertising, and love the funky status they acquire with
Svenson products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable disposable
income, buy on functionality, willing to pay for whichever technology combines
all the functions they need and fits their mobile lifestyle.
C. Family First - the largest segment (33% of your base), although it has shrunk
over the last year. Mobility based around supporting the family. High income
restricted by outlays on children and aged parents. Willing to purchase any
technology proven to make their lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable segment. Segment size is
reasonable, and it is growing, disposable income is high (for what is quite a reasonably expensive,
one-off purchase) and there is strong desire for the product. It is an ideal fit with Svenson's
advantages in innovation, plus its brand reputation - gadget lovers matched with funky gadget
provider. Youth of Today (B) is a reasonable-sized, growing segment. Svenson's advantages
match their needs, but the segment is more attracted by generic functionality than the Svenson
brand, making it less attractive to the company. Family First (C) is less attractive. Although this
segment is large, the profile suggests people in this segment are more likely to pay for features
that provide convenience rather than pure entertainment. Although they have high income, their
profile suggests they are likely to have priorities for spending rather than a high-priced
entertainment item.
18. Which one of the following lists contains items that are all included in Maslow's
hierarchy of needs?
Your answer (in bold):
A. Self-actualisation; financial; social.
B. Safety; psychological; esteem.
C. Working; physiological; financial.
D. Social; safety; esteem.
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under the
'identifying consumer needs' tutorial.
19. Which of the following forms of publicity is prohibited?
Your answer (in bold):
A. A member authorized by the Institute of Actuaries of India to represent the
profession speaking as its representative
B. Appropriate publicity of the profession objectively substantiated
C. Description of the professional services offered including basis for charging
D. Description of the work done on behalf of the profession for gains by
the actuary’s firm
Correct
Correct Answer: D
20.
Natalie, a successful training consultant, negotiated conference facilities at the Nelson
Hotel in Caledon where she was to conduct a two day seminar for local businesses. All
the arrangements were confirmed by the hotel and all the delegates were accordingly
informed of the venue, dates and times. On the morning of the conference, Natalie
discovered, much to her dismay, that the hotel had double booked its conference
facilities and that she could not run her seminar there. She quickly contacted the only
other hotel in the area, the Overberg Luxury Spa Resort, which was able to
accommodate her seminar for the two days but at double the rate the Nelson Hotel
was going to charge her. The delegates were redirected to this hotel. In her rush to
the new destination, Natalie had a minor accident in which her car's bumper was
damaged.
The Nelson Hotel admits that they were in breach but allege that Natalie has not
suffered any damages because the Overberg Luxury Spa Hotel is rated 5 star whereas
the Nelson is only rated 4 star and the conference facilities at the Overberg are much
better than at the Nelson. Natalie wants to claim the additional expenses she has
incurred. She also wants compensation for loss of profit, cost of repairs of the
bumper, inconvenience, humiliation and loss of prestige caused by the breach.
In terms of the law of contract, which of the following statements is correct?
Your answer (in bold):
A. Natalie cannot claim any damages.
B. Natalie can claim the additional expenses and any associated loss of profits.
C. Natalie can claim the additional expenses, and damages for the loss of
profit, cost of repairs of the bumper, inconvenience, humiliation and
loss of prestige.
D. Natalie cannot cancel the contract as the breach was not serious.
Incorrect
Answer B is correct. The breach in this case was material, entitling Natalie to claim damages for
breach of contract. She would be able to claim damages to put her in the position she would have
been had the contract not been breached. If the contract had not been breached, she would not
have incurred the additional expenses associated with having to move the conference to a more
expensive venue and the possible loss of profits associated with this. She may thus bring a claim
for the additional expenses and the loss of profits. However, she would not be able to claim for the
damages to her car from the Nelson Hotel, as these damages are not a direct and foreseeable
consequence of the Nelson’s breach. It would, therefore, be more appropriate for her to sue the
driver of the other vehicle in the law of delict for the damages to her car. Inconvenience,
humiliation and loss of prestige are non-patrimonial losses. In the law of contract, one cannot claim
damages for non-patrimonial loss. If she wishes to pursue her claims for these damages, she
would have to bring a claim in the law of delict, provided, of course, that she can satisfy all the
requirements of delict.
21. If you were classifying a company in terms of how it made decisions when
responding to changing market conditions, which one of the following descriptions
would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market
position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed
analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to
wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve
strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that
needs defending from others seeking to steal market share from them. They have resources they
can use to attack competitors. Sometimes their relative strength can make them over confident. D
- describes Fast Follower organisations who are less happy with high risk than Innovators, but can
often achieve greater returns and visibility than Innovators gain. B - describes a combination of
Defenders, Innovators and Fast Followers. C - describes Innovators.
22. When considering financial and non-financial objectives, which of the following
would be true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial ones,
and they can be a lot less obvious.
B. Financial objectives will always be more important than non-financial ones,
and are usually more obvious.
C. Non-financial objectives will usually be more obvious than financial ones and
will be better understood by the staff.
D. Financial objectives are key to the success of a company so non-financial ones
are not usually relevant.
Correct
The answer is A in accordance with the 'non-financial objectives' tutorial.
23. Actuaries Act 2006 provide for the constitution of various Committees.
These Committees report to?
Your answer (in bold):
A. President of the Institute
B. The Council
C. The Prosecuting Director
D. The member appointed by the Government of India to the Council
Correct
Correct Answer: B
24. Choose the correct statement(s):
Your answer (in bold):
A. A non-variation clause prevents the parties from ever varying the terms of a
contract.
B. A non-variation clause prevents the parties from varying the terms of
a contract, unless the variation is done in writing and signed by all the
parties to the contract.
C. A non-variation clause prevents the parties from varying the terms of a
contract, unless it is clear that the written agreement is not recorded properly
in which case any party can vary the contract by sending all the other parties
a notice to that effect.
D. Statements (b) and (c) are true.
Correct
The answer is B. Statement C is incorrect because it creates the impression that a contract can
only be varied if the contract does not reflect the true intention of the parties. This is not so. A
contract can be varied to reflect a change of circumstance, provided that the parties agree to the
variation in writing. Statement A is clearly incorrect for its unaccommodating stance.
25. You have just joined a new company, and you have already been asked to make
a recommendation on what you think is a strategic, high-impact decision. Your
recommendation will be made direct to the Chief Executive. You have looked for
someone able to help you with this, but not found anyone with the right qualifications
or experience. You had intended to do a detailed analysis, but a colleague has
informed you there is not enough time to do that, and suggested you should "use
your instinct."
What type of organisational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C. Newly-formed companies are frequently power-based and tend to involve little structure
or formality, high risk-taking, and the decision-making power concentrated in a few people. In a
hierarchy (B) you would expect a big decision to go through a more formal process of approval,
and in a matrix organisation (C) you would expect more people to be involved in the process
bringing their own views and expertise.
26.
Which of the following described in options A, B, C or D is used to self-regulate the
actuarial profession?
I.
II.
III.
Promoting good practice
Preventing poor rules and regulations
Intervention when necessary
Your answer (in bold):
A. I and III
B. II and II
C. II and III
D. All of them
Incorrect
Correct Answer: A
27. In the business game, The Way Forward, if your company made a new issue of
1,000,000 shares and the issue price was £3.25, how much money would your
company receive?
Your answer (in bold):
A. £32,500,000.
B. £750,000.
C. £325,000.
D. £3,250,000.
Correct
The correct answer is D. £3.25 times 1,000,000 shares which equals £3,250,000.
28. One form of research used with consumers to explore their needs is called
Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value of
different attributes of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the product
or service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A. Conjoint means 'CONsiderJOINTly and is devised to help people explain what
trade-offs they would make between attributes.
29. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is
needed.
B. Decide on the form of analysis, establish the right questions, discover the
facts.
C. Ask the right question, decide what analysis to undertake, collect the
relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
30. Choose the correct answer.
For a suretyship agreement to be valid...
Your answer (in bold):
A. all of the parties to it must sign it.
B. it must be in writing.
C. it must be in writing and signed by the surety.
D. it must be written, notarised before a notary public and signed by all the
parties thereto.
Correct
The answer is C. In terms of the General Law Amendment Act 50 of 1956, all suretyship
agreements must be in writing and signed by the surety or the surety’s representative. There is no
requirement for the credit grantor to also sign the agreement.
31.
Which of the following options A, B, C or D best describes the action in relation to
other members?
I.
II.
III.
Criticism of another member’s work is prohibited
Criticism of another member’s work is acceptable
Criticism of another member’s work is properly reasoned and believed to be justified
Your answer (in bold):
A. I only
B. II and III
C. II only
D. II or III
Correct
Correct Answer: B
32. The company you work for, TransGlobal Multinational Limited, is considering
entering a new market. The decision-making process has involved reviewing other
similar organisations' attempted entries, identifying successes and failures, suggesting
improvements that TransGlobal could make over competitors' offers, and an analysis
of the market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational cultural
types listed do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders.
B. Innovators.
C. Fast followers.
D. Slow reactors.
Incorrect
Answer C is correct. This behaviour illustrates an organisation not willing to take the risk of moving
first, but opportunistic enough to enter where an opportunity has appeared, and then attempt to
improve upon the market entry, process, or product introduced by the innovator.
33. Pat, a director of a company, makes a series of bad investments on behalf of the
company. By an exercise of reasonable care and skill, he should have realised that
these investments were bad. The company, acting through the other directors, can:
Your answer (in bold):
A. bring a delictual action against Pat to recover the losses sustained by the
company.
B. sue Pat on the basis of his negligent conduct for the losses sustained by the
company.
C. sue Pat for breaching his statutory duties in terms of s 77(2) of the Companies
Act of 2008.
D. All of the above.
Correct
Answer D is correct. Pat can be sued in the law of delict for the losses he has caused the
company. Presumably he will be sued on the basis that he acted negligently. Fault by way of
negligence is sufficient to ground liability in the law of delict. Alternatively, Pat can be held liable in
terms of s 77(2) of Companies Act of 2008 for breaching his statutory fiduciary duties.
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View Instructions
You got 18 out of 32 answers correct (56%)
Well tried. You need 75% to pass, so please read your feedback and revise again all the material covered by the
Module. You may take the test again once at least 4 weeks has elapsed.
1. Please mention your IAI membership ID:
Your response:
4901
(This question is not included in the score.)
2. You are the new Managing Director of Korsan, a city-based chain of medium-priced hotels
catering primarily for late-night business travellers. Trade is reasonable, and you have a high
level of repeat business (and thus good projected future occupancy), but costs seem high and
profits slim, particularly for the hotel's restaurant. It serves few customers at night, although
the chefs have done innovative things to the menus to increase their appeal. A rival chain Luxuria - is also setting up its high-class hotels for discerning travellers in the same cities,
and your board is panicking that significant business will be lost. They present some recent
research showing that customers' core needs are a good night's sleep and a convenient
location. They also present a large dossier of suggestions for maximising the value of the
business.
Which one would you implement?
Your answer (in bold):
A.
Refurbish the hotel, to attract some of Luxuria's target audience (discerning travellers)
to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential
customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of Korsan to
new customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a citybased restaurant for your customers to have discounted evening meals.
Incorrect
Answer D is correct. By only serving the needs most desired by customers (sleep and location) Korsan can
reduce unnecessary overheads and increase value captured. The deal with a city restaurant will also be
attractive to those customers wanting to eat in the evening. Korsan's target audience is different to Luxuria,
and there is no evidence to suggest that Luxuria's target audience would be attracted, even with a
refurbished hotel. A - could be a costly error. B - would require investment by way of a marketing campaign to
get it off the ground, and there is no guarantee that non-hotel customers would be attracted. Korsan has high
repeat business and high projected future occupancy, so a campaign to attract new customers (C) would be
wasteful.
3.
Latifah received a painting from her mother when she turned 21 many years ago. Her mother
always believed that the painting was by 3W Turner, the famous English artist, and regarded it
as a family heirloom. However, Latifah who is an artist herself, discovered some while back that
the painting is actually not by 3W Turner, but some unknown artist. She has never had the
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heart to tell her mother. One day while Latifah is at home having tea with her mother in the
lounge, a friend, Simon, arrives. While Latifah is in the kitchen making some tea for Simon, her
mother tells Simon, who is admiring the painting, that it is by the famous English artist JW
Turner. As a result of this, Simon decides to buy the painting and offers Latifah R500 000 when
she returns from the kitchen. Having not been party to the conversation between Simon and her
mother, Latifah is amazed at being offered such a high price for a painting by an unknown artist,
and accepts.
When Simon discovers the truth about the painting, he wants to set the contract aside on the
basis of misrepresentation as he would never have bought the painting if he had known it was
by an unknown artist.
Which of the following statements is correct?
Your answer (in bold):
A.
Simon will not be able to set the contract aside as it is not voidable due to
misrepresentation.
B. Simon will be able to set the contract aside as it is voidable due
to misrepresentation.
C. Simon will be able to set the contract aside as it is void due to misrepresentation.
D. None of the above.
Correct
Answer B is correct. In this case a misrepresentation by silence has occurred. A reasonable person would
have realised that Simon would not have offered such a high price unless he was labouring under some kind
of misapprehension. Latifah should have questioned him about his motives. She should also have been alert
to the fact that her mother, who was alone with Simon, might have said something to induce him to offer such
a high price. That she knew that her mother was labouring under the misapprehension that a famous artist had
painted the painting serves as a further reason why she should have said something. From Simon’s side, the
information imparted to him was clearly causal to the conclusion of the contract. The contract is thus voidable
on grounds of misrepresentation.
4. Select the one statement below that correctly defines the difference between deductive
synthesis and creative synthesis?
Your answer (in bold):
A.
In deductive synthesis the new fact is implicit in the old ones, while in creative
synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from a hypothesis, while
in creative synthesis facts are created by some additional insight.
C. In deductive synthesis facts are found by reducing the data down to the fact,
while in creative synthesis facts are created by some additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the outcome, while in creative synthesis facts
are not relevant to the outcome.
5. Which of the following Committee/Committees is/are mandated by the Actuaries Act 2006
I.
Finance and Strategic Affairs Committee
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II.
External Affairs Committee
III.
Professional Affairs Committee
IV.
Disciplinary Committee
Your answer (in bold):
A.
B.
C.
D.
I only
I, III and IV
IV only
III and IV
Incorrect
Correct Answer: C
6. Read the following facts and then pick out the incorrect statement:
Joe and Smith are the sole shareholders and also the only directors of XCo (Pty) Ltd. They
purchase immovable property on behalf of the company. Later, they sell and transfer the
property to one Sam, a first cousin of both directors. The director-shareholders declare a
dividend and each director receives 50% of the proceeds of the sale without satisfying the
debts owed by the company to its creditors. It now turns out that the company is insolvent.
The creditors can;
Your answer (in bold):
A.
bring an action against the directors in terms of section 77(2) of the Companies Act 71
of 2008 to hold the directors liable for fraud.
B. bring an action in which they ask the court to pierce the corporate veil of the company to
hold the directors and Sam jointly and severally liable.
C. bring an action against the directors for a breach of their fiduciary duties.
D. bring an action against the directors in the law of delict for failing to exercise care and
skill.
Incorrect
The correct answer is B. Sam cannot be held liable unless he participated in the fraud. There is nothing to
suggest that he was a party to the fraud even though he was a family member. The fact that the directors
acted fraudulently does not affect the transfer of ownership to Sam as Indian law subscribes to the abstract
system of transfer of ownership and not the causal system.
7. One source of competitive advantage is 'strategic relationships'.
If you were running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a sustainable
competitive advantage.
Your answer (in bold):
A.
B.
Client business is built into fixed term contracts of one or two years.
Extensive selection of testimonials from satisfied customers from a diverse
range of industries.
C. The only parent company in the agency world whose policy is to invest centrally in
building capabilities it then shares across business units.
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D. An award-winning creative team.
Incorrect
Correct Answer: C While all the options will contribute to a successful business, it is option C that is said to
be an exception, as it's harder to copy than the other options.
8. Which of the following is a wrong combination of an industry and its regulator?
Which one of the following has been the result of recent developments?
Your answer (in bold):
A.
B.
C.
D.
Insurance – IRDA
Banking – RBI
Financial markets – SEBI
None of above
Correct
Correct Answer: D
9. Which of the following forms of publicity is prohibited?
Your answer (in bold):
A.
A member authorized by the Institute of Actuaries of India to represent the profession
speaking as its representative
B. Appropriate publicity of the profession objectively substantiated
C. Description of the professional services offered including basis for charging
D. Description of the work done on behalf of the profession for gains by
the actuary’s firm
Correct
Correct Answer: D
10. Andile, who owns a farm in the Eastern Cape, enters into a contract with Mining Magnates
(Pty) Ltd, in terms of which Mining Magnates is given the sole and exclusive right to mine for
minerals on Andile’s farm. To be able to exercise its right, Mining Magnates needs to be able
to search the entire farm to determine where the minerals might be so that it can mine in the
right area. Mining Magnates argues that it is a tacit term of the contract that it should be able
to search the entire farm to check for minerals in order for it to be able to know where to
mine for the minerals. If a court were to imply such a term, the court would do so on the
following basis:
Your answer (in bold):
A.
B.
C.
D.
By applying the “curious bystander test”.
That the tacit term is automatically incorporated into the contract by operation of law.
That the tacit term is automatically incorporated into the contract by trade usage.
That the tacit term is automatically incorporated into the contract by reason of
legislation.
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Correct
Answer A is correct. Where parties enter into a contract, but the contract is silent on certain aspects, a court
can imply terms into the contract by holding that the parties agreed to certain tacit terms. There are a number
of ways in which a court can imply tacit terms into a contract. If there is legislation governing the silent
aspects of the contract, the court can rely on the legislation to provide guidance. If there is common law
governing the silent aspects, the court can rely on the common law. If the parties were in a long-standing
business relationship and were providing services in a particular industry, the court can consider principles of
custom and trade usage. However, where none of the above factors offer assistance, the court can apply the
test of the ‘curious bystander’ by asking itself: ‘What would the party have thought if he/she was presented
with the silent aspects of the contract.’ As there is nothing on the facts of the above case to suggest that the
court can consider legislation, common law or custom and trade usage, the court will apply the test of the
curious bystander.
11. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is needed.
B. Decide on the form of analysis, establish the right questions, discover the facts.
C. Ask the right question, decide what analysis to undertake, collect the relevant
facts.
D. Discover a range of facts, identify what questions arise, conduct an analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
12. You have just joined a new company, and you have already been asked to make a
recommendation on what you think is a strategic, high-impact decision. Your recommendation
will be made direct to the Chief Executive. You have looked for someone able to help you with
this, but not found anyone with the right qualifications or experience. You had intended to do a
detailed analysis, but a colleague has informed you there is not enough time to do that, and
suggested you should "use your instinct."
What type of organisational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Incorrect
Answer C. Newly-formed companies are frequently power-based and tend to involve little structure or
formality, high risk-taking, and the decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of approval, and in a matrix
organisation (C) you would expect more people to be involved in the process bringing their own views and
expertise.
13. In the business game, The Way Forward, which one of the following defines the ‘cost of
sales' in the Profit and Loss Account?
Your answer (in bold):
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A.
B.
C.
D.
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The purchase cost of all the items purchased by a team in the time period.
The purchase cost of all the items sold by a team in the time period.
The cost of all the items currently held in stock by a team.
The total costs incurred in marketing, selling and distribution of the items sold in the
period.
Correct
The correct answer is B. The cost of sales was defined as the amount a team had to pay for all the items that
it sold during the period.
14. Which of the following are the skills you have to acquire to become a competent actuary?
Your answer (in bold):
A.
B.
C.
D.
E.
Communication Skills.
Judgment.
Management and soft skills.
Professionalism and Business Ethics.
All of above.
Correct
Correct Answer: E
15. Which of the following options describes a function outside the purview of the Quality
Review Board?
Your answer (in bold):
A.
B.
Fix standards for the services provided by the members of the Institute
Review the quality of services provided by the members including actuarial audit services
C.
D.
Promote the status of the Actuarial profession
Guide members of the Institute to improve the quality of services and adherence to the
various statutory and other regulatory requirements
Incorrect
Correct Answer: C
16. On 15 January Richard entered into a written contract of agency with Diana in terms of
which Richard authorised his professional assistant Diana to purchase a vacant plot of land from
Golf Mead (Pty) Ltd, a private golf estate development company. Richard instructed Diana that
she must not pay more than R3 million for a vacant plot. Diana, on behalf of Richard, entered
into a written contract with Golf Mead (Pty) Ltd for the purchase of a vacant plot on a golf
estate. In terms of the contract of sale the purchase price for the vacant plot was R2.5 million.
In addition, Diana, professing to act on Richard’s behalf, bought a golf cart at the price of R150
000 from Golf Mead (Pty) Ltd. Although Richard at no stage provided Diana with either express
or implied authority to purchase the golf cart, Diana fraudulently represented that she had
authority to purchase the golf cart on Richard’s behalf. Furthermore, Richard did not impliedly or
expressly ratify Diana’s purchase of the golf cart (in fact he has never even seen it), nor did he,
at any time, give the impression that Diana was authorised to purchase the golf
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cart.
Which of the statements is correct?
Your answer (in bold):
A.
B.
C.
D.
Richard is bound to Golf Mead under the law of contract of sale for the purchase
of the vacant plot, and will be liable under the implied warranty of authority for
the golf cart.
Richard is not bound under the law of contract of sale for the purchase of the vacant plot
as Diana exceeded her authority in respect of the purchase of the golf cart. Diana may,
however, be liable to Golf Mead for contractual damages arising from the sale of the plot
and the golf cart because she exceeded her authority in this regard.
Richard is liable to Golf Mead in terms of the law of contract of sale for the purchase of
the vacant plot, and Diana will be liable to Golf Mead for the golf cart in terms of the
implied warranty of authority.
Richard is bound to Golf Mead for the sale of the vacant piece of land and the golf cart,
as the cumulative value of the purchases did not exceed R3 million.
Incorrect
Answer C is correct. An agent must act in terms of the mandate given by the principal. If the agent exceeds
her mandate, the principal is still bound to fulfil those transactions that were undertaken in terms of the
mandate, but may refuse to fulfil those transactions that were undertaken in excess of the given mandate. As
regards those transactions which were undertaken by the agent in excess of the mandate, the agent will be
liable. There are times, however, when the principal will be liable even for those transactions exceeding the
express mandate. This will occur where the principal has acted in a way so as to give the other party a
reasonable impression that the agent was authorised to enter into those transactions which were not covered
by the mandate. In the case above, the agent acted in terms of the mandate for the procurement of the
property, but exceeded her authority as regards the purchase of the golf cart. Accordingly, the principal,
Richard, will be liable to perform in terms of the sale agreement for the vacant plot of land. However, Diana
will be liable for the purchase price of the golf cart as she exceeded her authority and Richard did nothing to
create an impression in the mind of the seller that he had authorised this transaction.
17. You have been asked to define the competitive positioning for your business unit, a
supplier of laser printers.
Which one of the following statements would NOT represent a component of the business unit's
competitive position?
Your answer (in bold):
A.
B.
C.
D.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Incorrect
Answer C is correct. All of the other responses represent a definition of either product/service, target
customers, or channels, all of which are competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
18. You are given the following facts:
z All widgets have green stripes
z All things with green stripes also have a button z
Object A has green stripes
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Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget.
B. Object A has a button.
C. Object A is a green striped widget with a button.
D. Object A has a button and green stripes.
Correct
The answer is D as all you know for sure is that Object A has a button and green stripes. This is in
accordance with the deductive synthesis exercise under the 'synthesis' tutorial.
19. Which one is the powerful tool of memory?
Your answer (in bold):
A.
B.
C.
D.
Textbooks
Audio
Video
Visual
Incorrect
Correct Answer: D
20. Which of the following statements is correct?
Your answer (in bold):
A. The court will apply the curious bystander test when deciding if a term is an imposed
term.
B. When applying the parol evidence rule, the court will take into account not only the
written contract itself, but also all the surrounding circumstances to ascertain what the
true terms of the contract are.
C. The courts may order rectification of a written contract if, at the time of verbal
negotiations, the parties were both of the same mind, but the written contract
contains an error and does not conform to the parties’ true intentions.
D. All contracts must be in writing to be valid.
Correct
Answer C is correct. According to the common law, a contract need not be in writing. The only time a contact
needs to be in writing is when a statute requires the contract to be written. The curious bystander test is used
to imply a term into a contract. According to the common law, the parol evidence rule prevents parties from
relying on extrinsic evidence to construe the terms of an agreement that is reduced to writing.
21. You are considering opening a record store in a major shopping area. As there are other
record stores located nearby, you will have to find sources of competitive advantage.
Only one of the following would be a real source of competitive advantage - which is it?
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Your answer (in bold):
A.
B.
C.
D.
An award-winning advertising campaign.
Exclusive promotional relationship with a major record label.
An unusual store design and internal layout.
Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built on a strategic relationship that
cannot be copied or imitated. All of the other answers represent something that is easy to imitate, and are not
built upon superior assets, distinctive capabilities or strategic relationships.
22. The Value Chain shows the activities required to deliver value to...
Your answer (in bold):
A.
B.
C.
D.
shareholders.
customers.
products.
the economy.
Correct
The answer is B in accordance with 'the business system' tutorial.
23.
Which of the following options A, B, C or D is correct?
I.
II.
III.
The actuarial profession does not have an obligation to serve the public interest
Advice given to an actuarial colleague does not have to meet the same standards as
external advice
A member has a duty to the profession and must not act in a manner that denigrates its reputation
Your answer (in bold):
A.
B.
C.
D.
I and III
II and III
II only
III only
Correct
Correct Answer: D
24. A firm of actuaries issues a brochure advertising its services.
Which one of the following statements is most likely to be incorrect?
Your answer (in bold):
A.
B.
C.
The brochure is likely to be classed as an invitation to treat.
Statements made in the brochure are capable of being misrepresentations.
The brochure is likely to form a binding contract between the firm and the
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client.
D. The brochure is likely to give rise to warranties.
Correct
The correct answer is C. A is wrong because it is unlikely the firm will be expressing a willingness to be bound
by the terms of the brochure. B is wrong because if a statement in the brochure is untrue and induces entry
into a contract it is capable of being a misrepresentation. D is wrong because a warranty is an express term of
a contract where one of the parties makes a pre-contractual representation.
25. If you were classifying a company in terms of how it made decisions when responding to
changing market conditions, which one of the following descriptions would define a 'defender'?
Your answer (in bold):
A.
Historically successful, but conservative, and potentially becoming complacent.
Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses
to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait around
for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong returns
and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs
defending from others seeking to steal market share from them. They have resources they can use to attack
competitors. Sometimes their relative strength can make them over confident. D - describes Fast Follower
organisations who are less happy with high risk than Innovators, but can often achieve greater returns and
visibility than Innovators gain. B - describes a combination of Defenders, Innovators and Fast Followers. C describes Innovators.
26.
Which of the following described in options A, B, C or D is not in itself criteria used for the
issuance of an Actuarial Practice Standard or a Guidance Note?
I.
II.
III.
Consistent with public interest
Consistent with Professional Conduct Standards
Unambiguous
Your answer (in bold):
A.
B.
C.
D.
I only
II only
III only
None of them
Incorrect
Correct Answer: C
27. In the business game, The Way Forward, which one of the following mix of strategies
would you expect to be the most successful?
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Your answer (in bold):
A.
B.
C.
D.
Modern; high quality product; medium price; conservative brand image.
Traditional product; high price; modern brand image.
Fashionable product; high price; prestigious image.
Sturdy basic product, high price, traditional image.
Incorrect
The correct answer is C. The three features of C, taken together, offer a consistent strategy. In each of A, B
and D the three features are not consistent.
28. You run the office cleaning division at International GlobalCorp, and you are setting your
group's objectives. IGC's corporate goal is to grow market share in all its businesses.
Which of the following objectives for your area directly supports the corporate objective?
Your answer (in bold):
A.
B.
C.
D.
Increase the number of active customers by 15%.
Reduce costs of purchased cleaning products by 10%.
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards.
Incorrect
Answer A is correct. While the other objectives might indirectly contribute to the ability to grow market share,
answer A is the only one that directly results in increased share (assuming that the market as a whole grows
less than 15%).
29. When considering financial and non-financial objectives, which of the following would be
true?
Your answer (in bold):
A.
Non-financial objectives are often just as important as financial ones, and they
can be a lot less obvious.
B. Financial objectives will always be more important than non-financial ones, and
are usually more obvious.
C. Non-financial objectives will usually be more obvious than financial ones and will
be better understood by the staff.
D. Financial objectives are key to the success of a company so non-financial ones are not
usually relevant.
Correct
The answer is A in accordance with the 'non-financial objectives' tutorial.
30. Hannah, on selling a puppy to Irene, told Irene that the puppy was a Thoroughbred
Staffordshire Bull Terrier. On taking the puppy to the Staffordshire Bull Terrier Society for
registration, Irene was told that the puppy was not a Thoroughbred. As she had paid R2 000
for the puppy, Irene wants to return the puppy to Hannah and wants her money back.
Which of the following answers is correct?
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Your answer (in bold):
A.
If the statement by Hannah is a warranty, Irene can bring an action for breach of
contract against Hannah.
B. If the statement by Hannah is a misrepresentation, Irene can bring an action for
breach of contract against Hannah.
C. If the statement by Hannah is a warranty, Irene will be placed in the position as if the
contract had not occurred and she will therefore get her money back.
D. If the statement by Hannah is a misrepresentation, Irene will be placed in the
same economic position as if the contract had taken place.
Incorrect
Answer A is correct. Hannah’s statement constitutes a warranty as regards the qualities of the subject matter
of the contract (the dog). Since the statement is incorrect, the contract will be considered to have been
breached. This will entitle the innocent party (Irene) to sue for contractual damages. As such, the innocent
party will be placed in the same position she would have been had the contractual statement been true. If the
statement above is a misrepresentation, the contract would be voidable. This will give rise to a claim for
restitutio in integrum and a delictual claim for damages. As such, Irene’s damages claim would place her in the
position she would have been had the misrepresentation not occurred because the claim would effectively be
in the law of delict.
31.
Which of the following options A, B, C or D best describes the action in relation to other
members?
I.
II.
III.
Criticism of another member’s work is prohibited
Criticism of another member’s work is acceptable
Criticism of another member’s work is properly reasoned and believed to be justified
Your answer (in bold):
A.
B.
C.
D.
I only
II and III
II only
II or III
Correct
Correct Answer: B
32. As part of a 'PEST' analysis of external factors that might affect your industry, which of the
following areas might you investigate?
Your answer (in bold):
A.
B.
C.
D.
Political changes.
Environmental factors - how climate changes will affect your operation.
Strategic choices being made by your main competitor.
Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST framework that is
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Page 13 of 13
used to scan for external influences impacting an industry.
33. Alex runs a cleaning business. He orders 350 litres of cleaning chemicals from Best Products
(Pty) Ltd. In terms of the contract, Best Products had to deliver the chemicals to Alex on 30
June and the purchase price was to be paid in cash on delivery. On 1 June, Best Products
invoiced Alex for the chemicals and demanded payment by 15 June, failing which they would
sue for breach. By 15 June, Best Products had not yet delivered or tendered delivery of the
cleaning products and Alex refused to pay.
If Best Products tried to sue Alex, which statement would be correct?
Your answer (in bold):
A. Alex could raise the contractual defence of malperformance (defective performance)
against Best Products.
B. Alex would be obliged to pay Best Products. After paying, Alex could then sue Best
Products for the cleaning agents if they failed to deliver on time.
C. Alex could raise the defence of prevention of performance, because Alex needs the
chemicals to provide services to his clients. If he is unable to provide services to his
clients, he is unable to make an income and this prevents him from paying Best
Products.
D. Alex could argue that the agreement was subject to a suspensive condition,
namely that it would only come into being once Best Products provided the
cleaning chemicals, and because the latter had failed to do so, no contract had
come into existence.
Incorrect
Answer A is correct. If a contract is subject to a suspensive condition, the contract does not come into
existence until the condition has been met. Whether a contract is subject to a suspensive condition depends
on the terms of the contract and the intention of the parties. It could not have been the intention of the parties,
in the above case, to make the contract suspensive. Surely, if the cleaning materials were not delivered, Alex
would be able to sue for damages arising from the breach. If the contract was subject to a suspensive
condition, it would mean that Alex would not be able to sue for damages, because the very existence of the
contract would be dependant on Best Products delivering the products. The parties could not have intended
such a ridiculous outcome. Furthermore, it could not have been the intention of the parties to make Alex liable
for the price of the goods before the goods were delivered to him. The parties had expressly agreed that the
contract price would be paid on delivery of the cleaning materials. The remedy in the above case is for Alex to
rely on the defence of defective performance. There is an obligation on Best Products to perform before suing
for the price of the cleaning materials. As they have not performed their side of the bargain, Alex could raise
the defence of defective performance if they sued him for the contract price.
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View Instructions
You got 18 out of 32 answers correct (56%)
Well tried. You need 75% to pass, so please read your feedback and revise again all the material covered by the
Module. You may take the test again once at least 4 weeks has elapsed.
1. Please mention our IAI membershi ID:
Your response:
4901
(This question is not included in the score.)
2. You are the new Mana in Director of Korsan, a cit -based chain of medium- riced hotels
catering primarily for late-night business travellers. Trade is reasonable, and you have a high
level of repeat business (and thus good projected future occupancy), but costs seem high and
profits slim, particularly for the hotel's restaurant. It serves few customers at night, although
the chefs have done innovative things to the menus to increase their appeal. A rival chain Luxuria - is also setting up its high-class hotels for discerning travellers in the same cities, and
your board is panicking that significant business will be lost. They present some recent
research showing that customers' core needs are a good night's sleep and a convenient
location. They also present a large dossier of suggestions for maximising the value of the
business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's tar et audience discernin travellers to
Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential
customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of Korsan to new
customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a city-based
restaurant for your customers to have discounted evening meals.
Incorrect
nswer D is correct. By only serving the needs most desired by customers (sleep and location) Korsan can
reduce unnecessary overheads and increase value captured. The deal with a city restaurant will also be
attractive to those customers wanting to eat in the evening. Korsan's target audience is different to Luxuria,
and there is no evidence to suggest that Luxuria's target audience would be attracted, even with a
refurbished hotel. A - could be a costly error. B - would require investment by way of a marketing campaign to
get it off the ground, and there is no guarantee that non-hotel customers would be attracted. Korsan has high
repeat business and high projected future occupancy, so a campaign to attract new customers (C) would be
wasteful.
3.
ears a o. Her mother
Latifah received a aintin from her mother when she turned 21 man
alwa s believed that the aintin was b JW Turner, the famous En lish artist, and re arded it
as a famil heirloom. However, Latifah who is an artist herself, discovered some while back
that the aintin is actuall not b JW Turner, but some unknown artist. She has never had the
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heart to tell her mother. One da while Latifah is at home havin tea with her mother in the
loun e, a friend, Simon, arrives. While Latifah is in the kitchen makin some tea for Simon, her
mother tells Simon, who is admirin the aintin , that it is b the famous En lish artist JW
urner. As a result of this, Simon decides to bu the aintin and offers Latifah R500 000 when
she returns from the kitchen. Havin not been art to the conversation between Simon and
her mother, Latifah is amazed at bein offered such a hi h rice for a aintin b an unknown
artist, and accepts.
When Simon discovers the truth about the aintin , he wants to set the contract aside on the
basis of misre resentation as he would never have bou ht the aintin if he had known it was
by an unknown artist.
Which of the following statements is correct?
Your answer (in bold):
A. Simon will not be able to set the contract aside as it is not voidable due to
misrepresentation.
B. Simon will be able to set the contract aside as it is voidable due to
misrepresentation.
C. Simon will be able to set the contract aside as it is void due to misrepresentation.
D. None of the above.
Correct
nswer B is correct. In this case a misrepresentation by silence has occurred. A reasonable person would
have realised that Simon would not have offered such a high price unless he was labouring under some kind
of misapprehension. Latifah should have questioned him about his motives. She should also have been alert
to the fact that her mother, who was alone with Simon, might have said something to induce him to offer such
a high price. That she knew that her mother was labouring under the misapprehension that a famous artist
had painted the painting serves as a further reason why she should have said something. From Simon’s side,
the information imparted to him was clearly causal to the conclusion of the contract. The contract is thus
voidable on grounds of misrepresentation.
4. Select the one statement below that correctly defines the difference between deductive
synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while in creative synthesis
the new fact is explicit in the old ones.
B. In deductive s nthesis facts are found b buildin the data u from a h othesis, while in
creative synthesis facts are created by some additional insight.
C. In deductive synthesis facts are found by reducing the data down to the fact,
while in creative synthesis facts are created by some additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in creative
synthesis removing details creates the outcome.
Correct
nswer C is correct. In deductive synthesis facts are critical to the outcome, while in creative synthesis facts
are not relevant to the outcome.
5. Which of the following Committee/Committees is/are mandated by the Actuaries Act 2006
I.
Finance and Strategic Affairs Committee
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II.
External Affairs Committee
III.
Professional Affairs Committee
IV.
Disciplinary Committee
Your answer (in bold):
A.
B.
C.
D.
I only
I, III and IV
IV only
III and IV
Incorrect
Correct Answer: C
6. Read the following facts and then pick out the incorrect statement:
Joe and Smith are the sole shareholders and also the only directors of XCo (Pty) Ltd. They
purchase immovable property on behalf of the company. Later, they sell and transfer the
property to one Sam, a first cousin of both directors. The director-shareholders declare a
dividend and each director receives 50% of the proceeds of the sale without satisfying the
debts owed by the company to its creditors. It now turns out that the company is insolvent.
The creditors can;
Your answer (in bold):
A. brin an action a ainst the directors in terms of section 77 2 of the Com anies Act 71 of
2008 to hold the directors liable for fraud.
B. brin an action in which the ask the court to ierce the cor orate veil of the com an to
hold the directors and Sam jointly and severally liable.
C. bring an action against the directors for a breach of their fiduciary duties.
D. bring an action against the directors in the law of delict for failing to exercise care and
skill.
Incorrect
The correct answer is B. Sam cannot be held liable unless he participated in the fraud. There is nothing to
suggest that he was a party to the fraud even though he was a family member. The fact that the directors
acted fraudulently does not affect the transfer of ownership to Sam as Indian law subscribes to the abstract
system of transfer of ownership and not the causal system.
7. One source of competitive advantage is 'strategic relationships'.
If you were running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a sustainable
competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a diverse
range of industries.
C. The only parent company in the agency world whose policy is to invest centrally in
building capabilities it then shares across business units.
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D. An award-winnin creative team.
Incorrect
Correct Answer: C While all the options will contribute to a successful business, it is option C that is said to
be an exception, as it's harder to copy than the other options.
8. Which of the followin is a wron combination of an industr and its re ulator?
Which one of the following has been the result of recent developments?
Your answer (in bold):
A.
B.
C.
D.
Insurance – IRDA
Banking – RBI
Financial markets – SEBI
None of above
Correct
Correct Answer: D
9. Which of the following forms of publicity is prohibited?
Your answer (in bold):
A. A member authorized by the Institute of Actuaries of India to represent the profession
speaking as its representative
B. Appropriate publicity of the profession objectively substantiated
C. Description of the professional services offered including basis for charging
D. Description of the work done on behalf of the profession for gains by the
actuary’s firm
Correct
Correct Answer: D
10. Andile, who owns a farm in the Eastern Cape, enters into a contract with Mining Magnates
(Pty) Ltd, in terms of which Mining Magnates is given the sole and exclusive right to mine for
minerals on Andile’s farm. To be able to exercise its ri ht, Minin Ma nates needs to be able to
search the entire farm to determine where the minerals might be so that it can mine in the
right area. Mining Magnates argues that it is a tacit term of the contract that it should be able
to search the entire farm to check for minerals in order for it to be able to know where to mine
for the minerals. If a court were to imply such a term, the court would do so on the following
basis:
Your answer (in bold):
A.
B.
C.
D.
By applying the “curious bystander test”.
That the tacit term is automatically incorporated into the contract by operation of law.
That the tacit term is automatically incorporated into the contract by trade usage.
That the tacit term is automatically incorporated into the contract by reason of
legislation.
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Correct
nswer A is correct. Where parties enter into a contract, but the contract is silent on certain aspects, a court
can imply terms into the contract by holding that the parties agreed to certain tacit terms. There are a number
of ways in which a court can imply tacit terms into a contract. If there is legislation governing the silent
aspects of the contract, the court can rely on the legislation to provide guidance. If there is common law
governing the silent aspects, the court can rely on the common law. If the parties were in a long-standing
business relationship and were providing services in a particular industry, the court can consider principles of
custom and trade usage. However, where none of the above factors offer assistance, the court can apply the
test of the ‘curious bystander’ by asking itself: ‘What would the party have thought if he/she was presented
with the silent aspects of the contract.’ As there is nothing on the facts of the above case to suggest that the
court can consider legislation, common law or custom and trade usage, the court will apply the test of the
curious bystander.
11. Which is the correct order of activities to carr out roblem solvin ?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is needed.
B. Decide on the form of analysis, establish the right questions, discover the facts.
C. Ask the right question, decide what analysis to undertake, collect the relevant
facts.
D. Discover a range of facts, identify what questions arise, conduct an analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
12. You have ust oined a new com an , and ou have alread been asked to make a
recommendation on what you think is a strategic, high-impact decision. Your recommendation
will be made direct to the Chief Executive. You have looked for someone able to help you with
this, but not found anyone with the right qualifications or experience. You had intended to do a
detailed analysis, but a colleague has informed you there is not enough time to do that, and
suggested you should "use your instinct."
What type of organisational structure do you think you are now working in?
Your answer (in bold):
A.
B.
C.
D.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Incorrect
nswer C. Newly-formed companies are frequently power-based and tend to involve little structure or
formality, high risk-taking, and the decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of approval, and in a matrix
organisation (C) you would expect more people to be involved in the process bringing their own views and
expertise.
13. In the business game, The Way Forward, which one of the following defines the ‘cost of
sales' in the Profit and Loss Account?
Your answer (in bold):
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A. he urchase cost of all the items urchased b a team in the time eriod.
B. The purchase cost of all the items sold by a team in the time period.
C. The cost of all the items currently held in stock by a team.
D. The total costs incurred in marketing, selling and distribution of the items sold in the
period.
Correct
The correct answer is B. The cost of sales was defined as the amount a team had to pay for all the items that
it sold during the period.
14. Which of the following are the skills you have to acquire to become a competent actuary?
Your answer (in bold):
A.
B.
C.
D.
E.
Communication Skills.
Judgment.
Management and soft skills.
Professionalism and Business Ethics.
All of above.
Correct
Correct Answer: E
15. Which of the following options describes a function outside the purview of the Quality
Review Board?
Your answer (in bold):
A. Fix standards for the services provided by the members of the Institute
B. Review the ualit of services rovided b the members includin actuarial audit services
C. Promote the status of the Actuarial profession
D. Guide members of the Institute to improve the quality of services and adherence to the
various statutory and other regulatory requirements
Incorrect
Correct Answer: C
16. On 15 Januar Richard entered into a written contract of a enc with Diana in terms of
which Richard authorised his professional assistant Diana to purchase a vacant plot of land
from Golf Mead Pt Ltd, a rivate olf estate develo ment com an . Richard instructed Diana
that she must not pay more than R3 million for a vacant plot. Diana, on behalf of Richard,
entered into a written contract with Golf Mead (Pty) Ltd for the purchase of a vacant plot on a
golf estate. In terms of the contract of sale the purchase price for the vacant plot was R2.5
million. In addition, Diana, professing to act on Richard’s behalf, bought a golf cart at the price
of R150 000 from Golf Mead (Pty) Ltd. Although Richard at no stage provided Diana with either
express or implied authority to purchase the golf cart, Diana fraudulently represented that she
had authority to purchase the golf cart on Richard’s behalf. Furthermore, Richard did not
impliedly or expressly ratify Diana’s purchase of the golf cart (in fact he has never even seen
it), nor did he, at any time, give the impression that Diana was authorised to purchase the golf
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cart.
Which of the statements is correct?
Your answer (in bold):
A. Richard is bound to Golf Mead under the law of contract of sale for the urchase
of the vacant plot, and will be liable under the implied warranty of authority for
the golf cart.
B. Richard is not bound under the law of contract of sale for the purchase of the vacant plot
as Diana exceeded her authority in respect of the purchase of the golf cart. Diana may,
however, be liable to Golf Mead for contractual damages arising from the sale of the plot
and the golf cart because she exceeded her authority in this regard.
C. Richard is liable to Golf Mead in terms of the law of contract of sale for the purchase of
the vacant plot, and Diana will be liable to Golf Mead for the golf cart in terms of the
implied warranty of authority.
D. Richard is bound to Golf Mead for the sale of the vacant piece of land and the golf cart,
as the cumulative value of the purchases did not exceed R3 million.
Incorrect
nswer C is correct. An agent must act in terms of the mandate given by the principal. If the agent exceeds
her mandate, the principal is still bound to fulfil those transactions that were undertaken in terms of the
mandate, but may refuse to fulfil those transactions that were undertaken in excess of the given mandate. As
regards those transactions which were undertaken by the agent in excess of the mandate, the agent will be
liable. There are times, however, when the principal will be liable even for those transactions exceeding the
express mandate. This will occur where the principal has acted in a way so as to give the other party a
reasonable impression that the agent was authorised to enter into those transactions which were not covered
by the mandate. In the case above, the agent acted in terms of the mandate for the procurement of the
property, but exceeded her authority as regards the purchase of the golf cart. Accordingly, the principal,
Richard, will be liable to perform in terms of the sale agreement for the vacant plot of land. However, Diana
will be liable for the purchase price of the golf cart as she exceeded her authority and Richard did nothing to
create an impression in the mind of the seller that he had authorised this transaction.
17. You have been asked to define the competitive positioning for your business unit, a
supplier of laser printers.
Which one of the followin statements would NOT re resent a com onent of the business unit's
competitive position?
Your answer (in bold):
A.
B.
C.
D.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Incorrect
nswer C is correct. All of the other responses represent a definition of either product/service, target
customers, or channels, all of which are competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
18. You are iven the followin facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
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Which of the following statements best synthesises the facts?
Your answer (in bold):
A.
B.
C.
D.
Object A is a widget.
Object A has a button.
Object A is a green striped widget with a button.
Object A has a button and green stripes.
Correct
The answer is D as all you know for sure is that Object A has a button and green stripes. This is in
accordance with the deductive synthesis exercise under the 'synthesis' tutorial.
19. Which one is the powerful tool of memory?
Your answer (in bold):
A.
B.
C.
D.
Textbooks
Audio
Video
Visual
Incorrect
Correct Answer: D
20. Which of the followin statements is correct?
Your answer (in bold):
A. The court will apply the curious bystander test when deciding if a term is an imposed
term.
B. When applying the parol evidence rule, the court will take into account not only the
written contract itself, but also all the surrounding circumstances to ascertain what the
true terms of the contract are.
C. The courts may order rectification of a written contract if, at the time of verbal
negotiations, the parties were both of the same mind, but the written contract
contains an error and does not conform to the parties’ true intentions.
D. All contracts must be in writing to be valid.
Correct
nswer C is correct. According to the common law, a contract need not be in writing. The only time a contact
needs to be in writing is when a statute requires the contract to be written. The curious bystander test is used
to imply a term into a contract. According to the common law, the parol evidence rule prevents parties from
relying on extrinsic evidence to construe the terms of an agreement that is reduced to writing.
21. You are considerin o enin a record store in a ma or sho in area. As there are other
record stores located nearby, you will have to find sources of competitive advantage.
Only one of the following would be a real source of competitive advantage - which is it?
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Your answer in bold :
A.
B.
C.
D.
An award-winning advertising campaign.
Exclusive promotional relationship with a major record label.
An unusual store design and internal layout.
Higher ratio of staff per customer than the industry norm.
Correct
nswer B is correct. This answer represents a sustainable advantage, built on a strategic relationship that
cannot be copied or imitated. All of the other answers represent something that is easy to imitate, and are not
built upon superior assets, distinctive capabilities or strategic relationships.
22. The Value Chain shows the activities re uired to deliver value to...
Your answer (in bold):
A.
B.
C.
D.
shareholders.
customers.
products.
the economy.
Correct
The answer is B in accordance with 'the business system' tutorial.
23.
Which of the following options A, B, C or D is correct?
I. The actuarial profession does not have an obligation to serve the public interest
II. Advice given to an actuarial colleague does not have to meet the same standards as external
advice
III.
member has a duty to the profession and must not act in a manner that denigrates its reputation
Your answer (in bold):
A.
B.
C.
D.
I and III
II and III
II only
III only
Correct
Correct Answer: D
24. A firm of actuaries issues a brochure advertising its services.
Which one of the following statements is most likely to be incorrect?
Your answer (in bold):
A. The brochure is likely to be classed as an invitation to treat.
B. Statements made in the brochure are capable of being misrepresentations.
C. The brochure is likely to form a binding contract between the firm and the
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client.
D. The brochure is likely to give rise to warranties.
Correct
The correct answer is C. A is wrong because it is unlikely the firm will be expressing a willingness to be
bound by the terms of the brochure. B is wrong because if a statement in the brochure is untrue and induces
entry into a contract it is capable of being a misrepresentation. D is wrong because a warranty is an express
term of a contract where one of the parties makes a pre-contractual representation.
25. If ou were classif in a com an in terms of how it made decisions when res ondin to
changing market conditions, which one of the following descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming complacent.
Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to
improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait around
for detailed analyses.
D. Not keen on hi h risk, but keen to ada t and im rove ideas. Often achieve stron returns
and visibility in the market.
Correct
nswer A is correct. Defenders are often well-established companies with a strong position that needs
defending from others seeking to steal market share from them. They have resources they can use to attack
competitors. Sometimes their relative strength can make them over confident. D - describes Fast Follower
organisations who are less happy with high risk than Innovators, but can often achieve greater returns and
visibility than Innovators gain. B - describes a combination of Defenders, Innovators and Fast Followers. C describes Innovators.
26.
Which of the following described in options A, B, C or D is not in itself criteria used for the
issuance of an Actuarial Practice Standard or a Guidance Note?
I. Consistent with public interest
II. Consistent with Professional Conduct Standards
III. Unambiguous
Your answer (in bold):
A.
B.
C.
D.
I only
II only
III only
None of them
Incorrect
Correct Answer: C
27. In the business game, The Way Forward, which one of the following mix of strategies
would you expect to be the most successful?
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Your answer (in bold):
A.
B.
C.
D.
Modern; high quality product; medium price; conservative brand image.
Traditional product; high price; modern brand image.
Fashionable product; high price; prestigious image.
Sturdy basic product, high price, traditional image.
Incorrect
The correct answer is C. The three features of C, taken together, offer a consistent strategy. In each of A, B
and D the three features are not consistent.
our
28. You run the office cleanin division at International GlobalCor , and ou are settin
group's objectives. IGC's corporate goal is to grow market share in all its businesses.
Which of the following objectives for your area directly supports the corporate objective?
Your answer (in bold):
A.
B.
C.
D.
Increase the number of active customers by 15%.
Reduce costs of purchased cleaning products by 10%.
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards.
Incorrect
nswer A is correct. While the other objectives might indirectly contribute to the ability to grow market share,
answer A is the only one that directly results in increased share (assuming that the market as a whole grows
less than 15%).
29. When considering financial and non-financial objectives, which of the following would be
true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial ones, and they
can be a lot less obvious.
B. Financial objectives will always be more important than non-financial ones, and are
usually more obvious.
C. Non-financial objectives will usually be more obvious than financial ones and will be
better understood by the staff.
D. Financial objectives are key to the success of a company so non-financial ones are not
usually relevant.
Correct
The answer is A in accordance with the 'non-financial objectives' tutorial.
30. Hannah, on selling a puppy to Irene, told Irene that the puppy was a Thoroughbred
Staffordshire Bull Terrier. On taking the puppy to the Staffordshire Bull Terrier Society for
registration, Irene was told that the puppy was not a Thoroughbred. As she had paid R2 000
for the puppy, Irene wants to return the puppy to Hannah and wants her money back.
Which of the following answers is correct?
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Your answer (in bold):
A. If the statement by Hannah is a warranty, Irene can bring an action for breach of
contract against Hannah.
B. If the statement by Hannah is a misrepresentation, Irene can bring an action for breach
of contract against Hannah.
C. If the statement by Hannah is a warranty, Irene will be placed in the position as if the
contract had not occurred and she will therefore get her money back.
D. If the statement by Hannah is a misrepresentation, Irene will be placed in the
same economic position as if the contract had taken place.
Incorrect
nswer A is correct. Hannah’s statement constitutes a warranty as regards the qualities of the subject matter
of the contract (the dog). Since the statement is incorrect, the contract will be considered to have been
breached. This will entitle the innocent party (Irene) to sue for contractual damages. As such, the innocent
party will be placed in the same position she would have been had the contractual statement been true. If the
statement above is a misrepresentation, the contract would be voidable. This will give rise to a claim for
restitutio in integrum and a delictual claim for damages. As such, Irene’s damages claim would place her in
the position she would have been had the misrepresentation not occurred because the claim would
effectively be in the law of delict.
31.
Which of the following options A, B, C or D best describes the action in relation to other
members?
I. Criticism of another member’s work is prohibited
II. Criticism of another member’s work is acceptable
III. Criticism of another member’s work is properly reasoned and believed to be justified
Your answer (in bold):
A.
B.
C.
D.
I only
II and III
II only
II or III
Correct
Correct Answer: B
32. As art of a 'PEST' anal sis of external factors that mi ht affect our industr , which of the
following areas might you investigate?
Your answer (in bold):
A.
B.
C.
D.
Political changes.
Environmental factors - how climate changes will affect your operation.
Strategic choices being made by your main competitor.
Temporary advantages with product design.
Correct
nswer A is correct. The other responses do not represent factors that are part of the PEST framework that is
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used to scan for external influences impacting an industry.
33. Alex runs a cleaning business. He orders 350 litres of cleaning chemicals from Best
Products Pt Ltd. In terms of the contract, Best Products had to deliver the chemicals to Alex
on 30 June and the urchase rice was to be aid in cash on deliver . On 1 June, Best Products
invoiced Alex for the chemicals and demanded payment by 15 June, failing which they would
sue for breach. By 15 June, Best Products had not yet delivered or tendered delivery of the
cleaning products and Alex refused to pay.
If Best Products tried to sue Alex, which statement would be correct?
Your answer (in bold):
A. Alex could raise the contractual defence of malperformance (defective performance)
against Best Products.
B. Alex would be obliged to pay Best Products. After paying, Alex could then sue Best
Products for the cleaning agents if they failed to deliver on time.
C. Alex could raise the defence of prevention of performance, because Alex needs the
chemicals to provide services to his clients. If he is unable to provide services to his
clients, he is unable to make an income and this prevents him from paying Best
Products.
D. Alex could argue that the agreement was subject to a suspensive condition,
namely that it would only come into being once Best Products provided the
cleaning chemicals, and because the latter had failed to do so, no contract had
come into existence.
Incorrect
nswer A is correct. If a contract is subject to a suspensive condition, the contract does not come into
existence until the condition has been met. Whether a contract is subject to a suspensive condition depends
on the terms of the contract and the intention of the parties. It could not have been the intention of the parties,
in the above case, to make the contract suspensive. Surely, if the cleaning materials were not delivered, Alex
would be able to sue for damages arising from the breach. If the contract was subject to a suspensive
condition, it would mean that Alex would not be able to sue for damages, because the very existence of the
contract would be dependant on Best Products delivering the products. The parties could not have intended
such a ridiculous outcome. Furthermore, it could not have been the intention of the parties to make Alex liable
for the price of the goods before the goods were delivered to him. The parties had expressly agreed that the
contract price would be paid on delivery of the cleaning materials. The remedy in the above case is for Alex
to rely on the defence of defective performance. There is an obligation on Best Products to perform before
suing for the price of the cleaning materials. As they have not performed their side of the bargain, Alex could
raise the defence of defective performance if they sued him for the contract price.
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2. If you were classifying a company in terms of how it made decisions when responding to
changing market conditions, which one of the following descriptions would define a
'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to
improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait
around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong
returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs
defending from others seeking to steal market share from them. They have resources they can use to
attack competitors. Sometimes their relative strength can make them over confident. D - describes Fast
Follower organisations who are less happy with high risk than Innovators, but can often achieve greater
returns and visibility than Innovators gain. B - describes a combination of Defenders, Innovators and Fast
Followers. C - describes Innovators.
3. A construction contract contains the following clause: ‘It is specifically recorded that the
project must be completed by 31 January 2011. For every day that the project remains
incomplete after the aforementioned date, the construction company will be liable to the
developer for the sum of R15 000 per day.’
Which of the following statements is correct?
Your answer (in bold):
A. The aforementioned clause is called a penalty clause and is permitted in
terms of the Conventional Penalties Act of 1962.
B. The aforementioned clause is called a penalty clause. Penalty clauses in contracts
are not permitted in terms of the Conventional Penalties Act of 1962.
C. The aforementioned clause is called a penalty clause and is considered illegal as it is
said to be unconscionable in terms of the common law.
D. The aforementioned clause is called a penalty clause and is considered void in the
present case because the penalty is in excess of the recognised amount for penalties
stipulated by the Minister of Justice and Constitutional Development in the
Government Gazette. The amount is currently set at R10 000.
Correct
Answer A is correct. The Conventional Penalties Act recognises and endorses penalty clauses inserted
into contracts. A penalty clause usually entrenches a pre-estimate of damages in the event that a contract
is breached. If the penalty is unduly harsh, the party affected by the clause can apply to court to reduce
the penalty. However, until the party applies to court for a reduction of the penalty, the penalty stands.
There is no limitation as regards what a penalty could be. Depending on the circumstances of a case and
the nature of the contract, the penalty could be a few hundred, thousands, or evens millions of rands. In
the above case, the penalty clause stands.
4. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget.
B. Object A has a button.
C. Object A is a green striped widget with a button.
D. Object A has a button and green stripes.
Correct
The answer is D as all you know for sure is that Object A has a button and green stripes. This is in
accordance with the deductive synthesis exercise under the 'synthesis' tutorial.
5.
Which of the following options A, B, C or D is correct?
I.
II.
III.
The actuarial profession does not have an obligation to serve the public interest
Advice given to an actuarial colleague does not have to meet the same standards as
external advice
A member has a duty to the profession and must not act in a manner that denigrates its
reputation
Your answer (in bold):
A. I and III
B. II and III
C. II only
D. III only
Correct
Correct Answer: D
6. On 15 January Richard entered into a written contract of agency with Diana in terms of
which Richard authorised his professional assistant Diana to purchase a vacant plot of land
from Golf Mead (Pty) Ltd, a private golf estate development company. Richard instructed
Diana that she must not pay more than R3 million for a vacant plot. Diana, on behalf of
Richard, entered into a written contract with Golf Mead (Pty) Ltd for the purchase of a
vacant plot on a golf estate. In terms of the contract of sale the purchase price for the
vacant plot was R2.5 million. In addition, Diana, professing to act on Richard’s behalf,
bought a golf cart at the price of R150 000 from Golf Mead (Pty) Ltd. Although Richard at no
stage provided Diana with either express or implied authority to purchase the golf cart,
Diana fraudulently represented that she had authority to purchase the golf cart on Richard’s
behalf. Furthermore, Richard did not impliedly or expressly ratify Diana’s purchase of the
golf cart (in fact he has never even seen it), nor did he, at any time, give the impression
that Diana was authorised to purchase the golf cart.
Which of the statements is correct?
Your answer (in bold):
A. Richard is bound to Golf Mead under the law of contract of sale for the purchase of
the vacant plot, and will be liable under the implied warranty of authority for the golf
cart.
B. Richard is not bound under the law of contract of sale for the purchase of the vacant
plot as Diana exceeded her authority in respect of the purchase of the golf cart.
Diana may, however, be liable to Golf Mead for contractual damages arising from the
sale of the plot and the golf cart because she exceeded her authority in this regard.
C. Richard is liable to Golf Mead in terms of the law of contract of sale for the
purchase of the vacant plot, and Diana will be liable to Golf Mead for the
golf cart in terms of the implied warranty of authority.
D. Richard is bound to Golf Mead for the sale of the vacant piece of land and the golf
cart, as the cumulative value of the purchases did not exceed R3 million.
Correct
Answer C is correct. An agent must act in terms of the mandate given by the principal. If the agent
exceeds her mandate, the principal is still bound to fulfil those transactions that were undertaken in terms
of the mandate, but may refuse to fulfil those transactions that were undertaken in excess of the given
mandate. As regards those transactions which were undertaken by the agent in excess of the mandate,
the agent will be liable. There are times, however, when the principal will be liable even for those
transactions exceeding the express mandate. This will occur where the principal has acted in a way so as
to give the other party a reasonable impression that the agent was authorised to enter into those
transactions which were not covered by the mandate. In the case above, the agent acted in terms of the
mandate for the procurement of the property, but exceeded her authority as regards the purchase of the
golf cart. Accordingly, the principal, Richard, will be liable to perform in terms of the sale agreement for
the vacant plot of land. However, Diana will be liable for the purchase price of the golf cart as she
exceeded her authority and Richard did nothing to create an impression in the mind of the seller that he
had authorised this transaction.
7. All except two of the following would be appropriate criteria to test whether a potential
segment should be a viable target.
Select the two which are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require some
adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to include the
target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or distribution
exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a long time,
ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although it is vital to
have channels of communication and distribution they do not have to be exclusive. E - a long established
segment is likely to be served already and using this criterion would in any case eliminate interesting
emerging segments.
8. Which one of the following would not be a current issue for Health insurance companies
in India?
Your answer (in bold):
A. Fast changing regulations resulting in business challenges.
B. Move towards market consistent and risk based reporting techniques.
C. High claim ratio in group health insurance segment.
D. Increase in loss ratio with maturing policies in retail segment.
Correct
Correct Answer: B
9. Actuaries Act 2006 provide for the constitution of various Committees.
These Committees report to?
Your answer (in bold):
A. President of the Institute
B. The Council
C. The Prosecuting Director
D. The member appointed by the Government of India to the Council
Correct
Correct Answer: B
10. The sale of a collection of guns is illegal if a permit has not been granted allowing such
a sale. Bob and Sam enter into an agreement for the purchase and sale of a collection of
guns, without the required permit. Bob, the seller, knows that a permit is required whereas
Sam, the purchaser, does not. Sam pays the purchase price, but Bob refuses to deliver the
guns to Sam.
Which of the following statements is correct?
Your answer (in bold):
A. Because Sam was unaware of the requirement of a permit, he may legally compel
Bob to deliver the guns.
B. Sam may not legally compel Bob to deliver the guns, because all
performance is halted in an illegal contract.
C. Sam may not recover the purchase price, because of the rule that 'the position of the
possessor is the stronger'.
D. Sam may not recover the purchase price, because of the rule that 'ignorance of the
law is no excuse'.
Correct
Answer B is correct. An illegal contract is void. Once the illegality becomes known, all outstanding
performance may be halted. Where performance has already been made, the general rule is that the
possessor of the performance is not required to return the performance made. However, the general rule
can be overridden if it can be shown that the party who is out of pocket was innocent of the illegality. Bob
is thus not obliged to deliver the guns. The principle ‘the position of the possessor is stronger’ will not
apply in this case because Sam was innocent of the illegality.
11. In order to achieve a business plan, strategy and tactics must be considered. Tactics is
defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff.
B. the human resources needed for the plan.
C. the means by which the plan is implemented.
D. the competitive advantages the company will aspire to in order to achieve its
strategy.
Correct
The answer is C in accordance with the strategy vs. tactics explore diagram under the 'creating and
capturing value' tutorial.
12. You are considering opening a record store in a major shopping area. As there are other
record stores located nearby, you will have to find sources of competitive advantage.
Only one of the following would be a real source of competitive advantage - which is it?
Your answer (in bold):
A. An award-winning advertising campaign.
B. Exclusive promotional relationship with a major record label.
C. An unusual store design and internal layout.
D. Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built on a strategic relationship that
cannot be copied or imitated. All of the other answers represent something that is easy to imitate, and are
not built upon superior assets, distinctive capabilities or strategic relationships.
13. In the business game, The Way Forward, which one of the following defines the ‘cost of
sales' in the Profit and Loss Account?
Your answer (in bold):
A. The purchase cost of all the items purchased by a team in the time period.
B. The purchase cost of all the items sold by a team in the time period.
C. The cost of all the items currently held in stock by a team.
D. The total costs incurred in marketing, selling and distribution of the items sold in the
period.
Correct
The correct answer is B. The cost of sales was defined as the amount a team had to pay for all the items
that it sold during the period.
14. Which of the following is not a main practice area for actuaries working in life
insurance?
Your answer (in bold):
A. Pricing.
B. Reserving and valuations.
C. Risk Management.
D. Marketing.
Correct
Correct Answer: D
15. Which of the following options describes a function outside the purview of the Quality
Review Board?
Your answer (in bold):
A. Fix standards for the services provided by the members of the Institute
B. Review the quality of services provided by the members including actuarial audit
services
C. Promote the status of the Actuarial profession
D. Guide members of the Institute to improve the quality of services and adherence to
the various statutory and other regulatory requirements
Correct
Correct Answer: C
16. Sam buys a computer from Funeka. Ownership passes when...
Your answer (in bold):
A. the parties conclude the sale agreement.
B. Funeka hands over the computer to Sam.
C. Sam pays Funeka for the computer.
D. Sam inspects the computer, indicates that he is satisfied, and then pays for it.
Incorrect
Answer B is correct. For movable property, delivery is a prerequisite for the transfer of ownership. The
purchaser has to be placed either in physical possession of the property, or there has to be constructive
delivery (i.e. handing over the keys of a car). In the case at hand, ownership of the computer will pass
when the computer is delivered to the purchaser and not when the agreement of sale is concluded, or
when payment takes place, or when inspection occurs.
17. As part of a 'PEST' analysis of external factors that might affect your industry, which of
the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST framework
that is used to scan for external influences impacting an industry.
18. The Value Chain shows the activities required to deliver value to...
Your answer (in bold):
A. shareholders.
B. customers.
C. products.
D. the economy.
Correct
The answer is B in accordance with 'the business system' tutorial.
19. Which of the following constitutes professional guidance by the Institute of Actuaries of
India?
Your answer (in bold):
A. Professional guidance consists of the Professional Conduct Standards only
B. Professional guidance consists of the Professional Conduct Standards and
Actuarial Practice Standards
C. Professional guidance consists of all Guidance Notes and Standards of Practice issued
by the International Actuarial Association
D. Professional guidance consists of the Professional Conduct Standards, all Actuarial
Practice Standards and all Guidance Notes
Incorrect
Correct Answer: D
20. William buys a house from Sue-Ellen. Ownership passes when...
Your answer (in bold):
A. William and Sue-Ellen sign the deed of sale.
B. Sue-Ellen hands over the keys of the house to William.
C. the house is registered in William’s name in the deeds registries.
D. William’s bank approves the bond and pays the purchase price into Sue-Ellen’s bank
account.
Correct
Answer C is correct because ownership of immovable property passes when registration of transfer takes
place in the deeds registries. The conclusion of the contract, payment of the purchase price etc. only
create a personal right to receive transfer of the property, but not real right of ownership.
21. You are the new Managing Director of Korsan, a city-based chain of medium-priced
hotels catering primarily for late-night business travellers. Trade is reasonable, and you
have a high level of repeat business (and thus good projected future occupancy), but costs
seem high and profits slim, particularly for the hotel's restaurant. It serves few customers at
night, although the chefs have done innovative things to the menus to increase their appeal.
A rival chain - Luxuria - is also setting up its high-class hotels for discerning travellers in the
same cities, and your board is panicking that significant business will be lost. They present
some recent research showing that customers' core needs are a good night's sleep and a
convenient location. They also present a large dossier of suggestions for maximising the
value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning
travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential
customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of Korsan to
new customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a
city-based restaurant for your customers to have discounted evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers (sleep and location) Korsan
can reduce unnecessary overheads and increase value captured. The deal with a city restaurant will also
be attractive to those customers wanting to eat in the evening. Korsan's target audience is different to
Luxuria, and there is no evidence to suggest that Luxuria's target audience would be attracted, even with
a refurbished hotel. A - could be a costly error. B - would require investment by way of a marketing
campaign to get it off the ground, and there is no guarantee that non-hotel customers would be attracted.
Korsan has high repeat business and high projected future occupancy, so a campaign to attract new
customers (C) would be wasteful.
22. The main purpose of a business strategy is...
Your answer (in bold):
A. to follow every opportunity available.
B. to determine how best to use management talent.
C. to decide on the best way to promote the business to customers.
D. to maximise the value of the company.
Correct
The answer is D in accordance with the 'creating and capturing value' tutorial.
23.
Which of the following circumstances may warrant an actuary to disclose their client’s
confidential information?
I.
II.
III.
By virtue of statutory or other judicial authority
Disclosure of confidential information is in the public interest
Client did not get the actuary to sign a non disclosure agreement
Your answer (in bold):
A. I and III
B. I and II
C. II and III
D. All of above
Correct
Correct Answer: B
24. Marie has long admired a beautiful cloth that Lee bought while on holiday in Mali. One
day Lee offers to sell it to Marie for R500, and Marie accepts. Unbeknown to either of the
parties, at the time they enter into the contract of sale, Lee’s house had just been burgled,
and the cloth stolen. Your advice to them both is that...
Your answer (in bold):
A. the contract is void for reason of initial impossibility of performance.
B. the contract is void for reason of supervening impossibility of performance.
C. the contract is not void, because the impossibility is subjective.
D. the contract is not void. Although it is impossible for Lee to deliver the cloth, Marie is
still obliged to pay the agreed purchase price.
Correct
Answer A is correct. It is possible for a contract to come into existence and then for circumstances to arise
which make performance in terms of the contract impossible. When that happens, the debtor is no longer
required to perform, provided that the circumstances giving rise to the impossibility of performance were
not created by the debtor herself. A distinction is therefore drawn between objective impossibility (not
caused through the fault of the debtor) and subjective impossibility (caused through the fault of the
debtor). Objective impossibility will be condoned, but subjective impossibility will not. In the above case,
there is impossibility of performance and furthermore, the impossibility is objective as the theft was not
something Lee had any control over. However, because the impossibility existed at the time when the
contract was concluded, we are not dealing with supervening impossibility, but initial impossibility. The
consequence of this is that the contract is void.
25. As an executive in a major oil company, you work for the division where responsibilities
cover its network of petrol stations serving the public. You've received details from the
directors of the strategic, financial, and non-financial objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme you run for
customers.
B. Pledge to protect the environment by increasing new policies and processes.
C. Leverage distribution network more effectively by establishing shops on
sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the financial objectives
in D. A is tactical rather than strategic, and B is non-strategic and non-financial (although often it is difficult
to draw a clear-cut line between profits and social responsibility). D is financial - it is a specific goal with
specific timeframe.
26. Which one is the powerful tool of memory?
Your answer (in bold):
A. Textbooks
B. Audio
C. Video
D. Visual
Correct
Correct Answer: D
27. In the business game, The Way Forward, which one of the following is the primary
purpose of the Profit and Loss Account?
Your answer (in bold):
A. So that a team knows how much money it has got.
B. So that a team knows whether it traded profitably or not in the period concerned.
C. So that a team knows its overhead costs in relation to its turnover.
D. So that a team knows how much money to set aside for Corporation Tax.
Incorrect
The correct answer is B. The prime purpose of a Profit and Loss Account is to show the trading profit or
loss for the period of the accounts.
28. You have just joined a new company, and you have already been asked to make a
recommendation on what you think is a strategic, high-impact decision. Your
recommendation will be made direct to the Chief Executive. You have looked for someone
able to help you with this, but not found anyone with the right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you there is not
enough time to do that, and suggested you should "use your instinct."
What type of organisational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C. Newly-formed companies are frequently power-based and tend to involve little structure or
formality, high risk-taking, and the decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of approval, and in a matrix
organisation (C) you would expect more people to be involved in the process bringing their own views and
expertise.
29. Which one of the following lists contains items that are all included in Maslow's
hierarchy of needs?
Your answer (in bold):
A. Self-actualisation; financial; social.
B. Safety; psychological; esteem.
C. Working; physiological; financial.
D. Social; safety; esteem.
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under the 'identifying
consumer needs' tutorial.
30. Assume that in The Institute and Faculty of Actuaries there are two respected bodies of
opinion as to how to tackle a particular task (methods 1 and 2). You choose method 1. In
the event it turns out that using method 2 would have been more beneficial to the client.
Which one of the following statements is correct?
Your answer (in bold):
A. You are in breach of duty.
B. You are not in breach of duty.
C. You are in breach of duty, but damages will be reduced as you acted
reasonably.
D. You are in breach of duty, but the client’s damages will be reduced as the client was
guilty of contributory negligence by allowing you to choose method 1.
Incorrect
The correct answer is B. A is wrong because if there are two respected bodies of opinion you are not in
breach of duty by choosing one of them. C is wrong because you are not in breach of duty if you follow a
recognised body of opinion and there is no basis for claiming a reduction of damages. D is wrong
because you are not in breach of duty by choosing a recognised body of opinion and there is no basis for
holding the client negligent.
31. The Actuarial Society of India was established in?
Your answer (in bold):
A. 1945
B. 1944
C. 1947
D. 1946
Correct
Correct Answer: B
32. One form of research used with consumers to explore their needs is called Conjoint
Analysis.
For what precise purpose would you use this research? Choose the correct statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value of
different attributes of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the product or
service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A. Conjoint means 'CONsiderJOINTly and is devised to help people explain what tradeoffs they would make between attributes.
33.
XYZ Ltd is a Cape Town based company that develops computer software programs required
by financial institutions. Recently two of its employees resigned. The first employee, Ms
Winter, was the secretary of the managing director of XYZ Ltd. As part of her work she sent
letters to the clients. She however had no personal and direct contact with the clients
during her time as employee of XYZ Ltd. The other employee that resigned was Mr
Matshaba. He was part of the team that developed the actual software products.
Mr Matshaba decided to resign in order to start his own software development company in
Johannesburg that would develop products for both the Institute and Faculty of Actuaries
and financial institutions. Mr Matshaba is of the opinion that he gained enough experience
with XYZ Ltd to successfully start such business. He agreed to employ Ms Winter as his
personal assistant.
XYZ Ltd found out about Mr Matshaba's plans. XYZ Ltd is of the opinion that Mr Matshaba
and Ms Winter cannot start up this new business. According to XYZ Ltd there would be a
breach of the restraint of trade clauses that were contained in their employment contracts
with XYZ Ltd. The restraint of trade clauses stated that the employees undertook not to
start up any business in competition with XYZ Ltd anywhere in India for a period of 10 years
after termination of their employment contracts.
Which of the following statements is correct?
Your answer (in bold):
A. This agreement is so obviously unreasonable that the courts will declare it void
unless XYZ Ltd can prove that it is in the public interest that the restraint is
enforced.
B. This agreement is valid and enforceable and if Mr Matshaba and Ms Winter
want to get out of it, they will bear the onus of proving that it is
unreasonable.
C. This agreement is valid but unenforceable and if XYZ Ltd would like to enforce it they
bear the onus of proving that it is reasonable.
D. None of the above.
Correct
Answer B is correct. A restraint of trade agreement is valid and not against public policy. However, it can
be set aside if the contract in question is unreasonable. The party seeking to set a restraint of trade aside
bears the onus of proving that the terms of the restraint are unreasonable having regard to the
circumstances of the case. In the above case, it would be for Mr Matshaba and Ms Winter to prove, on a
balance of probabilities, that the restraint of trade is unreasonable.
Quiz Feedback
View Instructions
You got 19 out of 32 answers correct (59%)
Well tried. You need 75% to pass, so please read your feedback and revise again all the material covered by
the Module. You may take the test again once at least 4 weeks has elapsed.
1. Please mention your IAI membership ID:
Your response:
5877
(This question is not included in the score.)
2. As part of a 'PEST' analysis of external factors that might affect your industry, which of
the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST framework
that is used to scan for external influences impacting an industry.
3. Which one of the following statements is correct?
Your answer (in bold):
A. The standard of care expected of an actuary is assessed by reference to the
ordinary reasonable person.
B. The standard of care expected of an actuary is judged subjectively.
C. Following the standards set by a professional body automatically means an actuary
will not be in breach of duty.
D. The standard of care expected of an actuary is judged by reference to a
reasonably competent actuary.
Correct
The correct answer is D. B is wrong as the standard is judged objectively. C is wrong because following
standards set by a professional body will usually mean that a professional has taken appropriate care.
However, it does not automatically mean a professional will have reached the required level of skill.
4. If you have a major surprise to impart to your colleagues concerning the business, the
way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week before the
meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to the meeting.
Incorrect
The answer is A in accordance with the 'no surprises' tutorial.
5. Self regulation is a right for the actuarial profession
Your answer (in bold):
A. True
B. False
Correct
Correct Answer: B
6.
A company owns a plot of land. The company decides to sell the land and advertises for
offers from the general public. Offers come in. One of the company’s directors has a friend.
He informs his friend of what offers have come in. Relying on this information, the friend
places an offer which marginally outbids all the other offerors. The land is eventually sold
to the director’s friend. One of the unsuccessful bidders, Rupert, hears about the director’s
indiscretion and wants to take action. Rupert feels that if the friend had not placed an offer,
his (Rupert’s) offer would have been accepted, and he would have been able to develop a
residential complex on the land, bringing him a large profit.
One of the following statements is correct. Please select which one.
Your answer (in bold):
A. Rupert can sue the director for breaching his fiduciary duties and claim for loss of
profits.
B. Rupert can sue the company for loss of profits in the law of delict as the director
was acting within the course and scope of his employment when he divulged insider
information.
C. Rupert can sue the director’s friend in delict for loss of profits on the basis that he
acquired information in an underhanded manner to give him a competitive edge.
D. A and C above.
E. A, B and C above.
Incorrect
Answer E is correct. When a director of a company commits a delict, he can be sued personally, or the
company can be held liable for the delicts of the director on the basis of vicarious liability. The director
can be held personally liable for breaching his fiduciary duties. The fiduciary duties of a director require a
director to transact the business of the company in good faith. In this case, the director has clearly acted
contrary to the principle of good faith for divulging insider information to a friend to the detriment of
Rupert. Rupert may thus sue the director or the company. It may make more sense to sue the company
because the company has more resources to pay Rupert’s damages claim. The fact that the company
may also have been harmed by the director’s actions is irrelevant from the point of view of Rupert’s
delictual action against the company. As an alternative, Rupert could also sue the director’s friend as the
friend committed a delict when he fraudulently conspired with the director. Fraud is a wrongful act in the
law of delict.
7. The sustainability of a competitive advantage is driven in part by whether the
advantage is likely to last for a long time and is hard to substitute. You can 'test' if an
advantage is likely to be sustainable by asking if it has certain attributes. The
following list describes the attributes of a sustainable advantage - but one of them is
not correct.
Which one does NOT represent an attribute of sustainable advantage?
Your answer (in bold):
A. A competitive advantage is likely to be sustainable if it is based upon a scarce
resource.
B. A competitive advantage is likely to be sustainable if it is difficult to imitate.
C. A competitive advantage is likely to be sustainable if it is hard to transfer.
D. A competitive advantage is likely to be sustainable if it is based on
technology.
E. A competitive advantage is likely to be sustainable if it hard to identify or
understand.
Correct
Answer D is correct. Unless the technology is proprietary, and therefore hard to imitate, or
otherwise hard to identify or understand, technology often represents an advantage that is easily
eroded by others attaining the same, or similar, technology. All the other options are ways you can
'test' if an advantage is likely to be sustainable for a reasonable length of time because if an
advantage is hard to imitate, transfer or identify/understand the implication is competitors won't
have the capability to replicate it.
8. Which of the following is not a main practice area for actuaries working in life
insurance?
Your answer (in bold):
A. Pricing.
B. Reserving and valuations.
C. Risk Management.
D. Marketing.
Correct
Correct Answer: D
9.
Which of the following options A, B, C or D is correct?
I.
II.
III.
The actuarial profession does not have an obligation to serve the public interest
Advice given to an actuarial colleague does not have to meet the same standards as
external advice
A member has a duty to the profession and must not act in a manner that denigrates
its reputation
Your answer (in bold):
A. I and III
B. II and III
C. II only
D. III only
Correct
Correct Answer: D
10. Ferdie sold a house to Ernest without disclosing the existence of a
gravesite located close to one of the bedrooms. Prior to the sale, Ferdie ploughed over
the gravesite and obliterated all visible traces of it in order to make the house more
attractive to potential buyers. Ernest discovered the existence of the gravesite after
he had already moved in.
Which of the following statements is correct?
Your answer (in bold):
A. Ernest will be able to set the contract aside as there was a mutual mistake.
B. Ernest will not be able to set the contract aside as the misrepresentation was
not material.
C. Ernest will be able to set the contract aside on the basis of
misrepresentation as Ferdie had a duty to disclose the gravesite.
D. None of the above.
Correct
Answer C is correct. A misrepresentation by silence occurs when the seller fails to disclose
information which he should have. Put another way, one can say that a misrepresentation by
silence occurs when the seller fails to disclose material information. Information would be material
if a reasonable person would not have entered into the contract if they knew the undisclosed
information. In this case the existence of a gravesite would be material information. Making
matters worse, it is quite clear that the seller fraudulently concealed the material information. There
wasn't a mutual mistake in this case, because it cannot be said that both parties were mistaken
about different aspects of the contract.
11. Moving from an existing strategy to a new one can be challenging with
complicated changes to implement. Trying to do everything at once can stretch
resources. It is usually best to progress in manageable steps with each step
representing a sustainable strategy in itself. Such steps are a strategic staircase.
In what order are the steps on Komatsu's strategic staircase, starting at the bottom?
Your answer (in bold):
A. Cost; quality; diversification; differentiation.
B. Differentiation; quality; cost; diversification.
C. Quality; cost; differentiation; diversification.
D. Differentiation; diversification; quality; cost.
Correct
The answer is C in accordance with the 'Komatsu's strategic staircase'. Explore item in 'the
strategic staircase' tutorial.
12. You are an industry analyst in a venture capital company, preparing a report for
potential investors on a restaurant chain, Fervour, which is looking to expand abroad.
Fervour specialises in converting churches into restaurants, capitalising on the
architecture to create atmospheric surroundings, supported by live jazz. The menus created by Michelin Chef Jean-Pierre Noir - are highly acclaimed in culinary circles for
their imagination and flair. Fervour looks to cater for a wide range of clientele,
offering a dining experience 'for all the senses'. While it is still relatively unknown, it
has bought the majority of unused church buildings across the country, ready for
conversion. In trying to make the investment proposition sound as attractive as
possible, it is important that you highlight where Fervour has advantages in the
marketplace.
Which one of the following statements do you feel represents a real and sustainable
competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the country.
C. Superior locations - church buildings stand out against ordinary restaurants,
and are located close to the desired audience.
D. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at all its
venues.
E. Relationships with its key suppliers - to ensure the freshest food and the right
musicians.
Incorrect
Answer C is correct. The fact that Fervour has bought up most unused churches means that other
competitors will be unable to replicate the Fervour surroundings, making this a sustainable
advantage. While the menus are imaginative (A), they can also be copied, which means that this
advantage is difficult to sustain. The Fervour brand (B) is unknown outside the country, so it
cannot yet be exploited as an advantage. While a website (D) is useful, it is likely that most other
restaurants will also have a website supporting their core offering, so this does not represent an
advantage. Relationships with suppliers to ensure fresh food (E) are a necessity in this market,
rather than an advantage.
13. In the business game, The Way Forward, which one of the following mix of
strategies would you expect to be the most successful?
Your answer (in bold):
A. Modern; high quality product; medium price; conservative brand
image.
B. Traditional product; high price; modern brand image.
C. Fashionable product; high price; prestigious image.
D. Sturdy basic product, high price, traditional image.
Incorrect
The correct answer is C. The three features of C, taken together, offer a consistent strategy. In
each of A, B and D the three features are not consistent.
14. Which one of the following would not be a current issue for Health insurance
companies in India?
Your answer (in bold):
A. Fast changing regulations resulting in business challenges.
B. Move towards market consistent and risk based reporting techniques.
C. High claim ratio in group health insurance segment.
D. Increase in loss ratio with maturing policies in retail segment.
Correct
Correct Answer: B
15.
Which of the following described in options A, B, C or D is not in itself criteria used for
the issuance of an Actuarial Practice Standard or a Guidance Note?
I.
II.
III.
Consistent with public interest
Consistent with Professional Conduct Standards
Unambiguous
Your answer (in bold):
A. I only
B. II only
C. III only
D. None of them
Incorrect
Correct Answer: C
16. Which of the following mistakes will not be considered material?
Your answer (in bold):
A. Basil thinks he is entering into a sale with Agatha, but Agatha thinks that it is
a donation.
B. Basil thinks that he is buying dog biscuits from Agatha, but actually Agatha is
selling anti-aging cream.
C. Basil thinks that he is employing a woman called Agatha with a BCom degree,
but, due to an administrative error, he mistakenly offers the job to a different
person, Alice, who holds an LLB degree.
D. Basil thinks that he is buying his newspaper from Agatha, but actually
he is buying it from a different person, Alice.
Correct
Answer D is correct. A mistake as regards the type of contract that is being entered into would be
material. A mistake in respect of the subject matter of a contract would be material. The identities
of the contracting parties are generally considered immaterial. However, there are times when
identity can be important. It depends on the type of contract. With an employment contract, the
identity of the employee would be material. However, in a sale agreement, where the underlying
purpose of the sale is unaffected by the identities of the parties, a mistake as to the identities of the
parties would be immaterial. In the above case, the identities of the parties in the employment
contract would be material. However, the identities of the parties in the sale agreement is
immaterial as the identities of the parties would have no bearing on the subject matter and would
not have been causal for the conclusion of the contract.
17. Which of the following statements describes the characteristics of power-based
organisations in terms of organisational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key influencers more
than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
E. Company stability depends on a key person remaining in place.
Incorrect
Answers A and E are characteristics of power-based organisations. A - a central power source is
usually associated with young companies, or those where the founder has not wished to expand
greatly. B - describes a characteristic of a hierarchical organisation. C - is a characteristic of matrix
organisations. D - is a characteristic of matrix organisations. E- organisations where power is
highly concentrated in one or few individuals are compromising their future stability if those
decision makers cannot continue and no successors have been identified.
18. Which one of the following lists contains items that are all included in Maslow's
hierarchy of needs?
Your answer (in bold):
A. Self-actualisation; financial; social.
B. Safety; psychological; esteem.
C. Working; physiological; financial.
D. Social; safety; esteem.
Incorrect
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under the
'identifying consumer needs' tutorial.
19.
Which of the following circumstances may warrant an actuary to disclose their client’s
confidential information?
I.
By virtue of statutory or other judicial authority
II.
III.
Disclosure of confidential information is in the public interest
Client did not get the actuary to sign a non disclosure agreement
Your answer (in bold):
A. I and III
B. I and II
C. II and III
D. All of above
Correct
Correct Answer: B
20. Choose the correct answer.
For a suretyship agreement to be valid...
Your answer (in bold):
A. all of the parties to it must sign it.
B. it must be in writing.
C. it must be in writing and signed by the surety.
D. it must be written, notarised before a notary public and signed by all the
parties thereto.
Correct
The answer is C. In terms of the General Law Amendment Act 50 of 1956, all suretyship
agreements must be in writing and signed by the surety or the surety’s representative. There is no
requirement for the credit grantor to also sign the agreement.
21. You are the Marketing Director for Svenson, a technology manufacturer. You have
just introduced a new 'mobile entertainment' device, which will offer users the
opportunity to play videos, take digital photographs, send emails and text messages,
play music and communicate via telephone. It has state-of-the-art features, allowing
compatibility with all the top service providers. The Svenson brand is relatively new,
yet it already has a reputation for being innovative, cool and funky. The Svenson 'mini
entertainer' is priced at $600. You now have information from your Customer
Management team showing the profiles of your key customer segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good disposable income,
increasingly mobile for work and leisure, take huge interest in gadget
advertising, and love the funky status they acquire with Svenson products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable
disposable income, buy on functionality, willing to pay for whichever
technology combines all the functions they need and fits their mobile
lifestyle.
C. Family First - the largest segment (33% of your base), although it has shrunk
over the last year. Mobility based around supporting the family. High income
restricted by outlays on children and aged parents. Willing to purchase any
technology proven to make their lives easier.
Incorrect
Answer A is correct. Gadgets Galore is the most attractive/achievable segment. Segment size is
reasonable, and it is growing, disposable income is high (for what is quite a reasonably expensive,
one-off purchase) and there is strong desire for the product. It is an ideal fit with Svenson's
advantages in innovation, plus its brand reputation - gadget lovers matched with funky gadget
provider. Youth of Today (B) is a reasonable-sized, growing segment. Svenson's advantages
match their needs, but the segment is more attracted by generic functionality than the Svenson
brand, making it less attractive to the company. Family First (C) is less attractive. Although this
segment is large, the profile suggests people in this segment are more likely to pay for features
that provide convenience rather than pure entertainment. Although they have high income, their
profile suggests they are likely to have priorities for spending rather than a high-priced
entertainment item.
22. Select the one statement below that correctly defines the difference between
deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while in creative
synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from a
hypothesis, while in creative synthesis facts are created by some additional
insight.
C. In deductive synthesis facts are found by reducing the data down to
the fact, while in creative synthesis facts are created by some
additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the outcome, while in creative
synthesis facts are not relevant to the outcome.
23. Which one is the powerful tool of memory?
Your answer (in bold):
A. Textbooks
B. Audio
C. Video
D. Visual
Correct
Correct Answer: D
24. In a contract of sale, Basil thought he was buying a computer from Agatha and
Agatha thought that she was selling a computer. However, the box in fact contained a
television and was clearly labelled ‘television.’
Which of the following statements is correct?
Your answer (in bold):
A. The contract would be void due to common mistake as the error is material.
B. The contract would be void due to mutual mistake as the error is
material.
C. The contract would not be void due to common mistake as the error is not
reasonable.
D. The contract would be voidable due to mutual mistake as the error is
reasonable.
Incorrect
Answer A is correct. If both parties are mistaken about the same thing, this would be a common
mistake. If both parties are mistaken about different aspects of a contract, this would be mutual
mistake. In the above case, both parties laboured under a common mistake as regards the
contents of the box. Both thought that the box contained a computer, when in fact it contained a
television. The result of this common mistake is that the contract of sale is void. For common
mistake there is no requirement for the mistake to be reasonable in order for the contract to be
rendered void. Therefore, the fact that the box was clearly labelled is neither here nor there when it
comes to determining whether the contract is void.
25. You are the new Managing Director of Korsan, a city-based chain of mediumpriced hotels catering primarily for late-night business travellers. Trade is reasonable,
and you have a high level of repeat business (and thus good projected future
occupancy), but costs seem high and profits slim, particularly for the hotel's
restaurant. It serves few customers at night, although the chefs have done innovative
things to the menus to increase their appeal. A rival chain - Luxuria - is also setting
up its high-class hotels for discerning travellers in the same cities, and your board is
panicking that significant business will be lost. They present some recent research
showing that customers' core needs are a good night's sleep and a convenient
location. They also present a large dossier of suggestions for maximising the value of
the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning
travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of
potential customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of
Korsan to new customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a citybased restaurant for your customers to have discounted evening meals.
Incorrect
Answer D is correct. By only serving the needs most desired by customers (sleep and location)
Korsan can reduce unnecessary overheads and increase value captured. The deal with a city
restaurant will also be attractive to those customers wanting to eat in the evening. Korsan's target
audience is different to Luxuria, and there is no evidence to suggest that Luxuria's target audience
would be attracted, even with a refurbished hotel. A - could be a costly error. B - would require
investment by way of a marketing campaign to get it off the ground, and there is no guarantee that
non-hotel customers would be attracted. Korsan has high repeat business and high projected
future occupancy, so a campaign to attract new customers (C) would be wasteful.
26.
Which of the following options A, B, C or D best describes the action in relation to
other members?
I.
II.
III.
Criticism of another member’s work is prohibited
Criticism of another member’s work is acceptable
Criticism of another member’s work is properly reasoned and believed to be justified
Your answer (in bold):
A. I only
B. II and III
C. II only
D. II or III
Correct
Correct Answer: B
27. In the business game, The Way Forward, how is gross margin defined?
Your answer (in bold):
A. The difference between turnover and cost of sales.
B. The difference between the price a company sells at and the lowest price in
the market.
C. The difference between the Profit and Loss in the current time period and the
Profit and Loss in the previous period.
D. The biggest difference between the price at which a team purchased an item
and the price at which it sold that item.
Correct
The correct answer is A. Gross margin is the difference between the sale price and the cost price
of an item that is sold. Turnover is the total sales price for all units that are sold. B is not correct as
the lowest price in the market is not relevant to a company's gross margin. C is not correct
because many items make up the profit or loss in a period, not just the gross margin on the sale of
a product. D is not correct because it only relates to the gross margin for one item.
28. You run the office cleaning division at International GlobalCorp, and you are
setting your group's objectives. IGC's corporate goal is to grow market share in all its
businesses.
Which of the following objectives for your area directly supports the corporate
objective?
Your answer (in bold):
A. Increase the number of active customers by 15%.
B. Reduce costs of purchased cleaning products by 10%.
C. Buy four new mobile cleaning vans.
D. Achieve Silver status in the Association of Cleaners awards.
Incorrect
Answer A is correct. While the other objectives might indirectly contribute to the ability to grow
market share, answer A is the only one that directly results in increased share (assuming that the
market as a whole grows less than 15%).
29. There are four main types of external shock that are relevant to an organisation's
strategy. A PEST analysis can help think through what these potential shocks might
be, where PEST stands for...
Your answer (in bold):
A. Physical; Economic; Structural; Timing.
B. Political; External; Staffing; Technological.
C. Physical; External; Social; Timing.
D. Political; Economic; Social; Technological.
Correct
The answer is D in accordance with the 'PEST analysis' tutorial.
30. Alex runs a cleaning business. He orders 350 litres of cleaning chemicals from
Best Products (Pty) Ltd. In terms of the contract, Best Products had to deliver the
chemicals to Alex on 30 June and the purchase price was to be paid in cash on
delivery. On 1 June, Best Products invoiced Alex for the chemicals and demanded
payment by 15 June, failing which they would sue for breach. By 15 June, Best
Products had not yet delivered or tendered delivery of the cleaning products and Alex
refused to pay.
If Best Products tried to sue Alex, which statement would be correct?
Your answer (in bold):
A. Alex could raise the contractual defence of malperformance (defective
performance) against Best Products.
B. Alex would be obliged to pay Best Products. After paying, Alex could then sue
Best Products for the cleaning agents if they failed to deliver on time.
C. Alex could raise the defence of prevention of performance, because Alex needs
the chemicals to provide services to his clients. If he is unable to provide
services to his clients, he is unable to make an income and this prevents him
from paying Best Products.
D. Alex could argue that the agreement was subject to a suspensive
condition, namely that it would only come into being once Best
Products provided the cleaning chemicals, and because the latter had
failed to do so, no contract had come into existence.
Incorrect
Answer A is correct. If a contract is subject to a suspensive condition, the contract does not come
into existence until the condition has been met. Whether a contract is subject to a suspensive
condition depends on the terms of the contract and the intention of the parties. It could not have
been the intention of the parties, in the above case, to make the contract suspensive. Surely, if the
cleaning materials were not delivered, Alex would be able to sue for damages arising from the
breach. If the contract was subject to a suspensive condition, it would mean that Alex would not be
able to sue for damages, because the very existence of the contract would be dependant on Best
Products delivering the products. The parties could not have intended such a ridiculous outcome.
Furthermore, it could not have been the intention of the parties to make Alex liable for the price of
the goods before the goods were delivered to him. The parties had expressly agreed that the
contract price would be paid on delivery of the cleaning materials. The remedy in the above case is
for Alex to rely on the defence of defective performance. There is an obligation on Best Products to
perform before suing for the price of the cleaning materials. As they have not performed their side
of the bargain, Alex could raise the defence of defective performance if they sued him for the
contract price.
31. Which of the following forms of publicity is prohibited?
Your answer (in bold):
A. A member authorized by the Institute of Actuaries of India to represent the
profession speaking as its representative
B. Appropriate publicity of the profession objectively substantiated
C. Description of the professional services offered including basis for charging
D. Description of the work done on behalf of the profession for gains by
the actuary’s firm
Correct
Correct Answer: D
32. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've received
details from the directors of the strategic, financial, and non-financial objectives going
forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme you
run for customers.
B. Pledge to protect the environment by increasing new policies and processes.
C. Leverage distribution network more effectively by establishing shops
on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the financial
objectives in D. A is tactical rather than strategic, and B is non-strategic and non-financial
(although often it is difficult to draw a clear-cut line between profits and social responsibility). D is
financial - it is a specific goal with specific timeframe.
33.
Parliament recently passed the National Credit Act of 2005. The Act specifically
provides that it does not apply to a credit agreement in terms of which the consumer
is a juristic person with an asset value or annual turnover exceeding R1 million.
The Act provides that this amount may be amended by the Minister of Finance from
time to time by notice Regulation in the Government Gazette.
At the end of 2007, the Minister, through his government department, passes a
Regulation to increase the amount from R1 million to R1.2 million.
Which of the following statements is correct?
Your answer (in bold):
A. The National Credit Act is an example of original legislation and the Regulation
is an example of delegated legislation.
B. Both the National Credit Act and the Regulation are examples of original
legislation.
C. Both the National Credit Act and the Regulation are examples of delegated
legislation as the only original piece of legislation in India is the Constitution.
D. The National Credit Act is an example of original legislation and the
Regulation is an example of a by-law.
Incorrect
The correct answer is A. Acts passed by Parliament are original legislation because they represent
the will of the legislature. However, an Act sometimes empowers a functionary to pass Regulations
in terms of the Act. Regulations are delegated legislation because they represent the delegated
will of Parliament.
Quiz Feedback
View Instructions
You got 26 out of 32 answers correct (81%)
Congratulations! You have passed the Business Awareness Module test.
1. Please mention your IAI membership ID:
Your response:
5435
(This question is not included in the score.)
2. You have just joined a new company, and you have already been asked to make a
recommendation on what you think is a strategic, high-impact decision. Your
recommendation will be made direct to the Chief Executive. You have looked for someone
able to help you with this, but not found anyone with the right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you there is not
enough time to do that, and suggested you should "use your instinct."
What type of organisational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C. Newly-formed companies are frequently power-based and tend to involve little structure or formality,
high risk-taking, and the decision-making power concentrated in a few people. In a hierarchy (B) you would expect a
big decision to go through a more formal process of approval, and in a matrix organisation (C) you would expect
more people to be involved in the process bringing their own views and expertise.
3.
Lara buys a computer from Leon. The purchase price is paid and the computer is delivered
to Lara. Three months later, John claims the computer from Lara. John says that the
computer belonged to him, but was stolen by a thief, who in turn sold the computer to Leon.
Leon was not aware that the computer was stolen.
Which statement is most accurate?
Your answer (in bold):
A. Lara must cancel the contract, return the computer to John, and claim the return of
the purchase price as well as damages from Leon if she can prove that John had
been the owner and that the computer was stolen from him.
B. The contract between Lara and Leon is void because it is against public policy to sell
a stolen item. Because Leon did not know that the computer was stolen he can keep
the money Lara paid him, but Lara would have to return the computer to John.
C. The contract between Lara and Leon is void, because Leon was never the
owner and therefore he could not validly sell the computer to Lara. The
computer must be returned to John and Leon would have to repay Lara the
money she paid him.
D. Even if John can prove that he was the owner, Lara can keep the computer as Leon
was not aware that the computer had been stolen.
Correct
Answer C is correct. To validly transfer ownership of property, the transferor must be the owner of the property at
the time that he seeks to effect transfer of ownership. In this case Leon thought that he was the owner of the
computer. However, it turns out that a thief sold him the computer. The consequence of this is that even though Leon
might have paid fair value for the computer he never became the owner, as the thief did not have ownership rights
which were capable of being passed. This in turn means that Lara’s title to the computer is also defective. The result
is that the true owner, John, can recover his computer from whoever has possession of the computer. Lara would
have to return the computer to John and would have to sue Leon for the return of the money that she paid him. Leon
would have to sue the thief for the money that he (Leon) paid the thief. It will be for John to prove that he was the
owner of the computer and that it was stolen from him.
4. Synthesis is the process of combining two or more facts to produce other facts,
hypotheses or questions. There are two kinds of synthesis.
Which one of the following are they?
Your answer (in bold):
A. Negative and deductive.
B. Creative and corrective.
C. Corrective and negative.
D. Deductive and creative.
Correct
The answer is D in accordance with the 'synthesis' tutorial.
5. Which one is the powerful tool of memory?
Your answer (in bold):
A. Textbooks
B. Audio
C. Video
D. Visual
Correct
Correct Answer: D
6. Choose the correct statement:
Your answer (in bold):
A. Once delictual liability has been determined, it follows that damages will always be
awarded.
B. Once delictual liability has been determined, the court will not require the innocent
party to take steps to mitigate his/her losses. The mitigation of losses rule is only
applicable in the law of contract.
C. Once delictual liability is determined, the court will award damages if the damages
sustained by the innocent party were foreseeable by the wrongdoer.
D. Once delictual liability is determined, the court will award damages if the
innocent party sustained any losses whatsoever.
Incorrect
The answer is C. Just because someone has proven that a delict has been committed against him or her does not
mean he or she will be awarded damages as of right. Firstly, he or she has to prove the loss that was suffered.
Secondly, there is the requirement to mitigate one’s losses where this is possible. Thirdly, the damages must not be
too remote. This means that the damages must be foreseeable to the defendant.
7. You are the new Managing Director of Korsan, a city-based chain of medium-priced hotels
catering primarily for late-night business travellers. Trade is reasonable, and you have a
high level of repeat business (and thus good projected future occupancy), but costs seem
high and profits slim, particularly for the hotel's restaurant. It serves few customers at
night, although the chefs have done innovative things to the menus to increase their appeal.
A rival chain - Luxuria - is also setting up its high-class hotels for discerning travellers in the
same cities, and your board is panicking that significant business will be lost. They present
some recent research showing that customers' core needs are a good night's sleep and a
convenient location. They also present a large dossier of suggestions for maximising the
value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning
travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential
customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of Korsan to
new customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a
city-based restaurant for your customers to have discounted evening
meals.
Correct
Answer D is correct. By only serving the needs most desired by customers (sleep and location) Korsan can reduce
unnecessary overheads and increase value captured. The deal with a city restaurant will also be attractive to those
customers wanting to eat in the evening. Korsan's target audience is different to Luxuria, and there is no evidence to
suggest that Luxuria's target audience would be attracted, even with a refurbished hotel. A - could be a costly error.
B - would require investment by way of a marketing campaign to get it off the ground, and there is no guarantee that
non-hotel customers would be attracted. Korsan has high repeat business and high projected future occupancy, so a
campaign to attract new customers (C) would be wasteful.
8. Which one of the following statements is false?
Your answer (in bold):
A. Life insurance market in India was tariffed until very recently, which limited the role
that actuaries can play in product pricing and development.
B. IRDA has recently issued product related regulations, resulting is majority of life
insurance products offered by life insurers to be re-developed and re-priced.
C. Solvency II has been mandated by IRDA for life insurance companies, but not
general insurance companies in India.
D. None of the above.
Incorrect
Correct Answer: C
9.
Which of the following options A, B, C or D is correct?
I.
II.
III.
The actuarial profession does not have an obligation to serve the public interest
Advice given to an actuarial colleague does not have to meet the same standards as
external advice
A member has a duty to the profession and must not act in a manner that denigrates its
reputation
Your answer (in bold):
A. I and III
B. II and III
C. II only
D. III only
Correct
Correct Answer: D
10. Hannah, on selling a puppy to Irene, told Irene that the puppy was a Thoroughbred
Staffordshire Bull Terrier. On taking the puppy to the Staffordshire Bull Terrier Society for
registration, Irene was told that the puppy was not a Thoroughbred. As she had paid R2 000
for the puppy, Irene wants to return the puppy to Hannah and wants her money back.
Which of the following answers is correct?
Your answer (in bold):
A. If the statement by Hannah is a warranty, Irene can bring an action for
breach of contract against Hannah.
B. If the statement by Hannah is a misrepresentation, Irene can bring an action for
breach of contract against Hannah.
C. If the statement by Hannah is a warranty, Irene will be placed in the position as if
the contract had not occurred and she will therefore get her money back.
D. If the statement by Hannah is a misrepresentation, Irene will be placed in the same
economic position as if the contract had taken place.
Correct
Answer A is correct. Hannah’s statement constitutes a warranty as regards the qualities of the subject matter of the
contract (the dog). Since the statement is incorrect, the contract will be considered to have been breached. This will
entitle the innocent party (Irene) to sue for contractual damages. As such, the innocent party will be placed in the
same position she would have been had the contractual statement been true. If the statement above is a
misrepresentation, the contract would be voidable. This will give rise to a claim for restitutio in integrum and a
delictual claim for damages. As such, Irene’s damages claim would place her in the position she would have been
had the misrepresentation not occurred because the claim would effectively be in the law of delict.
11. There are four main types of external shock that are relevant to an organisation's
strategy. A PEST analysis can help think through what these potential shocks might be,
where PEST stands for...
Your answer (in bold):
A. Physical; Economic; Structural; Timing.
B. Political; External; Staffing; Technological.
C. Physical; External; Social; Timing.
D. Political; Economic; Social; Technological.
Correct
The answer is D in accordance with the 'PEST analysis' tutorial.
12. Your 'street-style' youth-orientated fashion-house needs extra suppliers to allow you to
get a constant flow of your new designs quickly to young customers. Based on the
strengths and weaknesses of potential overseas manufacturers listed below.
Which one would help you fulfil your strategy?
Your answer (in bold):
A. This company handles high volumes (they've supplied identical Government
uniforms for years). It has many machinists, but is not highly automated. It can
deliver on schedule if given long lead times. Low wages guarantee low cost per unit.
B. This small factory will take instructions electronically and transfer data to
computerised cutting machines. It can produce items quickly, though
usually in smaller batches than manufacturer A. It produces its own designs
for local markets. It has fewer, higher paid staff than manufacturer A.
C. Company C can - and will - copy anything - they don't need many written
instructions. They make near-identical copies of design from international fashion
shows within a week, usually without the designer's permission. They emphasise
speed over quality.
Correct
Correct Answer: B. Manufacturer B would be best as it seems responsive and flexible and could offer volume by
delivering smaller batches across staggered dates, allowing orders to be adapted according to market uptake. Staff
have better conditions and their skills for original design may be an asset. Company A's strengths appear to be in
large scale, repetitive orders. Indications are that their systems and staff may not be geared to fast turnaround on
changing requirements. Company C may present some risks. They provide speed, but if their success is built on
'stealing' designs, your own reputation may suffer by using them - or your own designs could be stolen too!
13. In the business game, The Way Forward, which two of the following are true?
The amount charged for depreciation is shown on the balance sheet.
2. Creditors and debtors both count as assets on the balance sheet.
3. The purpose of the balance sheet is to show what the company is worth.
4. The value of currently held stock is shown as an asset on the balance sheet.
1.
Your answer (in bold):
A. 1 and 4.
B. 2 and 4.
C. 1 and 3.
D. 2 and 3.
Correct
The correct answer is A. Both depreciation and the current value of stock are shown on the balance sheet. B is not
correct as creditors are an asset, debtors are a liability. C is not correct as a balance sheet does not reflect what a
company is worth, only the value of its assets and liabilities at a point in time.
14. Which of the following are the skills you have to acquire to become a competent
actuary?
Your answer (in bold):
A. Communication Skills.
B.
C.
D.
E.
Judgment.
Management and soft skills.
Professionalism and Business Ethics.
All of above.
Correct
Correct Answer: E
15. Which of the following options describes a function outside the purview of the Quality
Review Board?
Your answer (in bold):
A. Fix standards for the services provided by the members of the Institute
B. Review the quality of services provided by the members including actuarial audit
services
C. Promote the status of the Actuarial profession
D. Guide members of the Institute to improve the quality of services and adherence to
the various statutory and other regulatory requirements
Correct
Correct Answer: C
16. Standard terms on a contract will be binding on a customer if...
Your answer (in bold):
A. the contract is signed.
B. the other party did what was reasonably necessary to bring the standard terms to
the customer’s attention, and the contract does not contain particularly onerous
terms that a party would not expect to find in a contract of that nature.
C. Both A and B.
D. Neither A nor B.
Incorrect
Answer B is correct. For a standard term contract to come into operation, the contract does not have to be signed
unless the contract contains terms which subject the consumer to unusual risks, personal injury or death. All that the
service provider has to do is to take reasonable steps to bring the standard term(s) to the customer’s attention. If the
contract contains particularly onerous terms that a party would not expect to find in a contract of that nature, the
service provider is required to bring the onerous terms to the specific attention of the customer. If the service
provider has taken the steps above, the contract comes into existence, and is perfectly enforceable even though the
contract has not been signed.
17. If you were classifying a company in terms of how it made decisions when responding to
changing market conditions, which one of the following descriptions would define a
'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to
improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait
around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong
returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs defending
from others seeking to steal market share from them. They have resources they can use to attack competitors.
Sometimes their relative strength can make them over confident. D - describes Fast Follower organisations who are
less happy with high risk than Innovators, but can often achieve greater returns and visibility than Innovators gain. B
- describes a combination of Defenders, Innovators and Fast Followers. C - describes Innovators.
18. If you have a major surprise to impart to your colleagues concerning the business, the
way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week before the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to the meeting.
Correct
The answer is A in accordance with the 'no surprises' tutorial.
19.
Which of the following described in options A, B, C or D is not in itself criteria used for the
issuance of an Actuarial Practice Standard or a Guidance Note?
I.
II.
III.
Consistent with public interest
Consistent with Professional Conduct Standards
Unambiguous
Your answer (in bold):
A. I only
B. II only
C. III only
D. None of them
Correct
Correct Answer: C
20. A construction contract contains the following clause: ‘It is specifically recorded that the
project must be completed by 31 January 2011. For every day that the project remains
incomplete after the aforementioned date, the construction company will be liable to the
developer for the sum of R15 000 per day.’
Which of the following statements is correct?
Your answer (in bold):
A. The aforementioned clause is called a penalty clause and is permitted in
terms of the Conventional Penalties Act of 1962.
B. The aforementioned clause is called a penalty clause. Penalty clauses in contracts
are not permitted in terms of the Conventional Penalties Act of 1962.
C. The aforementioned clause is called a penalty clause and is considered illegal as it is
said to be unconscionable in terms of the common law.
D. The aforementioned clause is called a penalty clause and is considered void in the
present case because the penalty is in excess of the recognised amount for penalties
stipulated by the Minister of Justice and Constitutional Development in the
Government Gazette. The amount is currently set at R10 000.
Correct
Answer A is correct. The Conventional Penalties Act recognises and endorses penalty clauses inserted into contracts.
A penalty clause usually entrenches a pre-estimate of damages in the event that a contract is breached. If the penalty
is unduly harsh, the party affected by the clause can apply to court to reduce the penalty. However, until the party
applies to court for a reduction of the penalty, the penalty stands. There is no limitation as regards what a penalty
could be. Depending on the circumstances of a case and the nature of the contract, the penalty could be a few
hundred, thousands, or evens millions of rands. In the above case, the penalty clause stands.
21. As part of a 'PEST' analysis of external factors that might affect your industry, which of
the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST framework that is used to
scan for external influences impacting an industry.
22. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is needed.
B. Decide on the form of analysis, establish the right questions, discover the facts.
C. Ask the right question, decide what analysis to undertake, collect the
relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
23.
Which of the following options A, B, C or D best describes the action in relation to other
members?
I.
II.
III.
Criticism of another member’s work is prohibited
Criticism of another member’s work is acceptable
Criticism of another member’s work is properly reasoned and believed to be justified
Your answer (in bold):
A. I only
B. II and III
C. II only
D. II or III
Correct
Correct Answer: B
24. You are an actuary who has been engaged to provide professional services to a client.
No letter of engagement/mandate has been issued.
Which one of the following statements is incorrect?
Your answer (in bold):
A. You can contractually bind yourself to a client without a written contract.
B. The law will imply a term into the contract to the effect that you will carry out the
service with reasonable care and skill.
C. The only obligation you owe your client is a duty of care in delict.
D. There can be a contract without any express terms.
Incorrect
The correct answer is C. You have an oral contract with your client, so you would owe contractual duties. A is
wrong because you can bind yourself to a contract orally. B is wrong because the common law implies such a term.
D is wrong because there can be oral express terms.
25. One form of research used with consumers to explore their needs is called Conjoint
Analysis.
For what precise purpose would you use this research? Choose the correct statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value of
different attributes of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the product or
service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A. Conjoint means 'CONsiderJOINTly and is devised to help people explain what trade-offs they
would make between attributes.
26. Which of the following constitutes professional guidance by the Institute of Actuaries of
India?
Your answer (in bold):
A. Professional guidance consists of the Professional Conduct Standards only
B. Professional guidance consists of the Professional Conduct Standards and Actuarial
Practice Standards
C. Professional guidance consists of all Guidance Notes and Standards of Practice issued
by the International Actuarial Association
D. Professional guidance consists of the Professional Conduct Standards, all
Actuarial Practice Standards and all Guidance Notes
Correct
Correct Answer: D
27. In the business game, The Way Forward, which one of the following mix of strategies
would you expect to be the most successful?
Your answer (in bold):
A. Modern; high quality product; medium price; conservative brand image.
B. Traditional product; high price; modern brand image.
C. Fashionable product; high price; prestigious image.
D. Sturdy basic product, high price, traditional image.
Correct
The correct answer is C. The three features of C, taken together, offer a consistent strategy. In each of A, B and D
the three features are not consistent.
28. You have been asked to define the competitive positioning for your business unit, a
supplier of laser printers.
Which one of the following statements would NOT represent a component of the business
unit's competitive position?
Your answer (in bold):
A. Supply affordable laser printers and related supplies.
B. Target Home Office computer users.
C. Taking a phased approach to expanding the distribution network.
D. Sell through both retail stores and online.
Incorrect
Answer C is correct. All of the other responses represent a definition of either product/service, target customers, or
channels, all of which are competitive positioning decisions. Answer C is more concerned with timing and resource
decisions for building the company.
29. You are considering investing in the car manufacturing industry, but you are concerned
about competitive forces changing the market. You've decided to organise an analysis on
the five major competitive forces acting on the industry.
Which of the following represents the five forces that you should investigate?
Your answer (in bold):
A. Product, price, people, placement, positioning of substitute products.
B. Threat of substitute products, rivalry, supplier power, customer power,
threat of new entrants.
C. Missions, objectives, goals, strategies, people.
D. Access to capital, ease of integration, synergy with existing operations, distribution
channels, sustainable competitive advantages.
Correct
Answer B is correct. The other options do not represent the five competitive forces acting on an industry.
30. Choose the correct statement(s):
Your answer (in bold):
A. A non-variation clause prevents the parties from ever varying the terms of a
contract.
B. A non-variation clause prevents the parties from varying the terms of a
contract, unless the variation is done in writing and signed by all the parties
to the contract.
C. A non-variation clause prevents the parties from varying the terms of a contract,
unless it is clear that the written agreement is not recorded properly in which case
any party can vary the contract by sending all the other parties a notice to that
effect.
D. Statements (b) and (c) are true.
Correct
The answer is B. Statement C is incorrect because it creates the impression that a contract can only be varied if the
contract does not reflect the true intention of the parties. This is not so. A contract can be varied to reflect a change
of circumstance, provided that the parties agree to the variation in writing. Statement A is clearly incorrect for its
unaccommodating stance.
31. When can a firm practice as Actuaries?
Your answer (in bold):
A. All the partners are Fellow of Institute of Actuaries of India (FIAI)
B. Some of the partners are FIAI while some can be members of other professional
bodies
C. Some of the partners are FIAI while some can be Associates of Institute of Actuaries
of India
D. Professional qualification of partners doesn’t matter
Correct
Correct Answer: A
32. One source of competitive advantage is 'strategic relationships'.
If you were running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a sustainable
competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a diverse range of
industries.
C. The only parent company in the agency world whose policy is to invest
centrally in building capabilities it then shares across business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful business, it is option C that is said to be an
exception, as it's harder to copy than the other options.
33.
Brian wants to have the outside of his house painted and telephones Lalla’s Painters for a
quote. On 8 April, Penelope, the owner of Lalla’s Painters, has a look at Brian’s house and
gives a quote of R20 000. Later that day (8 April), Penelope faxes the quotation document
to Brian and one of the sentences reads as follows:
“Quotation of R20 000 is valid until 13 May” and the quote furthermore states that
acceptance of the quote must be done in writing and can either be faxed or posted to Lalla’s
Painters. On 10 May, Brian posts a letter of acceptance to Lalla’s Painters. The letter of
acceptance reached Lalla’s Painters on 15 May. As a result of this, Lalla’s Painters argue
that the acceptance was out of time and no contract has come into existence between the
parties.
Your advice to Brian is that:
Your answer (in bold):
A. There is no contract, as the acceptance was not received by 13 May and the so-
called ‘information’ theory applies on this set of facts.
B. There is no contract, as the acceptance was not received by 13 May and the
so-called ‘expedition’ theory applies on this set of facts.
C. There is a valid and binding contract, as it is irrelevant that the acceptance was not
received by 13 May, for the so-called ‘information’ theory applies on this set of facts.
D. There is a valid and binding contract, as it is irrelevant that the acceptance was not
received by 13 May, for the so-called ‘expedition’ theory applies on this set of facts.
Incorrect
Answer D is correct. With postal contracts, the expedition theory of contract formation applies. According to this
theory, a contract comes into existence the moment the offeree posts his acceptance to the offeror. As long as the
offeree can prove that he posted the acceptance before 13 May, a valid contract will come into being.
2. You are the Marketing Director for Svenson, a technology manufacturer. You have just
introduced a new 'mobile entertainment' device, which will offer users the opportunity to play
videos, take digital photographs, send emails and text messages, play music and
communicate via telephone. It has state-of-the-art features, allowing compatibility with all
the top service providers. The Svenson brand is relatively new, yet it already has a reputation
for being innovative, cool and funky. The Svenson 'mini entertainer' is priced at $600. You
now have information from your Customer Management team showing the profiles of your
key customer segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good disposable
income, increasingly mobile for work and leisure, take huge interest in
gadget advertising, and love the funky status they acquire with Svenson
products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable disposable income,
buy on functionality, willing to pay for whichever technology combines all the functions
they need and fits their mobile lifestyle.
C. Family First - the largest segment (33% of your base), although it has shrunk over the
last year. Mobility based around supporting the family. High income restricted by
outlays on children and aged parents. Willing to purchase any technology proven to
make their lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable segment. Segment size is
reasonable, and it is growing, disposable income is high (for what is quite a reasonably expensive, one-off
purchase) and there is strong desire for the product. It is an ideal fit with Svenson's advantages in
innovation, plus its brand reputation - gadget lovers matched with funky gadget provider. Youth of Today
(B) is a reasonable-sized, growing segment. Svenson's advantages match their needs, but the segment is
more attracted by generic functionality than the Svenson brand, making it less attractive to the company.
Family First (C) is less attractive. Although this segment is large, the profile suggests people in this
segment are more likely to pay for features that provide convenience rather than pure entertainment.
Although they have high income, their profile suggests they are likely to have priorities for spending rather
than a high-priced entertainment item.
3. Thandi lives in Cape Town. She is offered employment by a firm of actuaries in Sandton,
Gauteng. She receives the offer of employment by email. A week later she emails the
Sandton firm and informs them that she has decided to accept their offer. The email is
successfully sent. A few hours after sending the acceptance email, she has a change of
heart and decides to email the Sandton firm to withdraw her acceptance.
In terms of the Electronic Communications and Transactions Act of 2002, which of the
following statements is correct?
Your answer (in bold):
A. The moment Thandi sends the acceptance email Thandi is deemed to have
accepted the employment offer and a valid contract comes into being.
B. If Thandi can prove that the recipient of the email had not read the acceptance email
before she sent the withdrawal email, no contract comes into being.
C. Acceptance of the offer of employment would be deemed to have occurred when
Thandi’s acceptance email successfully reaches the email inbox of the recipient
(offeror) and is capable of being retrieved, even though the recipient has not had a
chance to read it. However, if the recipient reads the withdrawal email before
reading the acceptance email, the withdrawal email will automatically cancel the
acceptance email and accordingly, no contract comes into existence.
D. None of the above.
Incorrect
Answer D is correct. In terms of the Electronic Communications and Transactions Act of 2002,
acceptance of an email contract occurs when the offeree’s acceptance reaches the email inbox of the
offeror. The offeror need not have read the email for the contract to come into existence. One cannot
withdraw an acceptance after the acceptance has reached the offeror’s inbox, because a valid contract
has already come into existence. Withdrawal of the acceptance would be tantamount to repudiation of the
contract, which would entitle the offeror to sue the offeree for breach of contract.
4. When considering financial and non-financial objectives, which of the following would be
true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial ones, and
they can be a lot less obvious.
B. Financial objectives will always be more important than non-financial ones, and are
usually more obvious.
C. Non-financial objectives will usually be more obvious than financial ones and will be
better understood by the staff.
D. Financial objectives are key to the success of a company so non-financial ones are
not usually relevant.
Correct
The answer is A in accordance with the 'non-financial objectives' tutorial.
5. Which of the following forms of publicity is prohibited?
Your answer (in bold):
A. A member authorized by the Institute of Actuaries of India to represent the
profession speaking as its representative
B. Appropriate publicity of the profession objectively substantiated
C. Description of the professional services offered including basis for charging
D. Description of the work done on behalf of the profession for gains by the
actuary’s firm
Correct
Correct Answer: D
6. Choose the correct statement:
Your answer (in bold):
A. The law of delict is concerned with providing remedies for breach of contract.
B. The law of delict is concerned with providing compensation to victims who have
suffered a civil wrong.
C. The law of delict is concerned with providing compensation to victims who
have suffered a civil wrong and who are unable to prove a criminal case
beyond reasonable doubt.
D. Answer (a) and (c) above.
Incorrect
The answer is B. Although there may be an overlap between the law of delict and criminal law, an action
in delict is not dependent on the result of any criminal suit. Furthermore, although misrepresentation in the
law of contract gives rise to delictual remedies, the purpose of the law of delict is much wider.
7. One source of competitive advantage is 'strategic relationships'.
If you were running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a sustainable
competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a diverse range of
industries.
C. The only parent company in the agency world whose policy is to invest
centrally in building capabilities it then shares across business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful business, it is option C that is said
to be an exception, as it's harder to copy than the other options.
8.
Which of the following statements is not correct?
Your answer (in bold):
A. Soft skills complement hard skills, which are the basic occupational requirements of
a job.
B. As Actuaries, you will be expected to be technically sound i.e. possess in‐depth
technical knowledge in the area of expertise and the ability to apply it in practice.
C. As an actuary, you have to be able to manage business situations but can
get away without managing people.
D. Any profession is as good as its members and hence, as actuaries, you are always
expected to conduct yourself in a professional and ethical manner.
Correct
Correct answer: C
9.
Which of the following described in options A, B, C or D is not in itself criteria used for the
issuance of an Actuarial Practice Standard or a Guidance Note?
I.
II.
III.
Consistent with public interest
Consistent with Professional Conduct Standards
Unambiguous
Your answer (in bold):
A. I only
B. II only
C. III only
D. None of them
Correct
Correct Answer: C
10. Choose the incorrect statement:
Your answer (in bold):
A. A private company has the words ‘Proprietary Limited’ after its name.
B. In terms of the Companies Act of 2008, a private company can only have a
maximum of 50 members.
C. A private company must in its memorandum of incorporation restrict the right to
transfer its shares and prohibit any offer of its shares or debentures to the public.
D. None of the above.
Incorrect
The answer is B. Whereas the 1973 Act limited the number of members that a private company could
have, the 2008 Act does not have a similar provision.
11. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget.
B. Object A has a button.
C. Object A is a green striped widget with a button.
D. Object A has a button and green stripes.
Correct
The answer is D as all you know for sure is that Object A has a button and green stripes. This is in
accordance with the deductive synthesis exercise under the 'synthesis' tutorial.
12. As an executive in a major oil company, you work for the division where responsibilities
cover its network of petrol stations serving the public. You've received details from the
directors of the strategic, financial, and non-financial objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme you run for
customers.
B. Pledge to protect the environment by increasing new policies and processes.
C. Leverage distribution network more effectively by establishing shops on
sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the financial objectives
in D. A is tactical rather than strategic, and B is non-strategic and non-financial (although often it is difficult
to draw a clear-cut line between profits and social responsibility). D is financial - it is a specific goal with
specific timeframe.
13. In the business game, The Way Forward, which one of the following effects would be
most likely if public relations was chosen as the first management priority in all areas?
Your answer (in bold):
A. Increased sales.
B. Decreased sales price.
C. Decreased debtors.
D. Higher profit.
Correct
The correct answer is A. If the highest management priority was public relations this is most likely to
cause the public to buy more of the company's products. Public relations would not in itself decrease the
sales price, reduce the debtors, or necessarily result in higher profit, so B, C and D are not correct in the
context of the question asked.
14. Which of the following is not a main practice area for actuaries working in life
insurance?
Your answer (in bold):
A. Pricing.
B. Reserving and valuations.
C. Risk Management.
D. Marketing.
Correct
Correct Answer: D
15. When invited to give actuarial advice to a client an actuary must consider whether there
are any professional reasons not to accept the appointment by exercising which of the
following options?
Your answer (in bold):
A. Contacting the client’s Board or Trustees
B. Contacting the previous actuary when this is known
C. Contacting the client’s CEO
D. None of the above
Incorrect
Correct Answer: B
16. Which of the following statements is true?
Your answer (in bold):
A. An option is a contract whereby it is agreed that when the current contract expires,
either of the parties will have the right to extend the contract for a stipulated time
period.
B. An option is a contract whereby the offeror agrees not to sell a thing before first
offering it to a specific person.
C. An option is a contract to keep an offer open for a specified time, during
which period the offer cannot be revoked.
D. An option is a contract allowing the offeror to make his offer within a reasonable
time.
Correct
Answer C is correct. An option is a contract to keep an offer open for a specified time during which period
the offer cannot be revoked. A contract whereby the offeror agrees not to sell a thing before first offering it
to a specific person is called a contract containing a right of pre-emption.
17. Which of the following statements describes the characteristics of power-based
organisations in terms of organisational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key influencers
more than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified. Easier to
predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues beyond one
function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - a central power source is usually
associated with young companies, or those where the founder has not wished to expand greatly. B describes a characteristic of a hierarchical organisation. C - is a characteristic of matrix organisations. D is a characteristic of matrix organisations. E- organisations where power is highly concentrated in one or
few individuals are compromising their future stability if those decision makers cannot continue and no
successors have been identified.
18. The main purpose of a business strategy is...
Your answer (in bold):
A. to follow every opportunity available.
B. to determine how best to use management talent.
C. to decide on the best way to promote the business to customers.
D. to maximise the value of the company.
Correct
The answer is D in accordance with the 'creating and capturing value' tutorial.
19. When can a firm practice as Actuaries?
Your answer (in bold):
A. All the partners are Fellow of Institute of Actuaries of India (FIAI)
B. Some of the partners are FIAI while some can be members of other
professional bodies
C. Some of the partners are FIAI while some can be Associates of Institute of Actuaries
of India
D. Professional qualification of partners doesn’t matter
Incorrect
Correct Answer: A
20. On 15 January Richard entered into a written contract of agency with Diana in terms of
which Richard authorised his professional assistant Diana to purchase a vacant plot of land
from Golf Mead (Pty) Ltd, a private golf estate development company. Richard instructed
Diana that she must not pay more than R3 million for a vacant plot. Diana, on behalf of
Richard, entered into a written contract with Golf Mead (Pty) Ltd for the purchase of a
vacant plot on a golf estate. In terms of the contract of sale the purchase price for the
vacant plot was R2.5 million. In addition, Diana, professing to act on Richard’s behalf,
bought a golf cart at the price of R150 000 from Golf Mead (Pty) Ltd. Although Richard at no
stage provided Diana with either express or implied authority to purchase the golf cart,
Diana fraudulently represented that she had authority to purchase the golf cart on Richard’s
behalf. Furthermore, Richard did not impliedly or expressly ratify Diana’s purchase of the
golf cart (in fact he has never even seen it), nor did he, at any time, give the impression
that Diana was authorised to purchase the golf cart.
Which of the statements is correct?
Your answer (in bold):
A. Richard is bound to Golf Mead under the law of contract of sale for the purchase of
the vacant plot, and will be liable under the implied warranty of authority for the golf
cart.
B. Richard is not bound under the law of contract of sale for the purchase of the vacant
plot as Diana exceeded her authority in respect of the purchase of the golf cart.
Diana may, however, be liable to Golf Mead for contractual damages arising from the
sale of the plot and the golf cart because she exceeded her authority in this regard.
C. Richard is liable to Golf Mead in terms of the law of contract of sale for the
purchase of the vacant plot, and Diana will be liable to Golf Mead for the
golf cart in terms of the implied warranty of authority.
D. Richard is bound to Golf Mead for the sale of the vacant piece of land and the golf
cart, as the cumulative value of the purchases did not exceed R3 million.
Correct
Answer C is correct. An agent must act in terms of the mandate given by the principal. If the agent
exceeds her mandate, the principal is still bound to fulfil those transactions that were undertaken in terms
of the mandate, but may refuse to fulfil those transactions that were undertaken in excess of the given
mandate. As regards those transactions which were undertaken by the agent in excess of the mandate,
the agent will be liable. There are times, however, when the principal will be liable even for those
transactions exceeding the express mandate. This will occur where the principal has acted in a way so as
to give the other party a reasonable impression that the agent was authorised to enter into those
transactions which were not covered by the mandate. In the case above, the agent acted in terms of the
mandate for the procurement of the property, but exceeded her authority as regards the purchase of the
golf cart. Accordingly, the principal, Richard, will be liable to perform in terms of the sale agreement for
the vacant plot of land. However, Diana will be liable for the purchase price of the golf cart as she
exceeded her authority and Richard did nothing to create an impression in the mind of the seller that he
had authorised this transaction.
21. The sustainability of a competitive advantage is driven in part by whether the
advantage is likely to last for a long time and is hard to substitute. You can 'test' if an
advantage is likely to be sustainable by asking if it has certain attributes. The following list
describes the attributes of a sustainable advantage - but one of them is not correct.
Which one does NOT represent an attribute of sustainable advantage?
Your answer (in bold):
A. A competitive advantage is likely to be sustainable if it is based upon a scarce
resource.
B. A competitive advantage is likely to be sustainable if it is difficult to imitate.
C. A competitive advantage is likely to be sustainable if it is hard to transfer.
D. A competitive advantage is likely to be sustainable if it is based on
technology.
E. A competitive advantage is likely to be sustainable if it hard to identify or
understand.
Correct
Answer D is correct. Unless the technology is proprietary, and therefore hard to imitate, or otherwise hard
to identify or understand, technology often represents an advantage that is easily eroded by others
attaining the same, or similar, technology. All the other options are ways you can 'test' if an advantage is
likely to be sustainable for a reasonable length of time because if an advantage is hard to imitate, transfer
or identify/understand the implication is competitors won't have the capability to replicate it.
22. In meeting customer or client needs which of the following would not normally be true?
Your answer (in bold):
A. It is important for a company to know who its customers are and to be clear about
the needs it is meeting.
B. A company will not normally make assumptions about what its customers want
without asking them.
C. Customers' needs change over time.
D. Customers often find that a company will do things for them that they do
not care about.
Incorrect
The answer is B in accordance with the 'are we meeting customer needs?' tutorial.
23. Which of the following Committee/Committees is/are mandated by the Actuaries Act
2006
I.
Finance and Strategic Affairs Committee
II.
External Affairs Committee
III.
Professional Affairs Committee
IV.
Disciplinary Committee
Your answer (in bold):
A. I only
B. I, III and IV
C. IV only
D. III and IV
Incorrect
Correct Answer: C
24. Choose the statement that most correctly reflects the law.
Misrepresentation renders a contract…
Your answer (in bold):
A. void.
B. voidable.
C. against public policy.
D. capable of rectification.
Correct
The answer is B. Mistake renders a contract void. Misrepresentation renders a contract voidable.
25. Your 'street-style' youth-orientated fashion-house needs extra suppliers to allow you to
get a constant flow of your new designs quickly to young customers. Based on the
strengths and weaknesses of potential overseas manufacturers listed below.
Which one would help you fulfil your strategy?
Your answer (in bold):
A. This company handles high volumes (they've supplied identical Government
uniforms for years). It has many machinists, but is not highly automated. It can
deliver on schedule if given long lead times. Low wages guarantee low cost per unit.
B. This small factory will take instructions electronically and transfer data to
computerised cutting machines. It can produce items quickly, though usually in
smaller batches than manufacturer A. It produces its own designs for local markets.
It has fewer, higher paid staff than manufacturer A.
C. Company C can - and will - copy anything - they don't need many written
instructions. They make near-identical copies of design from international
fashion shows within a week, usually without the designer's permission.
They emphasise speed over quality.
Incorrect
Correct Answer: B. Manufacturer B would be best as it seems responsive and flexible and could offer
volume by delivering smaller batches across staggered dates, allowing orders to be adapted according to
market uptake. Staff have better conditions and their skills for original design may be an asset. Company
A's strengths appear to be in large scale, repetitive orders. Indications are that their systems and staff
may not be geared to fast turnaround on changing requirements. Company C may present some risks.
They provide speed, but if their success is built on 'stealing' designs, your own reputation may suffer by
using them - or your own designs could be stolen too!
26. Self regulation is a right for the actuarial profession
Your answer (in bold):
A. True
B. False
Correct
Correct Answer: B
27. In the business game, The Way Forward, if a company sold a simple but very effective
product that was designed many years ago, which one of the following words would be the
most appropriate to use in its advertising?
Your answer (in bold):
A. Distinctive.
B. Fashionable.
C. Green.
D. Reliable.
Incorrect
The correct answer is D as ‘reliable' would suggest a non-complicated product that has stood the test of
time. ‘Distinctive' would suggest a more modern product that has been specially designed to be different
from other available products. ‘Fashionable' would suggest a very recently designed product. ‘Green' is a
modern phenomenon and would not be a product designed many years ago.
28. All except two of the following would be appropriate criteria to test whether a potential
segment should be a viable target.
Select the two which are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require some
adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to include the
target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or distribution
exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a long time,
ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although it is vital to
have channels of communication and distribution they do not have to be exclusive. E - a long established
segment is likely to be served already and using this criterion would in any case eliminate interesting
emerging segments.
29. If you have a major surprise to impart to your colleagues concerning the business, the
way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week before the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to the meeting.
Correct
The answer is A in accordance with the 'no surprises' tutorial.
30. Choose the correct answer.
For a suretyship agreement to be valid...
Your answer (in bold):
A. all of the parties to it must sign it.
B. it must be in writing.
C. it must be in writing and signed by the surety.
D. it must be written, notarised before a notary public and signed by all the parties
thereto.
Correct
The answer is C. In terms of the General Law Amendment Act 50 of 1956, all suretyship agreements
must be in writing and signed by the surety or the surety’s representative. There is no requirement for the
credit grantor to also sign the agreement.
31. Which one is the powerful tool of memory?
Your answer (in bold):
A. Textbooks
B. Audio
C. Video
D. Visual
Correct
Correct Answer: D
32. If you were classifying a company in terms of how it made decisions when responding to
changing market conditions, which one of the following descriptions would define a
'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to
improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait
around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong
returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs
defending from others seeking to steal market share from them. They have resources they can use to
attack competitors. Sometimes their relative strength can make them over confident. D - describes Fast
Follower organisations who are less happy with high risk than Innovators, but can often achieve greater
returns and visibility than Innovators gain. B - describes a combination of Defenders, Innovators and Fast
Followers. C - describes Innovators.
33.
The University of Cape Town’s Zoology Department requires all students (or their guardians)
to sign the following indemnity form:
‘I understand that all zoology excursions are undertaken at my (or my child’s) own risk. I
indemnify the Department and its staff against any claims arising, whether from negligence,
gross negligence, or otherwise.’
On a recent zoology excursion a 19 year old student was injured (incurring medical
expenses in the amount of R5 000) in a motor vehicle accident as a result of gross
negligence on the part of the UCT bus driver, an employee in the Zoology Department.
In view of the wording of the indemnity, your advice to the student would be:
Your answer (in bold):
A. The indemnity is likely not to be valid as the court will adopt a narrow interpretation
to the word "excursions" and the UCT Zoology Department will be liable to pay the
R5000.
B. UCT will not be liable because one can exclude liability for gross negligence in terms
of the Consumer Protection Act of 2008 as long as the person who suffers the loss is
not a minor and has personally entered into the contract.
C. UCT will be liable because the indemnity for gross negligence is invalid as
one cannot exclude liability for gross negligence in terms of the Consumer
Protection Act of 2008.
D. The UCT Zoology Department will be liable, but can ask the court to apportion
damages between itself and the student.
Correct
Answer C is correct. In terms of the Consumer Protection Act of 2008 one cannot exclude liability for
gross negligence. There are no exceptions to this rule.
2. The sustainability of a competitive advantage is driven in part by whether the advantage is
likely to last for a long time and is hard to substitute. You can 'test' if an advantage is likely to
be sustainable by asking if it has certain attributes. The following list describes the attributes
of a sustainable advantage - but one of them is not correct.
Which one does NOT represent an attribute of sustainable advantage?
Your answer (in bold):
A. A competitive advantage is likely to be sustainable if it is based upon a scarce
resource.
B. A competitive advantage is likely to be sustainable if it is difficult to imitate.
C. A competitive advantage is likely to be sustainable if it is hard to transfer.
D. A competitive advantage is likely to be sustainable if it is based on
technology.
E. A competitive advantage is likely to be sustainable if it hard to identify or understand.
Correct
Answer D is correct. Unless the technology is proprietary, and therefore hard to imitate, or otherwise hard to
identify or understand, technology often represents an advantage that is easily eroded by others attaining
the same, or similar, technology. All the other options are ways you can 'test' if an advantage is likely to be
sustainable for a reasonable length of time because if an advantage is hard to imitate, transfer or
identify/understand the implication is competitors won't have the capability to replicate it.
3. On 15 January Richard entered into a written contract of agency with Diana in terms of
which Richard authorised his professional assistant Diana to purchase a vacant plot of land
from Golf Mead (Pty) Ltd, a private golf estate development company. Richard instructed
Diana that she must not pay more than R3 million for a vacant plot. Diana, on behalf of
Richard, entered into a written contract with Golf Mead (Pty) Ltd for the purchase of a
vacant plot on a golf estate. In terms of the contract of sale the purchase price for the
vacant plot was R2.5 million. In addition, Diana, professing to act on Richard’s behalf,
bought a golf cart at the price of R150 000 from Golf Mead (Pty) Ltd. Although Richard at no
stage provided Diana with either express or implied authority to purchase the golf cart,
Diana fraudulently represented that she had authority to purchase the golf cart on Richard’s
behalf. Furthermore, Richard did not impliedly or expressly ratify Diana’s purchase of the
golf cart (in fact he has never even seen it), nor did he, at any time, give the impression
that Diana was authorised to purchase the golf cart.
Which of the statements is correct?
Your answer (in bold):
A. Richard is bound to Golf Mead under the law of contract of sale for the purchase of
the vacant plot, and will be liable under the implied warranty of authority for the golf
cart.
B. Richard is not bound under the law of contract of sale for the purchase of the vacant
plot as Diana exceeded her authority in respect of the purchase of the golf cart.
Diana may, however, be liable to Golf Mead for contractual damages arising from the
sale of the plot and the golf cart because she exceeded her authority in this regard.
C. Richard is liable to Golf Mead in terms of the law of contract of sale for the
purchase of the vacant plot, and Diana will be liable to Golf Mead for the
golf cart in terms of the implied warranty of authority.
D. Richard is bound to Golf Mead for the sale of the vacant piece of land and the golf
cart, as the cumulative value of the purchases did not exceed R3 million.
Correct
Answer C is correct. An agent must act in terms of the mandate given by the principal. If the agent
exceeds her mandate, the principal is still bound to fulfil those transactions that were undertaken in terms
of the mandate, but may refuse to fulfil those transactions that were undertaken in excess of the given
mandate. As regards those transactions which were undertaken by the agent in excess of the mandate,
the agent will be liable. There are times, however, when the principal will be liable even for those
transactions exceeding the express mandate. This will occur where the principal has acted in a way so as
to give the other party a reasonable impression that the agent was authorised to enter into those
transactions which were not covered by the mandate. In the case above, the agent acted in terms of the
mandate for the procurement of the property, but exceeded her authority as regards the purchase of the
golf cart. Accordingly, the principal, Richard, will be liable to perform in terms of the sale agreement for
the vacant plot of land. However, Diana will be liable for the purchase price of the golf cart as she
exceeded her authority and Richard did nothing to create an impression in the mind of the seller that he
had authorised this transaction.
4. The Value Chain shows the activities required to deliver value to...
Your answer (in bold):
A. shareholders.
B. customers.
C. products.
D. the economy.
Correct
The answer is B in accordance with 'the business system' tutorial.
5.
Which of the following described in options A, B, C or D is not in itself criteria used for the
issuance of an Actuarial Practice Standard or a Guidance Note?
I.
II.
III.
Consistent with public interest
Consistent with Professional Conduct Standards
Unambiguous
Your answer (in bold):
A. I only
B. II only
C. III only
D. None of them
Correct
Correct Answer: C
6. An insurance company employs Edward, an actuary. Whilst acting within the course and
scope of his employment, he negligently misstates information to a client. By relying on this
information the client suffers loss.
Which of the following statements is correct?
Your answer (in bold):
A. The client can sue the insurance company in the law of delict for the loss that it (the
client) suffered.
B. The client can hold the insurance company liable on the basis of the
principle of vicarious liability.
C. The insurance company is not liable; only the actuary is, as the company was not at
fault.
D. A and B above.
Incorrect
Answer D is correct. According to the principle of vicarious liability an employer can be held liable for the
delicts of its employee provided that the employee was acting within the course and scope of his
employment.
7. All except two of the following would be appropriate criteria to test whether a potential
segment should be a viable target.
Select the two which are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require some
adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to include the
target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or distribution
exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a long time,
ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although it is vital to
have channels of communication and distribution they do not have to be exclusive. E - a long established
segment is likely to be served already and using this criterion would in any case eliminate interesting
emerging segments.
8. Which of the following are the aspects about your employing company that you should
understand?
Your answer (in bold):
A. What is the market in which the company operates?
B. What are the product / service it offers?
C. Ultimate corporate objectives – its mission, vision, values and strategy?
D. All of above.
Correct
Correct Answer: D
9. The Actuarial Society of India was established in?
Your answer (in bold):
A. 1945
B. 1944
C. 1947
D. 1946
Correct
Correct Answer: B
10.
The University of Cape Town’s Zoology Department requires all students (or their guardians)
to sign the following indemnity form:
‘I understand that all zoology excursions are undertaken at my (or my child’s) own risk. I
indemnify the Department and its staff against any claims arising, whether from negligence,
gross negligence, or otherwise.’
On a recent zoology excursion a 19 year old student was injured (incurring medical
expenses in the amount of R5 000) in a motor vehicle accident as a result of gross
negligence on the part of the UCT bus driver, an employee in the Zoology Department.
In view of the wording of the indemnity, your advice to the student would be:
Your answer (in bold):
A. The indemnity is likely not to be valid as the court will adopt a narrow interpretation
to the word "excursions" and the UCT Zoology Department will be liable to pay the
R5000.
B. UCT will not be liable because one can exclude liability for gross negligence in terms
of the Consumer Protection Act of 2008 as long as the person who suffers the loss is
not a minor and has personally entered into the contract.
C. UCT will be liable because the indemnity for gross negligence is invalid as
one cannot exclude liability for gross negligence in terms of the Consumer
Protection Act of 2008.
D. The UCT Zoology Department will be liable, but can ask the court to apportion
damages between itself and the student.
Correct
Answer C is correct. In terms of the Consumer Protection Act of 2008 one cannot exclude liability for
gross negligence. There are no exceptions to this rule.
11. If you have a major surprise to impart to your colleagues concerning the business, the
way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week before the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to the meeting.
Correct
The answer is A in accordance with the 'no surprises' tutorial.
12. As part of a 'PEST' analysis of external factors that might affect your industry, which of
the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST framework
that is used to scan for external influences impacting an industry.
13. In the business game, The Way Forward, which one of the following mix of strategies
would you expect to be the most successful?
Your answer (in bold):
A. Modern; high quality product; medium price; conservative brand image.
B. Traditional product; high price; modern brand image.
C. Fashionable product; high price; prestigious image.
D. Sturdy basic product, high price, traditional image.
Correct
The correct answer is C. The three features of C, taken together, offer a consistent strategy. In each of A,
B and D the three features are not consistent.
14. The key issues that an actuary will encounter in any business area in which he/she is
working are:
Your answer (in bold):
A. Balancing the interests of all stakeholders
B. Treating customers fairly
C. Statutory & regulatory compliances
D. All of above
Correct
Correct Answer: D
15. When can a firm practice as Actuaries?
Your answer (in bold):
A. All the partners are Fellow of Institute of Actuaries of India (FIAI)
B. Some of the partners are FIAI while some can be members of other professional
bodies
C. Some of the partners are FIAI while some can be Associates of Institute of Actuaries
of India
D. Professional qualification of partners doesn’t matter
Correct
Correct Answer: A
16. Dr Maritz is a collector of vintage motor cars. His patient and close friend, Jan,
possesses a vintage car which Dr Maritz has always admired. When Dr Maritz is suddenly
required to perform an emergency operation on Jan, he persuades Jan outside the operating
theatre to sell him the car at a very low price. After Jan's recovery, Dr Maritz informs him
that he has bought a similar car at a lower price from someone else and that he is no longer
interested in buying Jan's car.
Which of the following statements is correct?
Your answer (in bold):
A. The contract between Jan and Dr Maritz is invalid, because Jan was very ill when he
entered into the contract.
B. The contract is not enforceable because there was no consensus between Jan and Dr
Maritz.
C. Dr Maritz cannot set the contract aside because he (Dr Maritz) was not
unduly influenced to enter into the agreement.
D. Jan can set the contract aside because Dr Maritz made an innocent
misrepresentation.
Correct
Answer C is correct. Undue influence does not affect contract formation. A valid contract can come into
existence even if there is undue influence. However, undue influence renders a contract voidable. The
decision to set aside a contract on the basis of undue influence resides with the innocent party. On the
above facts, if there was anyone who would have been capable of setting aside the contract on the basis
of undue influence, it would have been Jan and not Dr Martiz. If Jan elects not to set the contract aside,
the contract remains in force. If Dr Maritz refuses to proceed with the sale, Jan can sue him for breach of
contract. In this case, there was no misrepresentation, innocent or otherwise.
17. You are the Marketing Director for Svenson, a technology manufacturer. You have just
introduced a new 'mobile entertainment' device, which will offer users the opportunity to
play videos, take digital photographs, send emails and text messages, play music and
communicate via telephone. It has state-of-the-art features, allowing compatibility with all
the top service providers. The Svenson brand is relatively new, yet it already has a
reputation for being innovative, cool and funky. The Svenson 'mini entertainer' is priced at
$600. You now have information from your Customer Management team showing the
profiles of your key customer segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good disposable
income, increasingly mobile for work and leisure, take huge interest in
gadget advertising, and love the funky status they acquire with Svenson
products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable disposable income,
buy on functionality, willing to pay for whichever technology combines all the
functions they need and fits their mobile lifestyle.
C. Family First - the largest segment (33% of your base), although it has shrunk over
the last year. Mobility based around supporting the family. High income restricted by
outlays on children and aged parents. Willing to purchase any technology proven to
make their lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable segment. Segment size is
reasonable, and it is growing, disposable income is high (for what is quite a reasonably expensive, one-off
purchase) and there is strong desire for the product. It is an ideal fit with Svenson's advantages in
innovation, plus its brand reputation - gadget lovers matched with funky gadget provider. Youth of Today
(B) is a reasonable-sized, growing segment. Svenson's advantages match their needs, but the segment is
more attracted by generic functionality than the Svenson brand, making it less attractive to the company.
Family First (C) is less attractive. Although this segment is large, the profile suggests people in this
segment are more likely to pay for features that provide convenience rather than pure entertainment.
Although they have high income, their profile suggests they are likely to have priorities for spending rather
than a high-priced entertainment item.
18. Which one of the following lists contains items that are all included in Maslow's
hierarchy of needs?
Your answer (in bold):
A. Self-actualisation; financial; social.
B. Safety; psychological; esteem.
C. Working; physiological; financial.
D. Social; safety; esteem.
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under the 'identifying
consumer needs' tutorial.
19. Which of the following forms of publicity is prohibited?
Your answer (in bold):
A. A member authorized by the Institute of Actuaries of India to represent the
profession speaking as its representative
B. Appropriate publicity of the profession objectively substantiated
C. Description of the professional services offered including basis for charging
D. Description of the work done on behalf of the profession for gains by the
actuary’s firm
Correct
Correct Answer: D
20.
Natalie, a successful training consultant, negotiated conference facilities at the Nelson Hotel
in Caledon where she was to conduct a two day seminar for local businesses. All the
arrangements were confirmed by the hotel and all the delegates were accordingly informed
of the venue, dates and times. On the morning of the conference, Natalie discovered, much
to her dismay, that the hotel had double booked its conference facilities and that she could
not run her seminar there. She quickly contacted the only other hotel in the area, the
Overberg Luxury Spa Resort, which was able to accommodate her seminar for the two days
but at double the rate the Nelson Hotel was going to charge her. The delegates were
redirected to this hotel. In her rush to the new destination, Natalie had a minor accident in
which her car's bumper was damaged.
The Nelson Hotel admits that they were in breach but allege that Natalie has not suffered
any damages because the Overberg Luxury Spa Hotel is rated 5 star whereas the Nelson is
only rated 4 star and the conference facilities at the Overberg are much better than at the
Nelson. Natalie wants to claim the additional expenses she has incurred. She also wants
compensation for loss of profit, cost of repairs of the bumper, inconvenience, humiliation
and loss of prestige caused by the breach.
In terms of the law of contract, which of the following statements is correct?
Your answer (in bold):
A. Natalie cannot claim any damages.
B. Natalie can claim the additional expenses and any associated loss of profits.
C. Natalie can claim the additional expenses, and damages for the loss of
profit, cost of repairs of the bumper, inconvenience, humiliation and loss of
prestige.
D. Natalie cannot cancel the contract as the breach was not serious.
Incorrect
Answer B is correct. The breach in this case was material, entitling Natalie to claim damages for breach of
contract. She would be able to claim damages to put her in the position she would have been had the
contract not been breached. If the contract had not been breached, she would not have incurred the
additional expenses associated with having to move the conference to a more expensive venue and the
possible loss of profits associated with this. She may thus bring a claim for the additional expenses and
the loss of profits. However, she would not be able to claim for the damages to her car from the Nelson
Hotel, as these damages are not a direct and foreseeable consequence of the Nelson’s breach. It would,
therefore, be more appropriate for her to sue the driver of the other vehicle in the law of delict for the
damages to her car. Inconvenience, humiliation and loss of prestige are non-patrimonial losses. In the law
of contract, one cannot claim damages for non-patrimonial loss. If she wishes to pursue her claims for
these damages, she would have to bring a claim in the law of delict, provided, of course, that she can
satisfy all the requirements of delict.
21. If you were classifying a company in terms of how it made decisions when responding to
changing market conditions, which one of the following descriptions would define a
'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to
improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait
around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong
returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs
defending from others seeking to steal market share from them. They have resources they can use to
attack competitors. Sometimes their relative strength can make them over confident. D - describes Fast
Follower organisations who are less happy with high risk than Innovators, but can often achieve greater
returns and visibility than Innovators gain. B - describes a combination of Defenders, Innovators and Fast
Followers. C - describes Innovators.
22. When considering financial and non-financial objectives, which of the following would be
true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial ones, and
they can be a lot less obvious.
B. Financial objectives will always be more important than non-financial ones, and are
usually more obvious.
C. Non-financial objectives will usually be more obvious than financial ones and will be
better understood by the staff.
D. Financial objectives are key to the success of a company so non-financial ones are
not usually relevant.
Correct
The answer is A in accordance with the 'non-financial objectives' tutorial.
23. Actuaries Act 2006 provide for the constitution of various Committees.
These Committees report to?
Your answer (in bold):
A. President of the Institute
B. The Council
C. The Prosecuting Director
D. The member appointed by the Government of India to the Council
Correct
Correct Answer: B
24. Choose the correct statement(s):
Your answer (in bold):
A. A non-variation clause prevents the parties from ever varying the terms of a
contract.
B. A non-variation clause prevents the parties from varying the terms of a
contract, unless the variation is done in writing and signed by all the parties
to the contract.
C. A non-variation clause prevents the parties from varying the terms of a contract,
unless it is clear that the written agreement is not recorded properly in which case
any party can vary the contract by sending all the other parties a notice to that
effect.
D. Statements (b) and (c) are true.
Correct
The answer is B. Statement C is incorrect because it creates the impression that a contract can only be
varied if the contract does not reflect the true intention of the parties. This is not so. A contract can be
varied to reflect a change of circumstance, provided that the parties agree to the variation in writing.
Statement A is clearly incorrect for its unaccommodating stance.
25. You have just joined a new company, and you have already been asked to make a
recommendation on what you think is a strategic, high-impact decision. Your
recommendation will be made direct to the Chief Executive. You have looked for someone
able to help you with this, but not found anyone with the right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you there is not
enough time to do that, and suggested you should "use your instinct."
What type of organisational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C. Newly-formed companies are frequently power-based and tend to involve little structure or
formality, high risk-taking, and the decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of approval, and in a matrix
organisation (C) you would expect more people to be involved in the process bringing their own views and
expertise.
26.
Which of the following described in options A, B, C or D is used to self-regulate the actuarial
profession?
I.
II.
III.
Promoting good practice
Preventing poor rules and regulations
Intervention when necessary
Your answer (in bold):
A. I and III
B. II and II
C. II and III
D. All of them
Incorrect
Correct Answer: A
27. In the business game, The Way Forward, if your company made a new issue of
1,000,000 shares and the issue price was £3.25, how much money would your company
receive?
Your answer (in bold):
A. £32,500,000.
B. £750,000.
C. £325,000.
D. £3,250,000.
Correct
The correct answer is D. £3.25 times 1,000,000 shares which equals £3,250,000.
28. One form of research used with consumers to explore their needs is called Conjoint
Analysis.
For what precise purpose would you use this research? Choose the correct statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value of
different attributes of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the product or
service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A. Conjoint means 'CONsiderJOINTly and is devised to help people explain what tradeoffs they would make between attributes.
29. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is needed.
B. Decide on the form of analysis, establish the right questions, discover the facts.
C. Ask the right question, decide what analysis to undertake, collect the
relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
30. Choose the correct answer.
For a suretyship agreement to be valid...
Your answer (in bold):
A. all of the parties to it must sign it.
B. it must be in writing.
C. it must be in writing and signed by the surety.
D. it must be written, notarised before a notary public and signed by all the parties
thereto.
Correct
The answer is C. In terms of the General Law Amendment Act 50 of 1956, all suretyship agreements
must be in writing and signed by the surety or the surety’s representative. There is no requirement for the
credit grantor to also sign the agreement.
31.
Which of the following options A, B, C or D best describes the action in relation to other
members?
I.
II.
III.
Criticism of another member’s work is prohibited
Criticism of another member’s work is acceptable
Criticism of another member’s work is properly reasoned and believed to be justified
Your answer (in bold):
A. I only
B. II and III
C. II only
D. II or III
Correct
Correct Answer: B
32. The company you work for, TransGlobal Multinational Limited, is considering entering a
new market. The decision-making process has involved reviewing other similar
organisations' attempted entries, identifying successes and failures, suggesting
improvements that TransGlobal could make over competitors' offers, and an analysis of the
market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational cultural types
listed do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders.
B. Innovators.
C. Fast followers.
D. Slow reactors.
Incorrect
Answer C is correct. This behaviour illustrates an organisation not willing to take the risk of moving first,
but opportunistic enough to enter where an opportunity has appeared, and then attempt to improve upon
the market entry, process, or product introduced by the innovator.
33. Pat, a director of a company, makes a series of bad investments on behalf of the
company. By an exercise of reasonable care and skill, he should have realised that these
investments were bad. The company, acting through the other directors, can:
Your answer (in bold):
A. bring a delictual action against Pat to recover the losses sustained by the company.
B. sue Pat on the basis of his negligent conduct for the losses sustained by the
company.
C. sue Pat for breaching his statutory duties in terms of s 77(2) of the Companies Act of
2008.
D. All of the above.
Correct
Answer D is correct. Pat can be sued in the law of delict for the losses he has caused the company.
Presumably he will be sued on the basis that he acted negligently. Fault by way of negligence is sufficient
to ground liability in the law of delict. Alternatively, Pat can be held liable in terms of s 77(2) of Companies
Act of 2008 for breaching his statutory fiduciary duties.
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You got 29 out of 32 answers correct (91%)
Congratulations! You have passed the Business Awareness Module test.
2. One source of competitive advantage is 'strategic relationships'.
If you were running a well-known Advertising Agency, select the one option in the
list below relating to the agency's relationships that you would consider as offering a
sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a diverse
range of industries.
C. The only parent company in the agency world whose policy is to invest
centrally in building capabilities it then shares across business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful business, it is
option C that is said to be an exception, as it's harder to copy than the other options.
3. Choose the correct answer.
For a suretyship agreement to be valid...
Your answer (in bold):
A. all of the parties to it must sign it.
B. it must be in writing.
C. it must be in writing and signed by the surety.
D. it must be written, notarised before a notary public and signed by all the
parties thereto.
Incorrect
The answer is C. In terms of the General Law Amendment Act 50 of 1956, all
suretyship agreements must be in writing and signed by the surety or the surety’s
representative. There is no requirement for the credit grantor to also sign the
agreement.
4. Moving from an existing strategy to a new one can be challenging with complicated
changes to implement. Trying to do everything at once can stretch resources. It is
usually best to progress in manageable steps with each step representing a sustainable
strategy in itself. Such steps are a strategic staircase.
In what order are the steps on Komatsu's strategic staircase, starting at the bottom?
Your answer (in bold):
A. Cost; quality; diversification; differentiation.
B. Differentiation; quality; cost; diversification.
C. Quality; cost; differentiation; diversification.
D. Differentiation; diversification; quality; cost.
Correct
The answer is C in accordance with the 'Komatsu's strategic staircase'. Explore item in
'the strategic staircase' tutorial.
5. Which of the following Committee/Committees is/are mandated by the Actuaries
Act 2006
I.
Finance and Strategic Affairs Committee
II.
External Affairs Committee
III.
Professional Affairs Committee
IV.
Disciplinary Committee
Your answer (in bold):
A. I only
B. I, III and IV
C. IV only
D. III and IV
Correct
Correct Answer: C
6.
A company owns a plot of land. The company decides to sell the land and advertises
for offers from the general public. Offers come in. One of the company’s directors has
a friend. He informs his friend of what offers have come in. Relying on this
information, the friend places an offer which marginally outbids all the other offerors.
The land is eventually sold to the director’s friend. One of the unsuccessful bidders,
Rupert, hears about the director’s indiscretion and wants to take action. Rupert feels
that if the friend had not placed an offer, his (Rupert’s) offer would have been
accepted, and he would have been able to develop a residential complex on the land,
bringing him a large profit.
One of the following statements is correct. Please select which one.
Your answer (in bold):
A. Rupert can sue the director for breaching his fiduciary duties and claim for
loss of profits.
B. Rupert can sue the company for loss of profits in the law of delict as the
director was acting within the course and scope of his employment when he
divulged insider information.
C. Rupert can sue the director’s friend in delict for loss of profits on the basis that
he acquired information in an underhanded manner to give him a competitive
edge.
D. A and C above.
E. A, B and C above.
Correct
Answer E is correct. When a director of a company commits a delict, he can be sued
personally, or the company can be held liable for the delicts of the director on the
basis of vicarious liability. The director can be held personally liable for breaching his
fiduciary duties. The fiduciary duties of a director require a director to transact the
business of the company in good faith. In this case, the director has clearly acted
contrary to the principle of good faith for divulging insider information to a friend to
the detriment of Rupert. Rupert may thus sue the director or the company. It may
make more sense to sue the company because the company has more resources to pay
Rupert’s damages claim. The fact that the company may also have been harmed by
the director’s actions is irrelevant from the point of view of Rupert’s delictual action
against the company. As an alternative, Rupert could also sue the director’s friend as
the friend committed a delict when he fraudulently conspired with the director. Fraud
is a wrongful act in the law of delict.
7. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've received
details from the directors of the strategic, financial, and non-financial objectives going
forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme you
run for customers.
B. Pledge to protect the environment by increasing new policies and processes.
C. Leverage distribution network more effectively by establishing shops on
sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the
financial objectives in D. A is tactical rather than strategic, and B is non-strategic and
non-financial (although often it is difficult to draw a clear-cut line between profits and
social responsibility). D is financial - it is a specific goal with specific timeframe.
8. Which of the following is a wrong combination of an industry and its regulator?
Which one of the following has been the result of recent developments?
Your answer (in bold):
A. Insurance – IRDA
B. Banking – RBI
C. Financial markets – SEBI
D. None of above
Correct
Correct Answer: D
9.
Which of the following described in options A, B, C or D is used to self-regulate the
actuarial profession?
I.
II.
III.
Promoting good practice
Preventing poor rules and regulations
Intervention when necessary
Your answer (in bold):
A. I and III
B. II and II
C. II and III
D. All of them
Correct
Correct Answer: A
10. Marie has long admired a beautiful cloth that Lee bought while on holiday in
Mali. One day Lee offers to sell it to Marie for R500, and Marie
accepts. Unbeknown to either of the parties, at the time they enter into the contract of
sale, Lee’s house had just been burgled, and the cloth stolen. Your advice to them
both is that...
Your answer (in bold):
A. the contract is void for reason of initial impossibility of performance.
B. the contract is void for reason of supervening impossibility of performance.
C. the contract is not void, because the impossibility is subjective.
D. the contract is not void. Although it is impossible for Lee to deliver the cloth,
Marie is still obliged to pay the agreed purchase price.
Correct
Answer A is correct. It is possible for a contract to come into existence and then for
circumstances to arise which make performance in terms of the contract impossible.
When that happens, the debtor is no longer required to perform, provided that the
circumstances giving rise to the impossibility of performance were not created by the
debtor herself. A distinction is therefore drawn between objective impossibility (not
caused through the fault of the debtor) and subjective impossibility (caused through
the fault of the debtor). Objective impossibility will be condoned, but subjective
impossibility will not. In the above case, there is impossibility of performance and
furthermore, the impossibility is objective as the theft was not something Lee had any
control over. However, because the impossibility existed at the time when the contract
was concluded, we are not dealing with supervening impossibility, but initial
impossibility. The consequence of this is that the contract is void.
11. The Value Chain shows the activities required to deliver value to...
Your answer (in bold):
A. shareholders.
B. customers.
C. products.
D. the economy.
Correct
The answer is B in accordance with 'the business system' tutorial.
12. Your 'street-style' youth-orientated fashion-house needs extra suppliers to allow
you to get a constant flow of your new designs quickly to young customers. Based on
the strengths and weaknesses of potential overseas manufacturers listed below.
Which one would help you fulfil your strategy?
Your answer (in bold):
A. This company handles high volumes (they've supplied identical Government
uniforms for years). It has many machinists, but is not highly automated. It can
deliver on schedule if given long lead times. Low wages guarantee low cost
per unit.
B. This small factory will take instructions electronically and transfer data to
computerised cutting machines. It can produce items quickly, though
usually in smaller batches than manufacturer A. It produces its own
designs for local markets. It has fewer, higher paid staff than
manufacturer A.
C. Company C can - and will - copy anything - they don't need many written
instructions. They make near-identical copies of design from international
fashion shows within a week, usually without the designer's permission. They
emphasise speed over quality.
Correct
Correct Answer: B. Manufacturer B would be best as it seems responsive and flexible
and could offer volume by delivering smaller batches across staggered dates, allowing
orders to be adapted according to market uptake. Staff have better conditions and their
skills for original design may be an asset. Company A's strengths appear to be in large
scale, repetitive orders. Indications are that their systems and staff may not be geared
to fast turnaround on changing requirements. Company C may present some risks.
They provide speed, but if their success is built on 'stealing' designs, your own
reputation may suffer by using them - or your own designs could be stolen too!
13. In the business game, The Way Forward, which one of the following is the
primary purpose of the Profit and Loss Account?
Your answer (in bold):
A. So that a team knows how much money it has got.
B. So that a team knows whether it traded profitably or not in the period
concerned.
C. So that a team knows its overhead costs in relation to its turnover.
D. So that a team knows how much money to set aside for Corporation Tax.
Correct
The correct answer is B. The prime purpose of a Profit and Loss Account is to show
the trading profit or loss for the period of the accounts.
14. Which one of the following statements is false?
Your answer (in bold):
A. Life insurance market in India was tariffed until very recently, which limited
the role that actuaries can play in product pricing and development.
B. IRDA has recently issued product related regulations, resulting is majority of
life insurance products offered by life insurers to be re-developed and repriced.
C. Solvency II has been mandated by IRDA for life insurance companies, but
not general insurance companies in India.
D. None of the above.
Correct
Correct Answer: C
15.
Which of the following options A, B, C or D best describes the action in relation to
other members?
I.
II.
III.
Criticism of another member’s work is prohibited
Criticism of another member’s work is acceptable
Criticism of another member’s work is properly reasoned and believed to be justified
Your answer (in bold):
A. I only
B. II and III
C. II only
D. II or III
Correct
Correct Answer: B
16. Pat, a director of a company, makes a series of bad investments on behalf of the
company. By an exercise of reasonable care and skill, he should have realised that
these investments were bad. The company, acting through the other directors, can:
Your answer (in bold):
A. bring a delictual action against Pat to recover the losses sustained by the
company.
B. sue Pat on the basis of his negligent conduct for the losses sustained by the
company.
C. sue Pat for breaching his statutory duties in terms of s 77(2) of the Companies
Act of 2008.
D. All of the above.
Incorrect
Answer D is correct. Pat can be sued in the law of delict for the losses he has caused
the company. Presumably he will be sued on the basis that he acted negligently. Fault
by way of negligence is sufficient to ground liability in the law of delict.
Alternatively, Pat can be held liable in terms of s 77(2) of Companies Act of 2008 for
breaching his statutory fiduciary duties.
17. You are an industry analyst in a venture capital company, preparing a report for
potential investors on a restaurant chain, Fervour, which is looking to expand abroad.
Fervour specialises in converting churches into restaurants, capitalising on the
architecture to create atmospheric surroundings, supported by live jazz. The menus created by Michelin Chef Jean-Pierre Noir - are highly acclaimed in culinary circles
for their imagination and flair. Fervour looks to cater for a wide range of clientele,
offering a dining experience 'for all the senses'. While it is still relatively unknown, it
has bought the majority of unused church buildings across the country, ready for
conversion. In trying to make the investment proposition sound as attractive as
possible, it is important that you highlight where Fervour has advantages in the
marketplace.
Which one of the following statements do you feel represents a real and sustainable
competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the country.
C. Superior locations - church buildings stand out against ordinary
restaurants, and are located close to the desired audience.
D. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at all its
venues.
E. Relationships with its key suppliers - to ensure the freshest food and the right
musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused churches
means that other competitors will be unable to replicate the Fervour surroundings,
making this a sustainable advantage. While the menus are imaginative (A), they can
also be copied, which means that this advantage is difficult to sustain. The Fervour
brand (B) is unknown outside the country, so it cannot yet be exploited as an
advantage. While a website (D) is useful, it is likely that most other restaurants will
also have a website supporting their core offering, so this does not represent an
advantage. Relationships with suppliers to ensure fresh food (E) are a necessity in this
market, rather than an advantage.
18. The pressures that affect an industry's profitability are known as competitive
forces, or Porter's 'Five Forces'.
Which of the following is not one of the five forces?
Your answer (in bold):
A. Rivalry.
B. Economic change.
C. Threat of new entrants.
D. Supplier power.
Correct
The answer is B in accordance with the 'how strong are the competitive forces?'
tutorial.
19. Self regulation is a right for the actuarial profession
Your answer (in bold):
A. True
B. False
Correct
Correct Answer: B
20.
Thabo wanted to impress his girlfriend by giving her a diamond bracelet as a gift.
While looking at bracelets in the window at a Jewellery store at the V & A
Waterfront, he spotted a diamond bracelet priced at R10. Realising that this was a
bargain (all the other bracelets were priced above R10 000), Thabo entered the store,
approached the sales assistant and told her that he wanted to buy the diamond bracelet
in the window priced at R10. The shop assistant told him that none of the bracelets
were priced that low and that there must be a mistake. It transpired that the price was
incorrect and that the correct price was R10 000. Thabo insists that he is entitled to
buy the bracelet for R10.
Which of the following statements is correct?
Your answer (in bold):
A. Thabo is correct, as by putting the bracelet in the window, and attaching the
price, an offer was made to him, which he accepted by telling the shop
assistant that he wanted to buy that bracelet.
B. Thabo is not correct, as the shop assistant had made a counter-offer to him of
R10 000 and he would have to consider the counter-offer.
C. The shop assistant has to sell the bracelet to Thabo at the price of R10 as the
price was misrepresented to Thabo.
D. Thabo is not correct. By putting the jewellery in the window, the store is
merely inviting business and it is the customer, in this case, Thabo, who
makes the offer to purchase.
Correct
Answer D is correct. According to our common law, an advertisement is simply an
invitation to do business. An advertisement does not constitute an offer. When Thabo
sees the bracelet in the window with the price attached, the display does not constitute
an offer. This means that when he goes into the shop, he cannot insist that the bracelet
be sold to him for the stated price. According to the common law, if he decides to
purchase the bracelet, his willingness to purchase the bracelet will constitute an offer
to purchase, which the sales person may either accept or reject. In this case, the sales
person is entitled to reject his offer because of the mistake with the price in the
window.
21. Strategic decisions work at different levels of a company.
If you were developing a 'business unit' strategy, which one of the following questions
would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet the
company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its competitive
positioning and the advantages it will use. A relates to functional strategy and C
relates to corporate strategy.
22. When considering financial and non-financial objectives, which of the following
would be true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial ones, and
they can be a lot less obvious.
B. Financial objectives will always be more important than non-financial ones,
and are usually more obvious.
C. Non-financial objectives will usually be more obvious than financial ones and
will be better understood by the staff.
D. Financial objectives are key to the success of a company so non-financial ones
are not usually relevant.
Correct
The answer is A in accordance with the 'non-financial objectives' tutorial.
23. Which of the following options describes a function outside the purview of the
Quality Review Board?
Your answer (in bold):
A. Fix standards for the services provided by the members of the Institute
B. Review the quality of services provided by the members including actuarial
audit services
C. Promote the status of the Actuarial profession
D. Guide members of the Institute to improve the quality of services and
adherence to the various statutory and other regulatory requirements
Correct
Correct Answer: C
24. Which one of the following statements is incorrect?
Your answer (in bold):
A. A partnership does not enjoy perpetual succession unless the partnership
agreement provides otherwise.
B. A close corporation always enjoys perpetual succession.
C. A company enjoys perpetual succession.
D. A trust deed may confer perpetual succession on a trust.
Correct
The correct answer is A. The common law says that a partnership can never enjoy
perpetual succession even if the partnership agreement provides otherwise.
25. You run the office cleaning division at International GlobalCorp, and you are
setting your group's objectives. IGC's corporate goal is to grow market share in all its
businesses.
Which of the following objectives for your area directly supports the corporate
objective?
Your answer (in bold):
A. Increase the number of active customers by 15%.
B. Reduce costs of purchased cleaning products by 10%.
C. Buy four new mobile cleaning vans.
D. Achieve Silver status in the Association of Cleaners awards.
Correct
Answer A is correct. While the other objectives might indirectly contribute to the
ability to grow market share, answer A is the only one that directly results in increased
share (assuming that the market as a whole grows less than 15%).
26. What is the maximum number of working offices an actuarial firm with two
partners can have?
Your answer (in bold):
A. One
B. Four
C. Two
D. Six
Correct
Correct Answer: C
27. In the business game, The Way Forward, how is gross margin defined?
Your answer (in bold):
A. The difference between turnover and cost of sales.
B. The difference between the price a company sells at and the lowest price in the
market.
C. The difference between the Profit and Loss in the current time period and the
Profit and Loss in the previous period.
D. The biggest difference between the price at which a team purchased an item
and the price at which it sold that item.
Correct
The correct answer is A. Gross margin is the difference between the sale price and the
cost price of an item that is sold. Turnover is the total sales price for all units that are
sold. B is not correct as the lowest price in the market is not relevant to a company's
gross margin. C is not correct because many items make up the profit or loss in a
period, not just the gross margin on the sale of a product. D is not correct because it
only relates to the gross margin for one item.
28. You are considering opening a record store in a major shopping area. As there are
other record stores located nearby, you will have to find sources of competitive
advantage.
Only one of the following would be a real source of competitive advantage - which is
it?
Your answer (in bold):
A. An award-winning advertising campaign.
B. Exclusive promotional relationship with a major record label.
C. An unusual store design and internal layout.
D. Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built on a
strategic relationship that cannot be copied or imitated. All of the other answers
represent something that is easy to imitate, and are not built upon superior assets,
distinctive capabilities or strategic relationships.
29. If you have a major surprise to impart to your colleagues concerning the business,
the way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week before the
meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to the meeting.
Correct
The answer is A in accordance with the 'no surprises' tutorial.
30.
The University of Cape Town’s Zoology Department requires all students (or their
guardians) to sign the following indemnity form:
‘I understand that all zoology excursions are undertaken at my (or my child’s) own
risk. I indemnify the Department and its staff against any claims arising, whether
from negligence, gross negligence, or otherwise.’
On a recent zoology excursion a 19 year old student was injured (incurring medical
expenses in the amount of R5 000) in a motor vehicle accident as a result of gross
negligence on the part of the UCT bus driver, an employee in the Zoology
Department.
In view of the wording of the indemnity, your advice to the student would be:
Your answer (in bold):
A. The indemnity is likely not to be valid as the court will adopt a narrow
interpretation to the word "excursions" and the UCT Zoology Department will
be liable to pay the R5000.
B. UCT will not be liable because one can exclude liability for gross negligence
in terms of the Consumer Protection Act of 2008 as long as the person who
suffers the loss is not a minor and has personally entered into the contract.
C. UCT will be liable because the indemnity for gross negligence is invalid as
one cannot exclude liability for gross negligence in terms of the Consumer
Protection Act of 2008.
D. The UCT Zoology Department will be liable, but can ask the court to
apportion damages between itself and the student.
Incorrect
Answer C is correct. In terms of the Consumer Protection Act of 2008 one cannot
exclude liability for gross negligence. There are no exceptions to this rule.
31. When invited to give actuarial advice to a client an actuary must consider whether
there are any professional reasons not to accept the appointment by exercising which
of the following options?
Your answer (in bold):
A. Contacting the client’s Board or Trustees
B. Contacting the previous actuary when this is known
C. Contacting the client’s CEO
D. None of the above
Correct
Correct Answer: B
32. You have been asked to define the competitive positioning for your business unit,
a supplier of laser printers.
Which one of the following statements would NOT represent a component of the
business unit's competitive position?
Your answer (in bold):
A. Supply affordable laser printers and related supplies.
B. Target Home Office computer users.
C. Taking a phased approach to expanding the distribution network.
D. Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of either
product/service, target customers, or channels, all of which are competitive
positioning decisions. Answer C is more concerned with timing and resource
decisions for building the company.
33. Choose the correct statement.
In terms of the Consumer Protection Act, every supplier of goods and services must
ensure that no goods and services are sold or provided on terms that are ‘unfair,
unreasonable or unjust.’ If goods and services are sold or provided on terms that are
‘unfair, unreasonable or unjust’ the contract concerned is...
Your answer (in bold):
A. automatically void for being against public policy.
B. automatically voidable for being against public policy.
C. automatically void for statutory illegality.
D. valid until a court makes an order to the contrary and provides a suitable
remedy.
Correct
The answer is D because section 48 read with section 52 of the Act provides that only
a court may determine whether a contract falls foul of the provisions of the Consumer
Protection legislation. Where the court finds a contravention, the court must determine
the appropriate remedy, which includes severing the offending provision(s) of the
contract from the rest of the contract.
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You got 26 out of 28 answers correct (93%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and
telephone system to enable smarter working on the move. However, the
Mobilo is not selling as well as expected into the company's core customer
segments. Recent research has revealed that the core segments are seeking
mobile efficiency as well as enhanced status for being 'early adopters' in
this market.
Which of the company's advantages would you use as the core of a
campaign to increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which
has an unrivalled reputation for new ideas in mobile
living/working.
B. The strong relationships the company has with its suppliers, who
provide highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the
competition, to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for
awareness three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency
as well as their need to be early adopters in the market. Customers will
value the highly-reputed technological components (B), but alone they do
not meet customer needs for mobile efficiency. Speed of delivery (C) will
help in getting the products to customers early, to support them being early
adopters, but it does not match their need for innovation. There is little
benefit in purely having high awareness of the company brand (D), if this
product campaign is not communicating the benefits relevant to the target
groups.
2. You are considering investing in the car manufacturing industry, but you
are concerned about competitive forces changing the market. You've
decided to organise an analysis on the five major competitive forces acting
on the industry.
Which of the following represents the five forces that you should
investigate?
Your answer (in bold):
A. Product, price, people, placement, positioning. of substitute
products,
B. Threat of substitute products, rivalry, supplier power,
customer power, threat of new entrants.
C. Missions, objectives, goals, strategies, objectives.
D. Access to capital, ease of integration, synergy with existing
operations, distribution channels, sustainable competitive
advantages.
Correct
Answer B is correct. The other options do not represent the five
competitive forces acting on an industry.
3. With regard to publicity, which of the following statements is incorrect?
Your answer (in bold):
A. Members may publicise the professional services offered
B. Members must ensure their publicity is appropriate to the
profession
C. Members speaking in public must make it clear that their
presentation has the backing of the profession
D. Members who have any doubts about material they wish to
publicise should seek advice from the professional body
Correct
The correct answer is C. An explanation can be found in Section 9 of the
PCS
4. Paul ordered new machinery from Buildco Ltd for use in his business
and to be delivered on 14 December. Buildco were three months late
delivering the machinery. The signed contract contains a clause stating that
Buildco will not be liable for late delivery of the machinery.
Which one of the following is NOT correct?
Your answer (in bold):
A. Buildco has broken an express term of the contract. s.3 of the
Unfair Contract Terms Act 1977 will apply to the exemption clause
if Paul is dealing on Buildco's written standard terms of business.
B. If s.3 of the Unfair Contract Terms Act 1977 applies the
exemption clause will be void.
C. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption
clause will be valid if reasonable.
D. If s.3 of the Unfair Contract Terms Act 1977 does not apply, the
exemption clause will be valid.
Correct
B is the only statement that is not correct since s.3 of the Unfair Contract
Terms Act 1977 makes the clause subject to the requirement of
reasonableness.
5. If you were classifying a company in terms of how it made decisions
when responding to changing market conditions, which one of the
following descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on
detailed analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities.
Not keen to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal market
share from them. They have resources they can use to attack competitors.
Sometimes their relative strength can make them over confident. D describes Fast Follower organisations who are less happy with high risk
than Innovators, but can often achieve greater returns and visibility than
Innovators gain. B - describes a combination of Defenders, Innovators and
Fast Followers. C - describes Innovators.
6. It is now becoming accepted practice that actuaries record an audit trail
for any substantive piece of work.
Why?
Your answer (in bold):
A. In order to document better the value added for their clients,
enabling them to charge accordingly.
B. Because it provides a means of self-checking their work so that
peer review is not necessary.
C. In order to provide a record of the process they have followed,
enabling another actuary to take over, or check, their work
D. Because this is now a requirement of the Professional Conduct
Standards.
Correct
Answer C is correct. Answer A would not in practice justify the need for
an audit trail. Answer B would be correct to the extent that an audit trail
can help self-check one's work, which should be done anyway, but an
actuary should always get someone else to check their work i.e. peer
review it. Answer D is not right because an audit trail is not covered
specifically by the Professional Conduct Standards.
7. Which one of the options A, B, C or D is not true?
When the PCS uses the term 'should normally', it means that members
must comply with an item in the PCS unless non-compliance...
Your answer (in bold):
A. would be perceived by the public as reflecting acceptable
professional judgement.
B. would meet more satisfactorily the requirements of the
member's client regardless of what other members might
reasonably expect of a member.
C. would reflect a level of competence which other members, or the
public, might reasonably expect of a member.
D. is consistent with the integrity which the public might expect of a
member.
Correct
The correct answer is B. An explanation can be found in the introductory
pages of the PCS.
8. You see a vase in an antique shop. You think it is very rare and worth
far more than the price asked. The owner of the shop hears you telling your
friend your views about the vase but does not say anything. You buy the
vase but it turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
A. The owner of the shop has made a misrepresentation as she should
have corrected your mistake.
B. The owner of the shop has made a misrepresentation as she was
under a duty to disclose all material facts.
C. The owner of the shop has made a negligent misstatement.
D. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a misrepresentation
or a negligent misstatement as there was no false statement.
9. In maximising the value of a company, which of the following is the
best measure of value to use?
Your answer (in bold):
A. Annual profit.
B. Annual return on assets.
C. Net present value of future profits.
D. There is no one perfect measure.
Incorrect
The answer is D as there is no single measure of value in accordance with
the 'Financial objectives' tutorial, it is best to consider that specific
measures are providing information on specific aspects of the business.
10. You have just joined a new company, and you have already been asked
to make a recommendation on what you think is a strategic, high-impact
decision. Your recommendation will be made direct to the Chief
Executive. You have looked for someone able to help you with this, but
not found anyone with the right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed
you there is not enough time to do that, and suggested you should "Use
your instinct."
What type of organizational structure do you think you are now working
in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend
to involve little structure or formality, high risk-taking, and the decisionmaking power concentrated in a few people. In a hierarchy (B) you would
expect a big decision to go through a more formal process of approval, and
in a matrix organisation (C) you would expect more people to be involved
in the process bringing their own views and expertise.
11. Which one of the following would not be a current issue for general
insurance companies?
Your answer (in bold):
A. Capital adequacy.
B. Increasing longevity.
C. Treating customers fairly.
D. Claims compensation culture.
Correct
Answer B is correct because increasing longevity is a current issue for life
insurance companies and pension schemes, particularly when annual or
monthly benefits are being paid out for the rest of a person's life. However,
this would not be an issue for a general insurance company that does not
offer benefits related to a person's lifetime. Answers A, C and D are all
current issues for a general insurance company.
12. You may be offered a gift by a company with whom you, or your
company, has a business / professional relationship. In deciding whether to
accept the gift, which of the following would not be true?
Your answer (in bold):
A. You must consider carefully whether acceptance of a gift could in
any way influence your judgement.
B. You must find out what your company's policy is on gifts.
C. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a
particular piece of work.
D. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the
termination of a particular task of some importance, is less likely to be
objectionable than a series of gifts implying the possibility of undue
influence. The other alternatives, A, B and D, are all true. An example
under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some standing.
13. Which one of the following is NOT correct?
Your answer (in bold):
A. The remoteness rule in contract is that the loss must be within the
reasonable contemplation of the parties.
B. The remoteness rule in contract is that the loss must be
reasonably foreseeable.
C. The normal aim of the court when assessing damages in contract is
to put the innocent party in the position he would have been in if
the contract had been properly performed.
Correct
The only answer that is not correct is B as the statement refers to the
remoteness rule in tort, not contract.
14. All except two of the following would be appropriate criteria to test
whether a potential segment should be a viable target. Select the two which
are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to
require some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales,
or to include the target customers willing to pay an acceptable price
to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for
a long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in any
case eliminate interesting emerging segments.
15. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff
B. the human resources needed for the plan
C. the means by which the plan is implemented
D. the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore diagram
under the 'Creating and capturing value' tutorial
16. If, as a result of a Disciplinary Scheme Tribunal, an actuary is fined,
what is the maximum amount he or she can be fined?
Your answer (in bold):
A. £5,000
B. £20,000
C. £50,000
D. there is no limit.
Correct
Answer D is correct because in theory there is no limit as to how much a
guilty actuary could be fined though in practice the amount must be in
proportion to the misdemeanor. This will be based on the panel's
judgement and at its discretion.
17. Kamla sends a fax to Tony asking if he wants to buy her computer for
£500. Tony sends a fax back asking if Kamla will accept £450. Later that
day, not having received a reply from Kamla, Tony sends her a fax saying
"I'll buy the computer for £500. Can you deliver it to me or should I
collect?" Kamla no longer wants to sell the computer.
Which one of the following is correct?
Your answer (in bold):
A. Tony has a contract with Kamla to buy the computer for £450.
B. Tony has a contract with Kamla to buy the computer for £500.
C. There is no contract between Tony and Kamla.
D. There is a contract with Kamla to buy the computer but the court
will fix a reasonable price.
Correct
The correct answer is C. Tony's first fax is a counter offer. This has the
effect of destroying Kamla's offer which can no longer be accepted. The
authority for this is the case of Hyde v Wrench (1840).
18. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet
the company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to
functional strategy and C relates to corporate strategy.
19. Select the one statement below that correctly defines the difference
between deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while
in creative synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from
an hypothesis, while in creative synthesis facts are created by some
additional insight.
C. In deductive synthesis facts are found by reducing the data
down to the fact, while in creative synthesis facts are created by
some additional insight.
D. In deductive synthesis the outcome is created by adding insight,
while in creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the
outcome, while in creative synthesis facts are not relevant to the outcome.
20. If work which a member considers necessary is precluded by cost or
time constraints the member should normally...
Your answer (in bold):
A. perform only that portion of the work permitted by cost and time,
and say nothing further.
B. recommend that the work is undertaken by another firm whose fees
are lower.
C. either decline to act or qualify the advice given.
D. refer the matter to the PAB.
Correct
The correct answer is C. An explanation can be found in Section 2 of the
PCS
21. You are an industry analyst in a venture capital company, preparing a
report for potential investors on a restaurant chain, Fervour, which is
looking to expand abroad. Fervour specialises in converting churches into
restaurants, capitalising on the architecture to create atmospheric
surroundings, supported by live jazz. The menus - created by Michelin
chef Jean-Pierre Noir - are highly acclaimed in culinary circles for their
imagination and flair. Fervour looks to cater for a wide range of clientele,
offering a dining experience 'for all the senses'. While it is still relatively
unknown, it has bought the majority of unused church buildings across the
country, ready for conversion.
In trying to make the investment proposition sound as attractive as
possible, it is important that you highlight where Fervour has advantages in
the marketplace.
Which one of the following statements do you feel represents a real and
sustainable competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the
country.
C. Superior locations - church buildings stand out against
ordinary restaurants, and are located close to the desired
audience.
D. Marketing capability - Fervour has recently introduced its own
website to extend the diner's experience, detailing the menus and
music planned at all its venues.
E. Relationships with its key suppliers - to ensure the freshest food
and the right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused
churches means that other competitors will be unable to replicate the
Fervour surroundings, making this a sustainable advantage. While the
menus are imaginative (A), they can also be copied, which means that this
advantage is difficult to sustain. The Fervour brand (B) is unknown outside
the country, so it cannot yet be exploited as an advantage. While a website
(D) is useful, it is likely that most other restaurants will also have a website
supporting their core offering, so this does not represent an advantage.
Relationships with suppliers to ensure fresh food (E) are a necessity in this
market, rather than an advantage.
22. Patricia Smith is a director of Smithsons Limited ('the Company').
Which two of the following are correct?
Your answer (in bold):
A. Patricia owes a duty to the Company.
B. Patricia owes a duty to the shareholders of the Company.
C. Patricia must have regard to the interests of the employees of the
Company.
Incorrect
The correct answer is A and C. As a fiduciary, Patricia owes a duty to the
Company and not to the shareholders. In addition, s 309(2) CA 85 imposes
an obligation on the directors to have regard to the interests of the
employees of the Company.
23. Errors have been occurring quite often in the work of actuarial students
in your company.
Which of the following control processes has an apparent weakness, based
on the information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the
work can be followed by another person who has the appropriate
level of knowledge and skills.
B. Documentation is in place describing how the bases and
assumptions adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry
out their checks very quickly in order to avoid missing
deadlines.
D. Checks are carried out on the computer systems that produce many
of the calculations
Correct
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems that
produce calculations. The latter would only be a problem if these checks
had not been carried out rigorously. The weakness in the controls described
would be in the peer review process if the peer reviewer is not given
sufficient time to carry out the peer review in sufficient detail. The peer
reviewer is as responsible as the originator. If you sign, you are
responsible.
24. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A. A map of all the businesses operating in a strategic set i.e. targeting
the same market segment.
B. A system showing the industry competitors and all their suppliers.
C. A technological map used to capture all the technology links used
within a company.
D. A model of the primary and support functions of a business
with their key activities.
Correct
D is correct. It is often used to map functions and activities within a
company to establish which create value and which create costs; or to
establish how activities are interlinked as a means of improving processes
and competence.
25. Moving from an existing strategy to a new one can be challenging with
complicated changes to implement. Trying to do everything at once can
stretch resources. It is usually best to progress in manageable steps with
each step representing a sustainable strategy in itself. Such steps are a
strategic staircase.
In what order are the steps on Komatsu's strategic staircase, starting at the
bottom?
Your answer (in bold):
A. Cost; quality; diversification; differentiation.
B. Differentiation; quality; cost; diversification.
C. Quality; cost; differentiation; diversification.
D. Differentiation; diversification; quality; cost.
Correct
The answer is C in accordance with the 'Komatsu's strategic staircase'.
Explore item in 'The strategic staircase' tutorial.
26. Success related fees should only be accepted by a member if...
Your answer (in bold):
A. they do not contravene the general requirements of the PCS
B. the member has disclosed them in advance to his / her firm
C. the member has made clear to the client that the advice given may
be influenced by the fee arrangement
D. other firms with which the member's firm is associated are not
affected by the success related fees
Correct
The correct answer is A. An explanation can be found in Section 6 of the
PCS
27. You are the marketing director for Svenson, a technology
manufacturer. You have just introduced a new 'mobile entertainment'
device, which will offer users the opportunity to play videos, take digital
photographs, send emails and text messages, play music and communicate
via telephone. It has state-of-the-art features, allowing compatibility with
all the top service providers. The Svenson brand is relatively new, yet it
already has a reputation for being innovative, cool and funky. The Svenson
'mini entertainer' is priced at $600. You now have information from your
Customer Management team showing the profiles of your key customer
segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good
disposable income, increasingly mobile for work and leisure,
take huge interest in gadget advertising, and love the funky
status they acquire with Svenson products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable
disposable income, buy on functionality, willing to pay for
whichever technology combines all the functions they need and fits
their mobile lifestyle
C. Family First - the largest segment (33% of your base), although it
has shrunk over the last year. Mobility based around supporting the
family. High income restricted by outlays on children and aged
parents. Willing to purchase any technology proven to make their
lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable
segment. Segment size is reasonable, and it is growing, disposable income
is high (for what is quite a reasonably expensive, one-off purchase) and
there is strong desire for the product. It is an ideal fit with Svenson's
advantages in innovation, plus its brand reputation - gadget lovers matched
with funky gadget provider. Youth of Today (B) is a reasonable-sized,
growing segment. Svenson's advantages match their needs, but the segment
is more attracted by generic functionality than the Svenson brand, making
it less attractive to the company. Family First (C) is less attractive.
Although this segment is large, the profile suggests people in this segment
are more likely to pay for features that provide convenience rather than
pure entertainment. Although they have high income, their profile suggests
they are likely to have priorities for spending rather than a high-priced
entertainment item.
28. You apply for a job as the PA to the Managing Director of Maximus
Limited and are interviewed for the job by the Managing Director himself.
Samuel Brown (the Personnel Director) later writes to you to offer you the
job and, when you ring up to ask for some further details on pay and
holiday entitlement, your queries are answered by the Human Resources
Manager (Heather Freeman). You decide to accept the job.
Who is your employer?
Your answer (in bold):
A. The Managing Director
B. Samuel Brown
C. Heather Freeman
D. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are not
acting in their own capacity but as agents of the company.
3
Quiz Feedback
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You got 27 out of 28 answers correct (96%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet
the company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to
functional strategy and C relates to corporate strategy.
2. If you have a major surprise to impart to your colleagues concerning the
business, the way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week
before the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to
the meeting.
Correct
The answer is A in accordance with the 'No surprises' tutorial.
3. An actuary is producing a report about an actuarial topic that has some
legal implications. The actuary has not come across these implications
before.
Which of the following courses of action would probably be the most
appropriate?
Your answer (in bold):
A. To research the implications by reference to legal publications and
make a personal judgement based on the findings.
B. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not
come across these implications before.
C. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
D. To make a judgement based on personal intuition but to make the
report non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and
correct. An actuary should not hesitate to obtain advice from someone
outside the Actuarial Profession if that is the best way to produce the
correct advice. Therefore, C is the correct answer.
4. Kerry offered to buy Rafiq's car for £5,000. She said that she would
keep her offer open until 1 June. On 14 May, Rafiq posted a letter
accepting Kerry's offer. This letter was lost in the post. In the meantime, on
13 May, Kerry posted a letter revoking her offer which Rafiq received on
18 May.
Which two of the following are correct?
Your answer (in bold):
A. If the postal rule applies Rafiq's acceptance is valid on 14 May.
B. If the postal rule does not apply Rafiq's acceptance is invalid as
it has not been communicated.
C. The postal rule cannot apply here, as Rafiq's acceptance was lost in
the post.
D. Kerry cannot revoke her offer as she said she would keep it open
until 1 June.
E. Kerry has validly revoked her offer on 13 May.
Correct
The correct answer is A and B. C is not correct because the postal rule can
still apply even if the acceptance is lost in the post - Household Fire
Insurance v Grant (1879).D is not correct as Kerry can still revoke even
though she said she would leave the offer open - Routledge v Grant
(1828).E is not correct as a revocation is only effective when
communicated, not when it is posted - Byrne v Van Tienhoven (1880).
5. You are considering opening a record store in a major shopping area. As
there are other record stores located nearby, you will have to find sources
of competitive advantage.
Only one of the following would be a real source of competitive advantage
- which is it?
Your answer (in bold):
A. An award-winning advertising campaign
B. Exclusive promotional relationship with a major record label.
C. An unusual store design and internal layout.
D. Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built
on a strategic relationship that cannot be copied or imitated. All of the
other answers represent something that is easy to imitate, and are not built
upon superior assets, distinctive capabilities or strategic relationships.
6. One of the actions you should take to develop your business awareness
is to read as much as you can about the financial services industry in the
national press, on websites, in financial magazines, and in The Actuary.
How much time should you commit yourself to spending on a regular
basis?
Your answer (in bold):
A. 1 hour per day.
B. 1 hour per week.
C. 1 hour per month.
D. 1 hour per quarter.
Correct
Answer B is correct. One hour per day would tend to be too high a
proportion of a working day. One hour per month or per quarter would be
better than nothing but not sufficient to build up a clear enough picture of
what is going on in the financial services industry.
7. Success related fees should only be accepted by a member if...
Your answer (in bold):
A. they do not contravene the general requirements of the PCS
B. the member has disclosed them in advance to his / her firm
C. the member has made clear to the client that the advice given may
be influenced by the fee arrangement
D. other firms with which the member's firm is associated are not
affected by the success related fees
Correct
The correct answer is A. An explanation can be found in Section 6 of the
PCS
8. Which one or more of the following claims can companies bring against
third parties who have received company property in breach of a director's
fiduciary duties?
Your answer (in bold):
A. Recipient liability (constructive trusteeship).
B. Restitution for unjust enrichment.
C. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the equitable
claim of a constructive trusteeship and use equitable tracing in connection
with a proprietary claim because the director owed the company fiduciary
duties. The company owns legal title to its assets and can therefore claim
restitution.
9. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff
B. the human resources needed for the plan
C. the means by which the plan is implemented
D. the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore diagram
under the 'Creating and capturing value' tutorial
10. You run the office cleaning division at International GlobalCorp, and
you are setting your group's objectives. IGC's corporate goal is to grow
market share in all its businesses.
Which of the following objectives for your area directly supports the
corporate objective?
Your answer (in bold):
A. Increase the number of active customers by 15%
B. Reduce costs of purchased cleaning products by 10%
C. Buy four new mobile cleaning vans.
D. Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute
to the ability to grow market share, answer A is the only one that directly
results in increased share (assuming that the market as a whole grows less
than 15%!).
11. Many pension schemes are currently underfunded. Which of these are
two of the main reasons for this?
Your answer (in bold):
A. People are living longer.
B. Asset values have fallen.
C. Employers have taken long contribution holidays.
D. More people than expected have been retiring early.
Correct
Answers A and B are correct, and these reasons are often being stated in
the media. Contribution rates and therefore the scope for periods of paying
nil or low contributions have been determined on best estimates of future
experience and the significant falls in asset values since 2000, in particular,
could not have been foreseen. Therefore, in this context, it cannot be
claimed that a main reason is contribution holidays. Although early
retirements may have been running at a higher level than assumed, and
may have proved to be under funded, this is not a main reason given for
many schemes being under funded.
12. A father of one of your friends feels he has lost out by his insurance
company merging with another. Your friend believes you know something
about how insurance companies work and asks you to find out something
for her father. Which of the following actions would it be sensible for you
to take?
Your answer (in bold):
A. Tell your friend everything you know about the merging of
insurance companies.
B. Tell your friend that her father may have been disadvantaged
because a main aim of any merger would be to benefit the
shareholders rather than the policyholders.
C. Tell your friend that you know one of the actuaries who worked on
the merger and that you will ask him to write to her father.
D. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version
of the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of
situation and remember that you are never "off duty". There will always be
a risk that what you say gets construed as expert actuarial opinion, and may
get quoted, or misquoted, by third parties. It would be potentially very
dangerous to act per A or B and not reasonable to act as C because the
actuary you know should not be expected to write to individual
policyholders - in fact his company may not allow him to.
13. You apply for a job as the PA to the Managing Director of Maximus
Limited and are interviewed for the job by the Managing Director himself.
Samuel Brown (the Personnel Director) later writes to you to offer you the
job and, when you ring up to ask for some further details on pay and
holiday entitlement, your queries are answered by the Human Resources
Manager (Heather Freeman). You decide to accept the job.
Who is your employer?
Your answer (in bold):
A. The Managing Director
B. Samuel Brown
C. Heather Freeman
D. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are not
acting in their own capacity but as agents of the company.
14. One source of competitive advantage is 'strategic relationships'. If you
were running a well-known Advertising Agency, select the one option in
the list below relating to the agency's relationships that you would consider
as offering a sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two
years.
B. Extensive selection of testimonials from satisfied customers from a
diverse range of industries.
C. The only parent company in the agency world whose policy is
to invest centrally in building capabilities it then shares across
business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful
business, it is option C that is said to be an exception, is harder to copy
than the other options.
15. When considering financial and non-financial objectives, which of the
following would be true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial
ones, and they can be a lot less obvious.
B. Financial objectives will always be more important than nonfinancial ones, and are usually more obvious.
C. Non-financial objectives will usually be more obvious than
financial ones and will be better understood by the staff.
D. Financial objectives are key to the success of a company so nonfinancial ones are not usually relevant.
Correct
The answer is A in accordance with the 'Non-financial objectives' tutorial
16. A member must make full and timely disclosure to the client of any
financial interest which the member or the member's firm may have in any
assignment that the member undertakes for that client or in its outcome.
Which one of the following is not included in the list of such financial
interests specified in the PCS?
Your answer (in bold):
A. Direct and indirect benefits.
B. Commission and introductory fees paid by or to the member or the
member's firm.
C. Direct remuneration.
D. Shareholding or other investment in the client's firm.
Correct
The correct answer is D. An explanation can be found in Section 6 of the
PCS.
17. Kamla sends a fax to Tony asking if he wants to buy her computer for
£500. Tony sends a fax back asking if Kamla will accept £450. Later that
day, not having received a reply from Kamla, Tony sends her a fax saying
"I'll buy the computer for £500. Can you deliver it to me or should I
collect?" Kamla no longer wants to sell the computer.
Which one of the following is correct?
Your answer (in bold):
A. Tony has a contract with Kamla to buy the computer for £450.
B. Tony has a contract with Kamla to buy the computer for £500.
C. There is no contract between Tony and Kamla.
D. There is a contract with Kamla to buy the computer but the court
will fix a reasonable price.
Correct
The correct answer is C. Tony's first fax is a counter offer. This has the
effect of destroying Kamla's offer which can no longer be accepted. The
authority for this is the case of Hyde v Wrench (1840).
18. The company you work for, TransGlobal Multinational Limited, is
considering entering a new market. The decision-making process has
involved reviewing other similar organisations' attempted entries,
identifying successes and failures, suggesting improvements that
TransGlobal could make over competitors' offers, and an analysis of the
market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational
cultural types listed do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders.
B. Innovators.
C. Fast followers.
D. Slow reactors.
Incorrect
Answer C is correct. This behaviour illustrates an organisation not willing
to take the risk of moving first, but opportunistic enough to enter where an
opportunity has appeared, and then attempt to improve upon the market
entry, process, or product introduced by the innovator.
19. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of
analysis is needed.
B. Decide on the form of analysis, establish the right questions,
discover the facts.
C. Ask the right question, decide what analysis to undertake,
collect the relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an
analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
20. For the purposes of the PCS, a senior actuary in a firm is a Fellow of
the Institute or Faculty who...
Your answer (in bold):
A. holds a practising certificate
B. has been registered with the FSA as responsible for professional
actuarial matters in the firm
C. has been nominated by a member's firm in respect of
professional actuarial matters
D. has worked for the firm for at least 10 years
Correct
The correct answer is C. An explanation can be found in the Definitions
section of the PCS
21. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and
telephone system to enable smarter working on the move. However, the
Mobilo is not selling as well as expected into the company's core customer
segments. Recent research has revealed that the core segments are seeking
mobile efficiency as well as enhanced status for being 'early adopters' in
this market.
Which of the company's advantages would you use as the core of a
campaign to increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which
has an unrivalled reputation for new ideas in mobile
living/working.
B. The strong relationships the company has with its suppliers, who
provide highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the
competition, to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for
awareness three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency
as well as their need to be early adopters in the market. Customers will
value the highly-reputed technological components (B), but alone they do
not meet customer needs for mobile efficiency. Speed of delivery (C) will
help in getting the products to customers early, to support them being early
adopters, but it does not match their need for innovation. There is little
benefit in purely having high awareness of the company brand (D), if this
product campaign is not communicating the benefits relevant to the target
groups.
22. You see a vase in an antique shop. You think it is very rare and worth
far more than the price asked. The owner of the shop hears you telling your
friend your views about the vase but does not say anything. You buy the
vase but it turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
A. The owner of the shop has made a misrepresentation as she should
have corrected your mistake.
B. The owner of the shop has made a misrepresentation as she was
under a duty to disclose all material facts.
C. The owner of the shop has made a negligent misstatement.
D. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a misrepresentation
or a negligent misstatement as there was no false statement.
23. When you are discussing work with actuarial friends from another
company you must be careful what you talk about. There is a risk that you
may be caught off guard, especially in a social environment. Which of the
following topics relating to your company would it normally be safe for
you to talk about without the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking
about B, C or D and you might be contravening your employment contract
by doing so. Therefore, A is the correct answer because there is no reason
why you should not talk about information that would be available in the
market place even if it could be quite hard for someone else to find that
information.
24. You are the new Managing Director of Korsan, a city-based chain of
medium-priced hotels catering primarily for late-night business travellers.
Trade is reasonable, and you have a high level of repeat business (and thus
good projected future occupancy), but costs seem high and profits slim,
particularly for the hotel's restaurant. It serves few customers at night,
although the chefs have done innovative things to the menus to increase
their appeal. A rival chain - Luxuria - is also setting up its high-class hotels
for discerning travellers in the same cities, and your board is panicking that
significant business will be lost. They present some recent research
showing that customers' core needs are a good night's sleep and a
convenient location. They also present a large dossier of suggestions for
maximising the value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience
(discerning travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of
potential customers for Korsan.
C. Invest in a major marketing campaign to promote the location
benefits of Korsan to new customers.
D. Reduce the restaurant to breakfast-only, setting up a
relationship with a city-based restaurant for your customers to
have discounted evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers
(sleep and location) Korsan can reduce unnecessary overheads and
increase value captured. The deal with a city restaurant will also be
attractive to those customers wanting to eat in the evening. Korsan's target
audience is different to Luxuria, and there is no evidence to suggest that
Luxuria's target audience would be attracted, even with a refurbished hotel.
A - could be a costly error. B - would require investment by way of a
marketing campaign to get it off the ground, and there is no guarantee that
non-hotel customers would be attracted. Korsan has high repeat business
and high projected future occupancy, so a campaign to attract new
customers (C) would be wasteful.
25. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget
B. Object A has a button
C. Object A is a green striped widget with a button
D. Object A has a button and green stripes
Correct
The answer is D as all you know for sure is that Object A has a button and
green stripes. This is in accordance with the deductive synthesis exercise
under the 'Synthesis' tutorial
26. Which of the following described in options A, B, C or D is not in
itself a ground for referral under the disciplinary procedures?
1 = material breach of the PCS
2 = material breach of a Guidance Note classified as Recommended
Practice
3 = material breach of a Guidance Note classified as Practice Standard
Your answer (in bold):
A. 1 only.
B. 2 only.
C. 3 only.
D. None of them.
Correct
The correct answer is B. An explanation can be found in Section 4 of the
PCS
27. If you were classifying a company in terms of how it made decisions
when responding to changing market conditions, which one of the
following descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on
detailed analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities.
Not keen to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal market
share from them. They have resources they can use to attack competitors.
Sometimes their relative strength can make them over confident. D describes Fast Follower organisations who are less happy with high risk
than Innovators, but can often achieve greater returns and visibility than
Innovators gain. B - describes a combination of Defenders, Innovators and
Fast Followers. C - describes Innovators.
28. Paul ordered new machinery from Buildco Ltd for use in his business
and to be delivered on 14 December. Buildco were three months late
delivering the machinery. The signed contract contains a clause stating that
Buildco will not be liable for late delivery of the machinery.
Which one of the following is NOT correct?
Your answer (in bold):
A. Buildco has broken an express term of the contract. s.3 of the
Unfair Contract Terms Act 1977 will apply to the exemption clause
if Paul is dealing on Buildco's written standard terms of business.
B. If s.3 of the Unfair Contract Terms Act 1977 applies the
exemption clause will be void.
C. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption
clause will be valid if reasonable.
D. If s.3 of the Unfair Contract Terms Act 1977 does not apply, the
exemption clause will be valid.
Correct
B is the only statement that is not correct since s.3 of the Unfair Contract
Terms Act 1977 makes the clause subject to the requirement of
reasonableness.
5
Quiz Feedback
6
You got 27 out of 28 answers correct (96%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet
the company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to
functional strategy and C relates to corporate strategy.
2. If you have a major surprise to impart to your colleagues concerning the
business, the way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week
before the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to
the meeting.
Correct
The answer is A in accordance with the 'No surprises' tutorial.
3. An actuary is producing a report about an actuarial topic that has some
legal implications. The actuary has not come across these implications
before.
Which of the following courses of action would probably be the most
appropriate?
Your answer (in bold):
A. To research the implications by reference to legal publications and
make a personal judgement based on the findings.
B. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not
come across these implications before.
C. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
D. To make a judgement based on personal intuition but to make the
report non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and
correct. An actuary should not hesitate to obtain advice from someone
outside the Actuarial Profession if that is the best way to produce the
correct advice. Therefore, C is the correct answer.
4. Kerry offered to buy Rafiq's car for £5,000. She said that she would
keep her offer open until 1 June. On 14 May, Rafiq posted a letter
accepting Kerry's offer. This letter was lost in the post. In the meantime, on
13 May, Kerry posted a letter revoking her offer which Rafiq received on
18 May.
Which two of the following are correct?
Your answer (in bold):
A. If the postal rule applies Rafiq's acceptance is valid on 14 May.
B. If the postal rule does not apply Rafiq's acceptance is invalid as
it has not been communicated.
C. The postal rule cannot apply here, as Rafiq's acceptance was lost in
the post.
D. Kerry cannot revoke her offer as she said she would keep it open
until 1 June.
E. Kerry has validly revoked her offer on 13 May.
Correct
The correct answer is A and B. C is not correct because the postal rule can
still apply even if the acceptance is lost in the post - Household Fire
Insurance v Grant (1879).D is not correct as Kerry can still revoke even
though she said she would leave the offer open - Routledge v Grant
(1828).E is not correct as a revocation is only effective when
communicated, not when it is posted - Byrne v Van Tienhoven (1880).
5. You are considering opening a record store in a major shopping area. As
there are other record stores located nearby, you will have to find sources
of competitive advantage.
Only one of the following would be a real source of competitive advantage
- which is it?
Your answer (in bold):
A. An award-winning advertising campaign
B. Exclusive promotional relationship with a major record label.
C. An unusual store design and internal layout.
D. Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built
on a strategic relationship that cannot be copied or imitated. All of the
other answers represent something that is easy to imitate, and are not built
upon superior assets, distinctive capabilities or strategic relationships.
6. One of the actions you should take to develop your business awareness
is to read as much as you can about the financial services industry in the
national press, on websites, in financial magazines, and in The Actuary.
How much time should you commit yourself to spending on a regular
basis?
Your answer (in bold):
A. 1 hour per day.
B. 1 hour per week.
C. 1 hour per month.
D. 1 hour per quarter.
Correct
Answer B is correct. One hour per day would tend to be too high a
proportion of a working day. One hour per month or per quarter would be
better than nothing but not sufficient to build up a clear enough picture of
what is going on in the financial services industry.
7. Success related fees should only be accepted by a member if...
Your answer (in bold):
A. they do not contravene the general requirements of the PCS
B. the member has disclosed them in advance to his / her firm
C. the member has made clear to the client that the advice given may
be influenced by the fee arrangement
D. other firms with which the member's firm is associated are not
affected by the success related fees
Correct
The correct answer is A. An explanation can be found in Section 6 of the
PCS
8. Which one or more of the following claims can companies bring against
third parties who have received company property in breach of a director's
fiduciary duties?
Your answer (in bold):
A. Recipient liability (constructive trusteeship).
B. Restitution for unjust enrichment.
C. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the equitable
claim of a constructive trusteeship and use equitable tracing in connection
with a proprietary claim because the director owed the company fiduciary
duties. The company owns legal title to its assets and can therefore claim
restitution.
9. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff
B. the human resources needed for the plan
C. the means by which the plan is implemented
D. the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore diagram
under the 'Creating and capturing value' tutorial
10. You run the office cleaning division at International GlobalCorp, and
you are setting your group's objectives. IGC's corporate goal is to grow
market share in all its businesses.
Which of the following objectives for your area directly supports the
corporate objective?
Your answer (in bold):
A. Increase the number of active customers by 15%
B. Reduce costs of purchased cleaning products by 10%
C. Buy four new mobile cleaning vans.
D. Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute
to the ability to grow market share, answer A is the only one that directly
results in increased share (assuming that the market as a whole grows less
than 15%!).
11. Many pension schemes are currently underfunded. Which of these are
two of the main reasons for this?
Your answer (in bold):
A. People are living longer.
B. Asset values have fallen.
C. Employers have taken long contribution holidays.
D. More people than expected have been retiring early.
Correct
Answers A and B are correct, and these reasons are often being stated in
the media. Contribution rates and therefore the scope for periods of paying
nil or low contributions have been determined on best estimates of future
experience and the significant falls in asset values since 2000, in particular,
could not have been foreseen. Therefore, in this context, it cannot be
claimed that a main reason is contribution holidays. Although early
retirements may have been running at a higher level than assumed, and
may have proved to be under funded, this is not a main reason given for
many schemes being under funded.
12. A father of one of your friends feels he has lost out by his insurance
company merging with another. Your friend believes you know something
about how insurance companies work and asks you to find out something
for her father. Which of the following actions would it be sensible for you
to take?
Your answer (in bold):
A. Tell your friend everything you know about the merging of
insurance companies.
B. Tell your friend that her father may have been disadvantaged
because a main aim of any merger would be to benefit the
shareholders rather than the policyholders.
C. Tell your friend that you know one of the actuaries who worked on
the merger and that you will ask him to write to her father.
D. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version
of the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of
situation and remember that you are never "off duty". There will always be
a risk that what you say gets construed as expert actuarial opinion, and may
get quoted, or misquoted, by third parties. It would be potentially very
dangerous to act per A or B and not reasonable to act as C because the
actuary you know should not be expected to write to individual
policyholders - in fact his company may not allow him to.
13. You apply for a job as the PA to the Managing Director of Maximus
Limited and are interviewed for the job by the Managing Director himself.
Samuel Brown (the Personnel Director) later writes to you to offer you the
job and, when you ring up to ask for some further details on pay and
holiday entitlement, your queries are answered by the Human Resources
Manager (Heather Freeman). You decide to accept the job.
Who is your employer?
Your answer (in bold):
A. The Managing Director
B. Samuel Brown
C. Heather Freeman
D. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are not
acting in their own capacity but as agents of the company.
14. One source of competitive advantage is 'strategic relationships'. If you
were running a well-known Advertising Agency, select the one option in
the list below relating to the agency's relationships that you would consider
as offering a sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two
years.
B. Extensive selection of testimonials from satisfied customers from a
diverse range of industries.
C. The only parent company in the agency world whose policy is
to invest centrally in building capabilities it then shares across
business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful
business, it is option C that is said to be an exception, is harder to copy
than the other options.
15. When considering financial and non-financial objectives, which of the
following would be true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial
ones, and they can be a lot less obvious.
B. Financial objectives will always be more important than nonfinancial ones, and are usually more obvious.
C. Non-financial objectives will usually be more obvious than
financial ones and will be better understood by the staff.
D. Financial objectives are key to the success of a company so nonfinancial ones are not usually relevant.
Correct
The answer is A in accordance with the 'Non-financial objectives' tutorial
16. A member must make full and timely disclosure to the client of any
financial interest which the member or the member's firm may have in any
assignment that the member undertakes for that client or in its outcome.
Which one of the following is not included in the list of such financial
interests specified in the PCS?
Your answer (in bold):
A. Direct and indirect benefits.
B. Commission and introductory fees paid by or to the member or the
member's firm.
C. Direct remuneration.
D. Shareholding or other investment in the client's firm.
Correct
The correct answer is D. An explanation can be found in Section 6 of the
PCS.
17. Kamla sends a fax to Tony asking if he wants to buy her computer for
£500. Tony sends a fax back asking if Kamla will accept £450. Later that
day, not having received a reply from Kamla, Tony sends her a fax saying
"I'll buy the computer for £500. Can you deliver it to me or should I
collect?" Kamla no longer wants to sell the computer.
Which one of the following is correct?
Your answer (in bold):
A. Tony has a contract with Kamla to buy the computer for £450.
B. Tony has a contract with Kamla to buy the computer for £500.
C. There is no contract between Tony and Kamla.
D. There is a contract with Kamla to buy the computer but the court
will fix a reasonable price.
Correct
The correct answer is C. Tony's first fax is a counter offer. This has the
effect of destroying Kamla's offer which can no longer be accepted. The
authority for this is the case of Hyde v Wrench (1840).
18. The company you work for, TransGlobal Multinational Limited, is
considering entering a new market. The decision-making process has
involved reviewing other similar organisations' attempted entries,
identifying successes and failures, suggesting improvements that
TransGlobal could make over competitors' offers, and an analysis of the
market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational
cultural types listed do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders.
B. Innovators.
C. Fast followers.
D. Slow reactors.
Incorrect
Answer C is correct. This behaviour illustrates an organisation not willing
to take the risk of moving first, but opportunistic enough to enter where an
opportunity has appeared, and then attempt to improve upon the market
entry, process, or product introduced by the innovator.
19. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of
analysis is needed.
B. Decide on the form of analysis, establish the right questions,
discover the facts.
C. Ask the right question, decide what analysis to undertake,
collect the relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an
analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
20. For the purposes of the PCS, a senior actuary in a firm is a Fellow of
the Institute or Faculty who...
Your answer (in bold):
A. holds a practising certificate
B. has been registered with the FSA as responsible for professional
actuarial matters in the firm
C. has been nominated by a member's firm in respect of
professional actuarial matters
D. has worked for the firm for at least 10 years
Correct
The correct answer is C. An explanation can be found in the Definitions
section of the PCS
21. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and
telephone system to enable smarter working on the move. However, the
Mobilo is not selling as well as expected into the company's core customer
segments. Recent research has revealed that the core segments are seeking
mobile efficiency as well as enhanced status for being 'early adopters' in
this market.
Which of the company's advantages would you use as the core of a
campaign to increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which
has an unrivalled reputation for new ideas in mobile
living/working.
B. The strong relationships the company has with its suppliers, who
provide highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the
competition, to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for
awareness three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency
as well as their need to be early adopters in the market. Customers will
value the highly-reputed technological components (B), but alone they do
not meet customer needs for mobile efficiency. Speed of delivery (C) will
help in getting the products to customers early, to support them being early
adopters, but it does not match their need for innovation. There is little
benefit in purely having high awareness of the company brand (D), if this
product campaign is not communicating the benefits relevant to the target
groups.
22. You see a vase in an antique shop. You think it is very rare and worth
far more than the price asked. The owner of the shop hears you telling your
friend your views about the vase but does not say anything. You buy the
vase but it turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
A. The owner of the shop has made a misrepresentation as she should
have corrected your mistake.
B. The owner of the shop has made a misrepresentation as she was
under a duty to disclose all material facts.
C. The owner of the shop has made a negligent misstatement.
D. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a misrepresentation
or a negligent misstatement as there was no false statement.
23. When you are discussing work with actuarial friends from another
company you must be careful what you talk about. There is a risk that you
may be caught off guard, especially in a social environment. Which of the
following topics relating to your company would it normally be safe for
you to talk about without the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking
about B, C or D and you might be contravening your employment contract
by doing so. Therefore, A is the correct answer because there is no reason
why you should not talk about information that would be available in the
market place even if it could be quite hard for someone else to find that
information.
24. You are the new Managing Director of Korsan, a city-based chain of
medium-priced hotels catering primarily for late-night business travellers.
Trade is reasonable, and you have a high level of repeat business (and thus
good projected future occupancy), but costs seem high and profits slim,
particularly for the hotel's restaurant. It serves few customers at night,
although the chefs have done innovative things to the menus to increase
their appeal. A rival chain - Luxuria - is also setting up its high-class hotels
for discerning travellers in the same cities, and your board is panicking that
significant business will be lost. They present some recent research
showing that customers' core needs are a good night's sleep and a
convenient location. They also present a large dossier of suggestions for
maximising the value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience
(discerning travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of
potential customers for Korsan.
C. Invest in a major marketing campaign to promote the location
benefits of Korsan to new customers.
D. Reduce the restaurant to breakfast-only, setting up a
relationship with a city-based restaurant for your customers to
have discounted evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers
(sleep and location) Korsan can reduce unnecessary overheads and
increase value captured. The deal with a city restaurant will also be
attractive to those customers wanting to eat in the evening. Korsan's target
audience is different to Luxuria, and there is no evidence to suggest that
Luxuria's target audience would be attracted, even with a refurbished hotel.
A - could be a costly error. B - would require investment by way of a
marketing campaign to get it off the ground, and there is no guarantee that
non-hotel customers would be attracted. Korsan has high repeat business
and high projected future occupancy, so a campaign to attract new
customers (C) would be wasteful.
25. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget
B. Object A has a button
C. Object A is a green striped widget with a button
D. Object A has a button and green stripes
Correct
The answer is D as all you know for sure is that Object A has a button and
green stripes. This is in accordance with the deductive synthesis exercise
under the 'Synthesis' tutorial
26. Which of the following described in options A, B, C or D is not in
itself a ground for referral under the disciplinary procedures?
1 = material breach of the PCS
2 = material breach of a Guidance Note classified as Recommended
Practice
3 = material breach of a Guidance Note classified as Practice Standard
Your answer (in bold):
A. 1 only.
B. 2 only.
C. 3 only.
D. None of them.
Correct
The correct answer is B. An explanation can be found in Section 4 of the
PCS
27. If you were classifying a company in terms of how it made decisions
when responding to changing market conditions, which one of the
following descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on
detailed analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities.
Not keen to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal market
share from them. They have resources they can use to attack competitors.
Sometimes their relative strength can make them over confident. D describes Fast Follower organisations who are less happy with high risk
than Innovators, but can often achieve greater returns and visibility than
Innovators gain. B - describes a combination of Defenders, Innovators and
Fast Followers. C - describes Innovators.
28. Paul ordered new machinery from Buildco Ltd for use in his business
and to be delivered on 14 December. Buildco were three months late
delivering the machinery. The signed contract contains a clause stating that
Buildco will not be liable for late delivery of the machinery.
Which one of the following is NOT correct?
Your answer (in bold):
A. Buildco has broken an express term of the contract. s.3 of the
Unfair Contract Terms Act 1977 will apply to the exemption clause
if Paul is dealing on Buildco's written standard terms of business.
B. If s.3 of the Unfair Contract Terms Act 1977 applies the
exemption clause will be void.
C. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption
clause will be valid if reasonable.
D. If s.3 of the Unfair Contract Terms Act 1977 does not apply, the
exemption clause will be valid.
Correct
B is the only statement that is not correct since s.3 of the Unfair Contract
Terms Act 1977 makes the clause subject to the requirement of
reasonableness.
7
Quiz Feedback
8
You got 26 out of 28 answers correct (93%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and
telephone system to enable smarter working on the move. However, the
Mobilo is not selling as well as expected into the company's core customer
segments. Recent research has revealed that the core segments are seeking
mobile efficiency as well as enhanced status for being 'early adopters' in
this market.
Which of the company's advantages would you use as the core of a
campaign to increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which
has an unrivalled reputation for new ideas in mobile
living/working.
B. The strong relationships the company has with its suppliers, who
provide highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the
competition, to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for
awareness three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency
as well as their need to be early adopters in the market. Customers will
value the highly-reputed technological components (B), but alone they do
not meet customer needs for mobile efficiency. Speed of delivery (C) will
help in getting the products to customers early, to support them being early
adopters, but it does not match their need for innovation. There is little
benefit in purely having high awareness of the company brand (D), if this
product campaign is not communicating the benefits relevant to the target
groups.
2. You are considering investing in the car manufacturing industry, but you
are concerned about competitive forces changing the market. You've
decided to organise an analysis on the five major competitive forces acting
on the industry.
Which of the following represents the five forces that you should
investigate?
Your answer (in bold):
A. Product, price, people, placement, positioning. of substitute
products,
B. Threat of substitute products, rivalry, supplier power,
customer power, threat of new entrants.
C. Missions, objectives, goals, strategies, objectives.
D. Access to capital, ease of integration, synergy with existing
operations, distribution channels, sustainable competitive
advantages.
Correct
Answer B is correct. The other options do not represent the five
competitive forces acting on an industry.
3. With regard to publicity, which of the following statements is incorrect?
Your answer (in bold):
A. Members may publicise the professional services offered
B. Members must ensure their publicity is appropriate to the
profession
C. Members speaking in public must make it clear that their
presentation has the backing of the profession
D. Members who have any doubts about material they wish to
publicise should seek advice from the professional body
Correct
The correct answer is C. An explanation can be found in Section 9 of the
PCS
4. Paul ordered new machinery from Buildco Ltd for use in his business
and to be delivered on 14 December. Buildco were three months late
delivering the machinery. The signed contract contains a clause stating that
Buildco will not be liable for late delivery of the machinery.
Which one of the following is NOT correct?
Your answer (in bold):
A. Buildco has broken an express term of the contract. s.3 of the
Unfair Contract Terms Act 1977 will apply to the exemption clause
if Paul is dealing on Buildco's written standard terms of business.
B. If s.3 of the Unfair Contract Terms Act 1977 applies the
exemption clause will be void.
C. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption
clause will be valid if reasonable.
D. If s.3 of the Unfair Contract Terms Act 1977 does not apply, the
exemption clause will be valid.
Correct
B is the only statement that is not correct since s.3 of the Unfair Contract
Terms Act 1977 makes the clause subject to the requirement of
reasonableness.
5. If you were classifying a company in terms of how it made decisions
when responding to changing market conditions, which one of the
following descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on
detailed analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities.
Not keen to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal market
share from them. They have resources they can use to attack competitors.
Sometimes their relative strength can make them over confident. D describes Fast Follower organisations who are less happy with high risk
than Innovators, but can often achieve greater returns and visibility than
Innovators gain. B - describes a combination of Defenders, Innovators and
Fast Followers. C - describes Innovators.
6. It is now becoming accepted practice that actuaries record an audit trail
for any substantive piece of work.
Why?
Your answer (in bold):
A. In order to document better the value added for their clients,
enabling them to charge accordingly.
B. Because it provides a means of self-checking their work so that
peer review is not necessary.
C. In order to provide a record of the process they have followed,
enabling another actuary to take over, or check, their work
D. Because this is now a requirement of the Professional Conduct
Standards.
Correct
Answer C is correct. Answer A would not in practice justify the need for
an audit trail. Answer B would be correct to the extent that an audit trail
can help self-check one's work, which should be done anyway, but an
actuary should always get someone else to check their work i.e. peer
review it. Answer D is not right because an audit trail is not covered
specifically by the Professional Conduct Standards.
7. Which one of the options A, B, C or D is not true?
When the PCS uses the term 'should normally', it means that members
must comply with an item in the PCS unless non-compliance...
Your answer (in bold):
A. would be perceived by the public as reflecting acceptable
professional judgement.
B. would meet more satisfactorily the requirements of the
member's client regardless of what other members might
reasonably expect of a member.
C. would reflect a level of competence which other members, or the
public, might reasonably expect of a member.
D. is consistent with the integrity which the public might expect of a
member.
Correct
The correct answer is B. An explanation can be found in the introductory
pages of the PCS.
8. You see a vase in an antique shop. You think it is very rare and worth
far more than the price asked. The owner of the shop hears you telling your
friend your views about the vase but does not say anything. You buy the
vase but it turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
A. The owner of the shop has made a misrepresentation as she should
have corrected your mistake.
B. The owner of the shop has made a misrepresentation as she was
under a duty to disclose all material facts.
C. The owner of the shop has made a negligent misstatement.
D. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a misrepresentation
or a negligent misstatement as there was no false statement.
9. In maximising the value of a company, which of the following is the
best measure of value to use?
Your answer (in bold):
A. Annual profit.
B. Annual return on assets.
C. Net present value of future profits.
D. There is no one perfect measure.
Incorrect
The answer is D as there is no single measure of value in accordance with
the 'Financial objectives' tutorial, it is best to consider that specific
measures are providing information on specific aspects of the business.
10. You have just joined a new company, and you have already been asked
to make a recommendation on what you think is a strategic, high-impact
decision. Your recommendation will be made direct to the Chief
Executive. You have looked for someone able to help you with this, but
not found anyone with the right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed
you there is not enough time to do that, and suggested you should "Use
your instinct."
What type of organizational structure do you think you are now working
in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend
to involve little structure or formality, high risk-taking, and the decisionmaking power concentrated in a few people. In a hierarchy (B) you would
expect a big decision to go through a more formal process of approval, and
in a matrix organisation (C) you would expect more people to be involved
in the process bringing their own views and expertise.
11. Which one of the following would not be a current issue for general
insurance companies?
Your answer (in bold):
A. Capital adequacy.
B. Increasing longevity.
C. Treating customers fairly.
D. Claims compensation culture.
Correct
Answer B is correct because increasing longevity is a current issue for life
insurance companies and pension schemes, particularly when annual or
monthly benefits are being paid out for the rest of a person's life. However,
this would not be an issue for a general insurance company that does not
offer benefits related to a person's lifetime. Answers A, C and D are all
current issues for a general insurance company.
12. You may be offered a gift by a company with whom you, or your
company, has a business / professional relationship. In deciding whether to
accept the gift, which of the following would not be true?
Your answer (in bold):
A. You must consider carefully whether acceptance of a gift could in
any way influence your judgement.
B. You must find out what your company's policy is on gifts.
C. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a
particular piece of work.
D. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the
termination of a particular task of some importance, is less likely to be
objectionable than a series of gifts implying the possibility of undue
influence. The other alternatives, A, B and D, are all true. An example
under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some standing.
13. Which one of the following is NOT correct?
Your answer (in bold):
A. The remoteness rule in contract is that the loss must be within the
reasonable contemplation of the parties.
B. The remoteness rule in contract is that the loss must be
reasonably foreseeable.
C. The normal aim of the court when assessing damages in contract is
to put the innocent party in the position he would have been in if
the contract had been properly performed.
Correct
The only answer that is not correct is B as the statement refers to the
remoteness rule in tort, not contract.
14. All except two of the following would be appropriate criteria to test
whether a potential segment should be a viable target. Select the two which
are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to
require some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales,
or to include the target customers willing to pay an acceptable price
to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for
a long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in any
case eliminate interesting emerging segments.
15. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff
B. the human resources needed for the plan
C. the means by which the plan is implemented
D. the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore diagram
under the 'Creating and capturing value' tutorial
16. If, as a result of a Disciplinary Scheme Tribunal, an actuary is fined,
what is the maximum amount he or she can be fined?
Your answer (in bold):
A. £5,000
B. £20,000
C. £50,000
D. there is no limit.
Correct
Answer D is correct because in theory there is no limit as to how much a
guilty actuary could be fined though in practice the amount must be in
proportion to the misdemeanor. This will be based on the panel's
judgement and at its discretion.
17. Kamla sends a fax to Tony asking if he wants to buy her computer for
£500. Tony sends a fax back asking if Kamla will accept £450. Later that
day, not having received a reply from Kamla, Tony sends her a fax saying
"I'll buy the computer for £500. Can you deliver it to me or should I
collect?" Kamla no longer wants to sell the computer.
Which one of the following is correct?
Your answer (in bold):
A. Tony has a contract with Kamla to buy the computer for £450.
B. Tony has a contract with Kamla to buy the computer for £500.
C. There is no contract between Tony and Kamla.
D. There is a contract with Kamla to buy the computer but the court
will fix a reasonable price.
Correct
The correct answer is C. Tony's first fax is a counter offer. This has the
effect of destroying Kamla's offer which can no longer be accepted. The
authority for this is the case of Hyde v Wrench (1840).
18. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet
the company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to
functional strategy and C relates to corporate strategy.
19. Select the one statement below that correctly defines the difference
between deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while
in creative synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from
an hypothesis, while in creative synthesis facts are created by some
additional insight.
C. In deductive synthesis facts are found by reducing the data
down to the fact, while in creative synthesis facts are created by
some additional insight.
D. In deductive synthesis the outcome is created by adding insight,
while in creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the
outcome, while in creative synthesis facts are not relevant to the outcome.
20. If work which a member considers necessary is precluded by cost or
time constraints the member should normally...
Your answer (in bold):
A. perform only that portion of the work permitted by cost and time,
and say nothing further.
B. recommend that the work is undertaken by another firm whose fees
are lower.
C. either decline to act or qualify the advice given.
D. refer the matter to the PAB.
Correct
The correct answer is C. An explanation can be found in Section 2 of the
PCS
21. You are an industry analyst in a venture capital company, preparing a
report for potential investors on a restaurant chain, Fervour, which is
looking to expand abroad. Fervour specialises in converting churches into
restaurants, capitalising on the architecture to create atmospheric
surroundings, supported by live jazz. The menus - created by Michelin
chef Jean-Pierre Noir - are highly acclaimed in culinary circles for their
imagination and flair. Fervour looks to cater for a wide range of clientele,
offering a dining experience 'for all the senses'. While it is still relatively
unknown, it has bought the majority of unused church buildings across the
country, ready for conversion.
In trying to make the investment proposition sound as attractive as
possible, it is important that you highlight where Fervour has advantages in
the marketplace.
Which one of the following statements do you feel represents a real and
sustainable competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the
country.
C. Superior locations - church buildings stand out against
ordinary restaurants, and are located close to the desired
audience.
D. Marketing capability - Fervour has recently introduced its own
website to extend the diner's experience, detailing the menus and
music planned at all its venues.
E. Relationships with its key suppliers - to ensure the freshest food
and the right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused
churches means that other competitors will be unable to replicate the
Fervour surroundings, making this a sustainable advantage. While the
menus are imaginative (A), they can also be copied, which means that this
advantage is difficult to sustain. The Fervour brand (B) is unknown outside
the country, so it cannot yet be exploited as an advantage. While a website
(D) is useful, it is likely that most other restaurants will also have a website
supporting their core offering, so this does not represent an advantage.
Relationships with suppliers to ensure fresh food (E) are a necessity in this
market, rather than an advantage.
22. Patricia Smith is a director of Smithsons Limited ('the Company').
Which two of the following are correct?
Your answer (in bold):
A. Patricia owes a duty to the Company.
B. Patricia owes a duty to the shareholders of the Company.
C. Patricia must have regard to the interests of the employees of the
Company.
Incorrect
The correct answer is A and C. As a fiduciary, Patricia owes a duty to the
Company and not to the shareholders. In addition, s 309(2) CA 85 imposes
an obligation on the directors to have regard to the interests of the
employees of the Company.
23. Errors have been occurring quite often in the work of actuarial students
in your company.
Which of the following control processes has an apparent weakness, based
on the information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the
work can be followed by another person who has the appropriate
level of knowledge and skills.
B. Documentation is in place describing how the bases and
assumptions adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry
out their checks very quickly in order to avoid missing
deadlines.
D. Checks are carried out on the computer systems that produce many
of the calculations
Correct
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems that
produce calculations. The latter would only be a problem if these checks
had not been carried out rigorously. The weakness in the controls described
would be in the peer review process if the peer reviewer is not given
sufficient time to carry out the peer review in sufficient detail. The peer
reviewer is as responsible as the originator. If you sign, you are
responsible.
24. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A. A map of all the businesses operating in a strategic set i.e. targeting
the same market segment.
B. A system showing the industry competitors and all their suppliers.
C. A technological map used to capture all the technology links used
within a company.
D. A model of the primary and support functions of a business
with their key activities.
Correct
D is correct. It is often used to map functions and activities within a
company to establish which create value and which create costs; or to
establish how activities are interlinked as a means of improving processes
and competence.
25. Moving from an existing strategy to a new one can be challenging with
complicated changes to implement. Trying to do everything at once can
stretch resources. It is usually best to progress in manageable steps with
each step representing a sustainable strategy in itself. Such steps are a
strategic staircase.
In what order are the steps on Komatsu's strategic staircase, starting at the
bottom?
Your answer (in bold):
A. Cost; quality; diversification; differentiation.
B. Differentiation; quality; cost; diversification.
C. Quality; cost; differentiation; diversification.
D. Differentiation; diversification; quality; cost.
Correct
The answer is C in accordance with the 'Komatsu's strategic staircase'.
Explore item in 'The strategic staircase' tutorial.
26. Success related fees should only be accepted by a member if...
Your answer (in bold):
A. they do not contravene the general requirements of the PCS
B. the member has disclosed them in advance to his / her firm
C. the member has made clear to the client that the advice given may
be influenced by the fee arrangement
D. other firms with which the member's firm is associated are not
affected by the success related fees
Correct
The correct answer is A. An explanation can be found in Section 6 of the
PCS
27. You are the marketing director for Svenson, a technology
manufacturer. You have just introduced a new 'mobile entertainment'
device, which will offer users the opportunity to play videos, take digital
photographs, send emails and text messages, play music and communicate
via telephone. It has state-of-the-art features, allowing compatibility with
all the top service providers. The Svenson brand is relatively new, yet it
already has a reputation for being innovative, cool and funky. The Svenson
'mini entertainer' is priced at $600. You now have information from your
Customer Management team showing the profiles of your key customer
segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good
disposable income, increasingly mobile for work and leisure,
take huge interest in gadget advertising, and love the funky
status they acquire with Svenson products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable
disposable income, buy on functionality, willing to pay for
whichever technology combines all the functions they need and fits
their mobile lifestyle
C. Family First - the largest segment (33% of your base), although it
has shrunk over the last year. Mobility based around supporting the
family. High income restricted by outlays on children and aged
parents. Willing to purchase any technology proven to make their
lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable
segment. Segment size is reasonable, and it is growing, disposable income
is high (for what is quite a reasonably expensive, one-off purchase) and
there is strong desire for the product. It is an ideal fit with Svenson's
advantages in innovation, plus its brand reputation - gadget lovers matched
with funky gadget provider. Youth of Today (B) is a reasonable-sized,
growing segment. Svenson's advantages match their needs, but the segment
is more attracted by generic functionality than the Svenson brand, making
it less attractive to the company. Family First (C) is less attractive.
Although this segment is large, the profile suggests people in this segment
are more likely to pay for features that provide convenience rather than
pure entertainment. Although they have high income, their profile suggests
they are likely to have priorities for spending rather than a high-priced
entertainment item.
28. You apply for a job as the PA to the Managing Director of Maximus
Limited and are interviewed for the job by the Managing Director himself.
Samuel Brown (the Personnel Director) later writes to you to offer you the
job and, when you ring up to ask for some further details on pay and
holiday entitlement, your queries are answered by the Human Resources
Manager (Heather Freeman). You decide to accept the job.
Who is your employer?
Your answer (in bold):
A. The Managing Director
B. Samuel Brown
C. Heather Freeman
D. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are not
acting in their own capacity but as agents of the company.
9
Quiz Feedback
10
You got 26 out of 28 answers correct (93%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. You are the new Managing Director of Korsan, a city-based chain of
medium-priced hotels catering primarily for late-night business travellers.
Trade is reasonable, and you have a high level of repeat business (and thus
good projected future occupancy), but costs seem high and profits slim,
particularly for the hotel's restaurant. It serves few customers at night,
although the chefs have done innovative things to the menus to increase
their appeal. A rival chain - Luxuria - is also setting up its high-class hotels
for discerning travellers in the same cities, and your board is panicking that
significant business will be lost. They present some recent research
showing that customers' core needs are a good night's sleep and a
convenient location. They also present a large dossier of suggestions for
maximising the value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience
(discerning travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of
potential customers for Korsan.
C. Invest in a major marketing campaign to promote the location
benefits of Korsan to new customers.
D. Reduce the restaurant to breakfast-only, setting up a
relationship with a city-based restaurant for your customers to
have discounted evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers
(sleep and location) Korsan can reduce unnecessary overheads and
increase value captured. The deal with a city restaurant will also be
attractive to those customers wanting to eat in the evening. Korsan's target
audience is different to Luxuria, and there is no evidence to suggest that
Luxuria's target audience would be attracted, even with a refurbished hotel.
A - could be a costly error. B - would require investment by way of a
marketing campaign to get it off the ground, and there is no guarantee that
non-hotel customers would be attracted. Korsan has high repeat business
and high projected future occupancy, so a campaign to attract new
customers (C) would be wasteful.
2.
Your company is assessing whether to enter new markets and has asked
you to carry out a check on one of these to gain a clearer picture of its
potential profitability.
Which one of the following frameworks might you apply to structure your
thinking for this purpose?
Your answer (in bold):
A. A 'competitive forces' analysis.
B. A 'PEST' analysis.
C. An analysis of your company's business system.
D. A 'competitive advantage' analysis of your strategic assets,
capabilities and relationships.
Correct
Correct Answer: A. The purpose of analysing the strength of the combined
power of the competitive forces that bear on an industry or market segment
is to first, assess how much pressure they will exert and hence squeeze
profits on companies trying to operate in that industry or market. Having
assessed that, a company should next consider what it could do to push
back against these forces to see if the market is viable for it. The other
frameworks only provide you with elements of the information you need.
3. In carrying out a piece of work for your company, which of the
following is not a requirement in terms of the Professional Conduct
Standards ('PCS')?
Your answer (in bold):
A. You must follow the judgement of your company's
management.
B. You must disclose a conflict of interest.
C. Advice you give to a colleague should normally meet the same
standards as for external advice.
D. You must not give advice unless competent.
Correct
Answer A is correct because the PCS applies to individual members, not
their companies. Therefore, it is the individual judgement of members
upon which the good standing of the profession relies.
4. Peter owes Dent & Co £2,000. Peter asks Dent & Co if they will accept
£1,500 in full settlement. Dent & Co agree and Peter hands over the
£1,500.
Is the following statement false or true? Dent & Co cannot sue Peter for the
balance as promissory estoppel can only be used as a defence.
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A. Dent & Co. will not be relying on promissory
estoppel. Dent & Co. can sue for the balance relying on the contract and
the rule in Foakes v Beer - it is Peter who may then try to rely on
promissory estoppel as a defence.
5. If you were classifying a company in terms of how it made decisions
when responding to changing market conditions, which one of the
following descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on
detailed analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities.
Not keen to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal market
share from them. They have resources they can use to attack competitors.
Sometimes their relative strength can make them over confident. D describes Fast Follower organisations who are less happy with high risk
than Innovators, but can often achieve greater returns and visibility than
Innovators gain. B - describes a combination of Defenders, Innovators and
Fast Followers. C - describes Innovators.
6. There are certain roles for actuaries that are 'reserved' solely for them.
These are roles laid down by statute that only an actuary can carry out.
Which two of the following are not statutory roles reserved for actuaries
only?
Your answer (in bold):
A. Scheme Actuary (pensions).
B. With Profits Actuary (life insurance).
C. Reserving actuary (general insurance).
D. Lloyd's Syndicate Actuary (Lloyd's of London market).
E. Appointed Actuary (life insurance).
Correct
Answers C and E are correct. Although the Morris Review has
recommended that the FSA should require a general insurer to take advice
from an approved person regarding risk assessment and the valuation of
liabilities, this approved person would not have to be an actuary (C). The
Appointed Actuary role was a statutory one until 31 December 2004 when
it was replaced by an Actuarial Function Holder and a With Profits
Actuary (E). A, B and D are all statutory roles.
7. Which one of the following is correct?
Your answer (in bold):
A. Members must always comply with the PCS but need not always
comply with the relevant Guidance Notes
B. Members need not comply with the PCS if they are complying with
relevant Guidance Notes
C. A member's judgement will always take precedence over the PCS
and relevant Guidance Notes
D. Members must always comply with the PCS and relevant
Guidance Notes
Correct
The correct answer is D. An explanation can be found in the introductory
pages of the PCS
8. John, Andrew and Robert have been in partnership together for 3 years.
They have no partnership agreement. John has recently been declared
bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership
without John who will have to retire."
Your answer (in bold):
A. True
B. False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under
s33 Partnership Act 1890. In any event there is no right of retirement in the
Partnership Act 1890.
9. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff
B. the human resources needed for the plan
C. the means by which the plan is implemented
D. the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore diagram
under the 'Creating and capturing value' tutorial
10. All except two of the following would be appropriate criteria to test
whether a potential segment should be a viable target. Select the two which
are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to
require some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales,
or to include the target customers willing to pay an acceptable price
to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for
a long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in any
case eliminate interesting emerging segments.
11. Who carried out a review of The Actuarial Profession in 2004/05?
Your answer (in bold):
A. Lord Penrose.
B. Sir Derek Morris.
C. John Myners.
D. Gordon Brown.
Correct
Answer B is correct. Sir Derek Morris carried out the review at the request
of Gordon Brown's Treasury Department following the report by Lord
Penrose about Equitable Life.
12. Errors have been occurring quite often in the work of actuarial students
in your company.
Which of the following control processes has an apparent weakness, based
on the information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the
work can be followed by another person who has the appropriate
level of knowledge and skills.
B. Documentation is in place describing how the bases and
assumptions adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry
out their checks very quickly in order to avoid missing
deadlines.
D. Checks are carried out on the computer systems that produce many
of the calculations
Correct
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems that
produce calculations. The latter would only be a problem if these checks
had not been carried out rigorously. The weakness in the controls described
would be in the peer review process if the peer reviewer is not given
sufficient time to carry out the peer review in sufficient detail. The peer
reviewer is as responsible as the originator. If you sign, you are
responsible.
13. Kamla sends a fax to Tony asking if he wants to buy her computer for
£500. Tony sends a fax back asking if Kamla will accept £450. Later that
day, not having received a reply from Kamla, Tony sends her a fax saying
"I'll buy the computer for £500. Can you deliver it to me or should I
collect?" Kamla no longer wants to sell the computer.
Which one of the following is correct?
Your answer (in bold):
A. Tony has a contract with Kamla to buy the computer for £450.
B. Tony has a contract with Kamla to buy the computer for £500.
C. There is no contract between Tony and Kamla.
D. There is a contract with Kamla to buy the computer but the court
will fix a reasonable price.
Correct
The correct answer is C. Tony's first fax is a counter offer. This has the
effect of destroying Kamla's offer which can no longer be accepted. The
authority for this is the case of Hyde v Wrench (1840).
14. As part of a 'PEST' analysis of external factors that might affect your
industry, which one of the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your
operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Incorrect
Answer A is correct. The other responses do not represent factors that are
part of the PEST framework that is used to scan for external influences
impacting an industry.
15. If you have a major surprise to impart to your colleagues concerning
the business, the way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week
before the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to
the meeting.
Correct
The answer is A in accordance with the 'No surprises' tutorial.
16. With regard to publicity, which of the following statements is
incorrect?
Your answer (in bold):
A. Members may publicise the professional services offered
B. Members must ensure their publicity is appropriate to the
profession
C. Members speaking in public must make it clear that their
presentation has the backing of the profession
D. Members who have any doubts about material they wish to
publicise should seek advice from the professional body
Correct
The correct answer is C. An explanation can be found in Section 9 of the
PCS
17. Paul ordered new machinery from Buildco Ltd for use in his business
and to be delivered on 14 December. Buildco were three months late
delivering the machinery. The signed contract contains a clause stating that
Buildco will not be liable for late delivery of the machinery.
Which one of the following is NOT correct?
Your answer (in bold):
A. Buildco has broken an express term of the contract. s.3 of the
Unfair Contract Terms Act 1977 will apply to the exemption clause
if Paul is dealing on Buildco's written standard terms of business.
B. If s.3 of the Unfair Contract Terms Act 1977 applies the
exemption clause will be void.
C. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption
clause will be valid if reasonable.
D. If s.3 of the Unfair Contract Terms Act 1977 does not apply, the
exemption clause will be valid.
Correct
B is the only statement that is not correct since s.3 of the Unfair Contract
Terms Act 1977 makes the clause subject to the requirement of
reasonableness.
18. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet
the company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to
functional strategy and C relates to corporate strategy.
19. You are considering investing in the car manufacturing industry, but
you are concerned about competitive forces changing the market. You've
decided to organise an analysis on the five major competitive forces acting
on the industry.
Which of the following represents the five forces that you should
investigate?
Your answer (in bold):
A. Product, price, people, placement, positioning. of substitute
products,
B. Threat of substitute products, rivalry, supplier power,
customer power, threat of new entrants.
C. Missions, objectives, goals, strategies, objectives.
D. Access to capital, ease of integration, synergy with existing
operations, distribution channels, sustainable competitive
advantages.
Correct
Answer B is correct. The other options do not represent the five
competitive forces acting on an industry.
20. Which of these statements is not correct?
Your answer (in bold):
A. The PCS are not exhaustive so considerable reliance is placed on
the conscience of each individual member to maintain the highest
standards of conduct.
B. The PCS are comprehensive and all members must comply
with each section.
C. Members must comply with the spirit and letter of the PCS.
D. The PCS are not comprehensive and rely on the collective
conscience of all members to maintain the highest standards of
conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
21. The company you work for, TransGlobal Multinational Limited, is
considering entering a new market. The decision-making process has
involved reviewing other similar organisations' attempted entries,
identifying successes and failures, suggesting improvements that
TransGlobal could make over competitors' offers, and an analysis of the
market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational
cultural types listed do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders.
B. Innovators.
C. Fast followers.
D. Slow reactors.
Correct
Answer C is correct. This behaviour illustrates an organisation not willing
to take the risk of moving first, but opportunistic enough to enter where an
opportunity has appeared, and then attempt to improve upon the market
entry, process, or product introduced by the innovator.
22. You apply for a job as the PA to the Managing Director of Maximus
Limited and are interviewed for the job by the Managing Director himself.
Samuel Brown (the Personnel Director) later writes to you to offer you the
job and, when you ring up to ask for some further details on pay and
holiday entitlement, your queries are answered by the Human Resources
Manager (Heather Freeman). You decide to accept the job.
Who is your employer?
Your answer (in bold):
A. The Managing Director
B. Samuel Brown
C. Heather Freeman
D. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are not
acting in their own capacity but as agents of the company.
23. You may be offered a gift by a company with whom you, or your
company, has a business / professional relationship. In deciding whether to
accept the gift, which of the following would not be true?
Your answer (in bold):
A. You must consider carefully whether acceptance of a gift could in
any way influence your judgement.
B. You must find out what your company's policy is on gifts.
C. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a
particular piece of work.
D. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the
termination of a particular task of some importance, is less likely to be
objectionable than a series of gifts implying the possibility of undue
influence. The other alternatives, A, B and D, are all true. An example
under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some standing.
24. Your 'street-style' youth-orientated fashion-house needs extra suppliers
to allow you to get a constant flow of your new designs quickly to young
customers. Based on the strengths and weaknesses of potential overseas
manufacturers listed below.
Which one would help you fulfil your strategy?
Your answer (in bold):
A. This company handles high volumes. (they've supplied identical
Government uniforms for years) It has many machinists, but is not
highly automated. It can deliver on schedule if given long lead
times. Low wages guarantee low cost per unit.
B. This small factory will take instructions electronically and
transfer data to computerised cutting machines. It can produce
items quickly, though usually in smaller batches than
manufacturer A. It produces its own designs for local markets.
It has fewer, higher paid staff than manufacturer A.
C. Company C can - and will - copy anything - they don't need many
written instructions. They make near-identical copies of design
from international fashion shows within a week, usually without the
designer's permission. They emphasise speed over quality.
Correct
Correct Answer: B Manufacturer B would be best as it seems responsive
and flexible and could offer volume by delivering smaller batches across
staggered dates, allowing orders to be adapted according to market uptake.
Staff have better conditions and their skills for original design may be an
asset. Company A's strengths appear to be in large scale, repetitive orders.
Indications are that their systems and staff may not be geared to fast
turnaround on changing requirements. Company C may present some risks.
They provide speed, but if their success is built on 'stealing' designs, your
own reputation may suffer by using them - or your own designs could be
stolen, too!
25. The pressures that affect an industry's profitability are known as
competitive forces, or Porter's 'Five Forces'.
Which of the following is not one of the five forces?
Your answer (in bold):
A. Rivalry.
B. Economic change.
C. Threat of new entrants.
D. Supplier power.
Correct
The answer is B in accordance with the 'How strong are the competitive
forces?' tutorial
26. If there is, or might be, a conflict of interest between two clients of a
member's firm, the member must...
Which of these is not correct?
Your answer (in bold):
A. advise the clients at the earliest opportunity.
B. decide which client to advise and must inform the other client that
he / she is unable to provide advice.
C. disclose, in the advice given to one or both of the clients that the
advice is, or will be, influenced by interests other than those of
the client.
D. decide whether it would be improper for the member to give advice
to one or both of the clients.
Incorrect
The correct answer is B. An explanation can be found in Section 5 of the
PCS
27. As an executive in a major oil company, you work for the division
where responsibilities cover its network of petrol stations serving the
public. You've received details from the directors of the strategic,
financial, and non-financial objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty
scheme you run for customers.
B. Pledge to protect the environment by increasing new policies and
processes.
C. Leverage distribution network more effectively by establishing
shops on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update
facilities.
Correct
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic, and
B is non-strategic and non financial (although often it is difficult to draw a
clear-cut line between profits and social responsibility). D is financial - it is
a specific goal with specific timeframe.
28. The defendant is only liable for the extent of the injury which the
reasonable man would have suffered. If the claimant is particularly
sensitive and this means that he suffers greater loss, the defendant is not
liable for this 'extra' loss even though the type of injury was reasonably
foreseeable.
Is the statement above true or false?
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A (false). Provided the type of loss is reasonably
foreseeable, the defendant is liable for the full extent of the loss even
though the precise extent was not foreseeable. This is known as the eggshell skull rule.
11
Quiz Feedback
View Instructions
12
You got 29 out of 32 answers correct (91%)
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9033819
(This question is not included in the score.)
2. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and
telephone system to enable smarter working on the move. However, the
Mobilo is not selling as well as expected into the company's core customer
segments. Recent research has revealed that the core segments are seeking
mobile efficiency as well as enhanced status for being 'early adopters' in
this market.
Which of the company's advantages would you use as the core of a
campaign to increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which
has an unrivalled reputation for new ideas in mobile
living/working.
B. The strong relationships the company has with its suppliers, who
provide highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the
competition, to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for
awareness three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency
as well as their need to be early adopters in the market. Customers will
value the highly-reputed technological components (B), but alone they do
not meet customer needs for mobile efficiency. Speed of delivery (C) will
help in getting the products to customers early, to support them being early
adopters, but it does not match their need for innovation. There is little
benefit in purely having high awareness of the company brand (D), if this
product campaign is not communicating the benefits relevant to the target
groups.
3. John, Andrew and Robert have been in partnership together for 3 years.
They have no partnership agreement. John has recently been declared
bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership
without John who will have to retire."
Your answer (in bold):
A. True
B. False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under
s33 Partnership Act 1890. In any event there is no right of retirement in the
Partnership Act 1890.
4. Select the one statement below that correctly defines the difference
between deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while
in creative synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from
an hypothesis, while in creative synthesis facts are created by some
additional insight.
C. In deductive synthesis facts are found by reducing the data
down to the fact, while in creative synthesis facts are created by
some additional insight.
D. In deductive synthesis the outcome is created by adding insight,
while in creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the
outcome, while in creative synthesis facts are not relevant to the outcome.
5. The PCS applies to all members where a member is...
Your answer (in bold):
A. a Fellow of the Institute or Faculty
B. a Fellow or an Associate of the Institute or Faculty
C. a Fellow, Associate or Student of the Institute, or a Fellow or
Associate of the Faculty
D. a Fellow, Associate or Student of the Institute or Faculty
Incorrect
The correct answer is D. An explanation can be found in the Definitions of
the PCS.
6. A firm of actuaries issues a brochure advertising its services.
Which one of the following statements is most likely to be incorrect?
Your answer (in bold):
A. The brochure is likely to be classed as an invitation to treat
B. Statements made in the brochure are capable of being
misrepresentations
C. The brochure is likely for form a binding contract between the
firm and the client
D. The brochure is likely to form a collateral contract with the client
Correct
The correct answer is C. A is wrong because it is unlikely the firm will be
expressing a willingness to be bound by the terms of the brochure. B is
wrong because if a statement in the brochure is untrue and induces entry
into a contract it is capable of being a misrepresentation. D is wrong
because collateral contracts are rare. The brochure is unlikely to form a
collateral contract.
7. All except two of the following would be appropriate criteria to test
whether a potential segment should be a viable target. Select the two which
are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to
require some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales,
or to include the target customers willing to pay an acceptable price
to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for
a long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. D - although it is vital to have channels of communication and
distribution they do not have to be exclusive. E - a long established
segment is likely to be served already and using this criterion would in any
case eliminate interesting emerging segments.
8. Many pension schemes are currently underfunded. Which of these are
two of the main reasons for this?
Your answer (in bold):
A. People are living longer.
B. Asset values have fallen.
C. Employers have taken long contribution holidays.
D. More people than expected have been retiring early.
Correct
Answers A and B are correct, and these reasons are often being stated in
the media. Contribution rates and therefore the scope for periods of paying
nil or low contributions have been determined on best estimates of future
experience and the significant falls in asset values since 2000, in particular,
could not have been foreseen. Therefore, in this context, it cannot be
claimed that a main reason is contribution holidays. Although early
retirements may have been running at a higher level than assumed, and
may have proved to be under funded, this is not a main reason given for
many schemes being under funded.
9. With regard to publicity, which one of the following statements is
incorrect?
Your answer (in bold):
A. Members may publicise the professional services offered
B. Members must ensure their publicity is appropriate to the Actuarial
Profession
C. Members who have any doubts about material they wish to
publicise should seek advice from the Actuarial Profession
D. Members speaking in public must make it clear that their
presentation has the backing of the Actuarial Profession
Incorrect
The correct answer is D. An explanation can be found in Section 9 of the
PCS.
10. Assume that in The Actuarial Profession there are two respected bodies
of opinion as to how to tackle a particular task (methods 1 and 2). You
choose method 1. In the event it turns out that using method 2 would have
been more beneficial to the client.
Which one of the following statements is correct?
Your answer (in bold):
A. You are in breach of duty
B. You are not in breach of duty
C. You are in breach of duty, but damages will be reduced as you
acted reasonably
D. You are in breach of duty, but the client's damages will be reduced
as the client was guilty of contributory negligence by allowing you
to choose method 1
Correct
The correct answer is B. A is wrong because it there are two respected
bodies of opinion you are not in breach of duty by choosing one of them. C
is wrong because you are not in breach of duty if you follow a recognised
body of opinion. D is wrong because you are not in breach of duty by
choosing a recognised body of opinion.
11. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff
B. the human resources needed for the plan
C. the means by which the plan is implemented
D. the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore diagram
under the 'Creating and capturing value' tutorial
12. Which of the following statements describes the characteristics of
power-based organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly
specified. Easier to predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A
central power source is usually associated with young companies, or those
where the founder has not wished to expand greatly. B - describes a
characteristic of a hierarchical organisation. C - is a characteristic of matrix
organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision makers
cannot continue and no successors have been identified.
13. In the business game, The Way Forward, which one of the following
defines the ‘cost of sales' in the Profit and Loss Account?
Your answer (in bold):
A. The purchase cost of all the items purchased by a team in the time
period
B. The purchase cost of all the items sold by a team in the time
period
C. The cost of all the items currently held in stock by a team
D. The total costs incurred in marketing, selling and distribution of the
items sold in the period.
Correct
The correct answer is B. The cost of sales was defined as the amount a
team had to pay for all the items that it sold during the period.
14. It is now becoming accepted practice that actuaries record an audit trail
for any substantive piece of work.
Why?
Your answer (in bold):
A. In order to document better the value added for their clients,
enabling them to charge accordingly.
B. Because it provides a means of self-checking their work so that
peer review is not necessary.
C. In order to provide a record of the process they have followed,
enabling another actuary to take over, or check, their work
D. Because this is now a requirement of the Professional Conduct
Standards.
Correct
Answer C is correct. Answer A would not in practice justify the need for
an audit trail. Answer B would be correct to the extent that an audit trail
can help self-check one's work, which should be done anyway, but an
actuary should always get someone else to check their work i.e. peer
review it. Answer D is not right because an audit trail is not covered
specifically by the Professional Conduct Standards.
15. When you are discussing work with actuarial friends from another
company you must be careful what you talk about. There is a risk that you
may be caught off guard, especially in a social environment. Which of the
following topics relating to your company would it normally be safe for
you to talk about without the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking
about B, C or D and you might be contravening your employment contract
by doing so. Therefore, A is the correct answer because there is no reason
why you should not talk about information that would be available in the
market place even if it could be quite hard for someone else to find that
information.
16. Which one of the following statements is correct?
Your answer (in bold):
A. An actuary can never limit his or her liability to a client
B. An attempt by an actuary to limit liability to a client will be
subject to a reasonableness test
C. Any attempt by an actuary to exclude liability for his or her
negligence is void
D. If there is any ambiguity in a limitation clause used by an actuary, it
will be construed in favour of the actuary
Correct
The correct answer is B because the Unfair Contract Terms Act 1977
imposes such a test. C is wrong because an actuary can exclude liability for
loss other than death or personal injury arising from negligence as long as
the exclusion satisfies the reasonableness test. D is wrong because it will
be construed against the actuary!
17. Your 'street-style' youth-orientated fashion-house needs extra suppliers
to allow you to get a constant flow of your new designs quickly to young
customers. Based on the strengths and weaknesses of potential overseas
manufacturers listed below.
Which one would help you fulfil your strategy?
Your answer (in bold):
A. This company handles high volumes. (they've supplied identical
Government uniforms for years) It has many machinists, but is not
highly automated. It can deliver on schedule if given long lead
times. Low wages guarantee low cost per unit.
B. This small factory will take instructions electronically and
transfer data to computerised cutting machines. It can produce
items quickly, though usually in smaller batches than
manufacturer A. It produces its own designs for local markets.
It has fewer, higher paid staff than manufacturer A.
C. Company C can - and will - copy anything - they don't need many
written instructions. They make near-identical copies of design
from international fashion shows within a week, usually without the
designer's permission. They emphasise speed over quality.
Correct
Correct Answer: B Manufacturer B would be best as it seems responsive
and flexible and could offer volume by delivering smaller batches across
staggered dates, allowing orders to be adapted according to market uptake.
Staff have better conditions and their skills for original design may be an
asset. Company A's strengths appear to be in large scale, repetitive orders.
Indications are that their systems and staff may not be geared to fast
turnaround on changing requirements. Company C may present some risks.
They provide speed, but if their success is built on 'stealing' designs, your
own reputation may suffer by using them - or your own designs could be
stolen, too!
18. The pressures that affect an industry's profitability are known as
competitive forces, or Porter's 'Five Forces'.
Which of the following is not one of the five forces?
Your answer (in bold):
A. Rivalry.
B. Economic change.
C. Threat of new entrants.
D. Supplier power.
Correct
The answer is B in accordance with the 'How strong are the competitive
forces?' tutorial
19. If, as a result of a Disciplinary Scheme Tribunal, an actuary is fined,
what is the maximum amount he or she can be fined?
Your answer (in bold):
A. £5,000
B. £20,000
C. £50,000
D. there is no limit.
Correct
Answer D is correct because in theory there is no limit as to how much a
guilty actuary could be fined though in practice the amount must be in
proportion to the misdemeanor. This will be based on the panel's
judgement and at its discretion.
20. Kerry offered to buy Rafiq's car for £5,000. She said that she would
keep her offer open until 1 June. On 14 May, Rafiq posted a letter
accepting Kerry's offer. This letter was lost in the post. In the meantime, on
13 May, Kerry posted a letter revoking her offer which Rafiq received on
18 May.
Which two of the following are correct?
Your answer (in bold):
A. If the postal rule applies Rafiq's acceptance is valid on 14 May.
B. If the postal rule does not apply Rafiq's acceptance is invalid as
it has not been communicated.
C. The postal rule cannot apply here, as Rafiq's acceptance was lost in
the post.
D. Kerry cannot revoke her offer as she said she would keep it open
until 1 June.
E. Kerry has validly revoked her offer on 13 May.
Correct
The correct answer is A and B. C is not correct because the postal rule can
still apply even if the acceptance is lost in the post - Household Fire
Insurance v Grant (1879).D is not correct as Kerry can still revoke even
though she said she would leave the offer open - Routledge v Grant
(1828).E is not correct as a revocation is only effective when
communicated, not when it is posted - Byrne v Van Tienhoven (1880).
21. You have been asked to define the competitive positioning for your
business unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component
of the business unit's competitive position?
Your answer (in bold):
A. Supply affordable laser printers and related supplies.
B. Target Home Office computer users.
C. Taking a phased approach to expanding the distribution
network.
D. Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of
either product/service, target customers, or channels, all of which are
competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
22. Moving from an existing strategy to a new one can be challenging with
complicated changes to implement. Trying to do everything at once can
stretch resources. It is usually best to progress in manageable steps with
each step representing a sustainable strategy in itself. Such steps are a
strategic staircase.
In what order are the steps on Komatsu's strategic staircase, starting at the
bottom?
Your answer (in bold):
A. Cost; quality; diversification; differentiation.
B. Differentiation; quality; cost; diversification.
C. Quality; cost; differentiation; diversification.
D. Differentiation; diversification; quality; cost.
Correct
The answer is C in accordance with the 'Komatsu's strategic staircase'.
Explore item in 'The strategic staircase' tutorial.
23. If work which a member considers necessary is precluded by cost or
time constraints, the member must...
Your answer (in bold):
A. perform only that portion of the work permitted by cost and time,
and say nothing further
B. recommend that the work is undertaken by another firm whose fees
are lower
C. refer the matter to the Professional Affairs Board
D. either decline to act or qualify the advice given
Correct
The correct answer is D. An explanation can be found in Section 2 of the
PCS.
24. Which one of the following is NOT correct?
Your answer (in bold):
A. The remoteness rule in contract is that the loss must be within the
reasonable contemplation of the parties.
B. The remoteness rule in contract is that the loss must be
reasonably foreseeable.
C. The normal aim of the court when assessing damages in contract is
to put the innocent party in the position he would have been in if
the contract had been properly performed.
Correct
The only answer that is not correct is B as the statement refers to the
remoteness rule in tort, not contract.
25. You are considering opening a record store in a major shopping area.
As there are other record stores located nearby, you will have to find
sources of competitive advantage.
Only one of the following would be a real source of competitive advantage
- which is it?
Your answer (in bold):
A. An award-winning advertising campaign
B. Exclusive promotional relationship with a major record label.
C. An unusual store design and internal layout.
D. Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built
on a strategic relationship that cannot be copied or imitated. All of the
other answers represent something that is easy to imitate, and are not built
upon superior assets, distinctive capabilities or strategic relationships.
26. A father of one of your friends feels he has lost out by his insurance
company merging with another. Your friend believes you know something
about how insurance companies work and asks you to find out something
for her father. Which of the following actions would it be sensible for you
to take?
Your answer (in bold):
A. Tell your friend everything you know about the merging of
insurance companies.
B. Tell your friend that her father may have been disadvantaged
because a main aim of any merger would be to benefit the
shareholders rather than the policyholders.
C. Tell your friend that you know one of the actuaries who worked on
the merger and that you will ask him to write to her father.
D. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version
of the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of
situation and remember that you are never "off duty". There will always be
a risk that what you say gets construed as expert actuarial opinion, and may
get quoted, or misquoted, by third parties. It would be potentially very
dangerous to act per A or B and not reasonable to act as C because the
actuary you know should not be expected to write to individual
policyholders - in fact his company may not allow him to.
27.
In the business game, The Way Forward, which two of the following are
true? When ...
1. the amount charged for depreciation is shown on the balance sheet
2. creditors and debtors both count as assets on the balance sheet
3. the purpose of the balance sheet is to show what the company is
worth
4. the value of currently held stock is shown as an asset on the balance
sheet
Your answer (in bold):
A. 1 and 4
B. 2 and 4
C. 1 and 3
D. 2 and 3
Correct
The correct answer is A. Both depreciation and the current value of stock
are shown on the balance sheet. 2 is not correct as creditors are an asset,
debtors are a liability. 3 is not correct as a balance sheet does not reflect
what a company is worth, only the value of its assets and liabilities at a
point in time.
28. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A. A map of all the businesses operating in a strategic set i.e. targeting
the same market segment.
B. A system showing the industry competitors and all their suppliers.
C. A technological map used to capture all the technology links used
within a company.
D. A model of the primary and support functions of a business
with their key activities.
Correct
D is correct. It is often used to map functions and activities within a
company to establish which create value and which create costs; or to
establish how activities are interlinked as a means of improving processes
and competence.
29. The main purpose of a business strategy is...
Your answer (in bold):
A. to follow every opportunity available.
B. to determine how best to use management talent.
C. to decide on the best way to promote the business to customers.
D. to maximise the value of the company.
Correct
The answer is D in accordance with the 'Creating and capturing value'
tutorial
30. An actuary agrees to do work for a client, but does not expressly agree
a fee or hourly rate.
Which one of the following is correct?
Your answer (in bold):
A. The agreement is void for uncertainty
B. The agreement fails for lack of consideration
C. The law will imply a term that the fee or hourly rate charged is a
reasonable one
D. The agreement fails for lack of an express term as to charging
Incorrect
The correct answer is C. The Supply of Goods and Services Act 1982
implies such a term in the absence of express agreement. A, B and D are
incorrect because The Supply of Goods and Services Act 1982 implies a
term that the fees charged will be reasonable.
31. Which one of these is not applicable?
A member providing reserved advice must ensure that the client is aware
of...
Your answer (in bold):
A. the name and qualifications of the member providing the advice
B. the name of the member's firm
C. the name and qualifications of any non-members involved in
the assignment
D. the scope, purpose and terms of reference of the advice provided by
the member
Correct
The correct answer is C. The explanation can be found in Section 3 of the
PCS.
32. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet
the company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to
functional strategy and C relates to corporate strategy.
33. Which one of the following is correct?
Your answer (in bold):
A. If a condition is broken, the innocent party may be able to
terminate the contract as well as sue for damages.
B. If a warranty is broken, the innocent party may be able to terminate
the contract as well as sue for damages.
C. If a condition is broken and the innocent party terminates the
contract, he cannot also sue for damages
D. If an innominate term is broken, the innocent party can sue for
damages but cannot terminate the contract.
Correct
The correct answer is A. B is not correct because if a warranty is broken
the innocent party can sue for damages but cannot terminate the contract. C
is not correct because a party entitled to terminate a contract for breach of a
condition is also entitled to claim damages for any loss suffered. D is not
correct because if an innominate term is broken the innocent party can
terminate the contract if the effects of the breach are major.
13
Quiz Feedback
14
You got 30 out of 32 answers correct (94%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9032955
(This question is not included in the score.)
2. Your 'street-style' youth-orientated fashion-house needs extra suppliers
to allow you to get a constant flow of your new designs quickly to young
customers. Based on the strengths and weaknesses of potential overseas
manufacturers listed below.
Which one would help you fulfil your strategy?
Your answer (in bold):
A. This company handles high volumes. (they've supplied identical
Government uniforms for years) It has many machinists, but is not
highly automated. It can deliver on schedule if given long lead
times. Low wages guarantee low cost per unit.
B. This small factory will take instructions electronically and
transfer data to computerised cutting machines. It can produce
items quickly, though usually in smaller batches than
manufacturer A. It produces its own designs for local markets.
It has fewer, higher paid staff than manufacturer A.
C. Company C can - and will - copy anything - they don't need many
written instructions. They make near-identical copies of design
from international fashion shows within a week, usually without the
designer's permission. They emphasise speed over quality.
Correct
Correct Answer: B Manufacturer B would be best as it seems responsive
and flexible and could offer volume by delivering smaller batches across
staggered dates, allowing orders to be adapted according to market uptake.
Staff have better conditions and their skills for original design may be an
asset. Company A's strengths appear to be in large scale, repetitive orders.
Indications are that their systems and staff may not be geared to fast
turnaround on changing requirements. Company C may present some risks.
They provide speed, but if their success is built on 'stealing' designs, your
own reputation may suffer by using them - or your own designs could be
stolen, too!
3. Which ONE of the following statements about directors' duties is
incorrect?
Your answer (in bold):
A. A director owes a duty to employees of a company
B. Directors' duties are codified in the Companies Act 2006
C. A director is expected to exercise reasonable care and skill when
performing his functions
D. A director must exercise independent judgment
Correct
The correct answer is A because that is the untrue statement - a director
should consider the interests of employees, but owes no direct duty to
employees. B is true - Directors' duties are codified in sections 170 – 177
Companies Act 2006. C is true - this duty is set out in section 174
Companies Act 2006. D is true -this duty is set out in section 173
Companies Act 2006.
4. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget
B. Object A has a button
C. Object A is a green striped widget with a button
D. Object A has a button and green stripes
Correct
The answer is D as all you know for sure is that Object A has a button and
green stripes. This is in accordance with the deductive synthesis exercise
under the 'Synthesis' tutorial
5. If there might be a conflict between the interests of different clients or
previous clients of a member, or of the member's firm, the member must...
Your answer (in bold):
A. not communicate information within the member's firm which
might harm the interest of any client, present or previous
B. ensure that members currently working with the previous clients of
the member are in receipt of all information and advice
C. relay all information and advice to all parties to ensure openness
and transparency
D. destroy all records relating to the confidential business affairs of
previous and current clients, once the member notices the potential
conflict
Correct
The correct answer is A. An explanation can be found in Section 5 of the
PCS.
6. Jane agrees to buy goods from Ben for £1,000, payment on delivery.
Ben refuses to deliver the goods. In fact he has sold them elsewhere for
£1,800. Jane can buy similar goods for £1,500.
Assuming the court uses the usual method of assessing damages in
contract, which one of the following amounts is Jane likely to get?
Your answer (in bold):
A. Nominal damages only.
B. £800
C. £500
D. £1,500
Correct
The correct answer is C. Jane would have paid £1,000 but because of Ben's
breach she now has to pay £1,500 for similar goods. Therefore she needs
£500 to put her in the position as if her contract with Ben had been
properly performed.
7. As part of a 'PEST' analysis of external factors that might affect your
industry, which of the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your
operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are
part of the PEST framework that is used to scan for external influences
impacting an industry.
8. Who carried out a review of The Actuarial Profession in 2004/05?
Your answer (in bold):
A. Lord Penrose.
B. Sir Derek Morris.
C. John Myners.
D. Gordon Brown.
Correct
Answer B is correct. Sir Derek Morris carried out the review at the request
of Gordon Brown's Treasury Department following the report by Lord
Penrose about Equitable Life.
9. The PCS uses the term "should normally" to indicate that members must
comply with a particular requirement unless non-compliance...
Your answer (in bold):
A. would meet more satisfactorily the requirements of the member's
client regardless of what other members might reasonably expect of
a member
B. is consistent with the standards of behaviour, integrity,
competence and professional judgement which other members
or the public might reasonably expect of a member
C. has been approved by the Actuarial Profession
D. has been requested by a Senior Actuary who has responsibility for
signing off the work in question
Correct
The correct answer is B. An explanation can be found in the Definitions of
the PCS.
10. ABC Ltd were asked to provide a reference for their former employee,
Jane, by XYZ Ltd who had provisionally offered her a job. Unfortunately,
when preparing the reference Jane's record was confused with another
employee's record. The reference given was completely inaccurate, stating
that Jane was a bad time-keeper. Jane was not offered the job as a result of
the information contained in the reference.
Which one of the following statements correctly identifies Jane's position?
Your answer (in bold):
A. Jane cannot bring a claim against ABC Ltd as she did not ask for
the reference and therefore no duty is owed to her.
B. Jane has suffered no loss and cannot bring a claim.
C. Jane may bring a claim against XYZ Ltd for relying on an
inaccurate reference.
D. Jane may bring a claim against ABC Ltd as a former employer
does owe a duty to a former employee to prepare the reference
without negligence.
Correct
The correct answer is D. A former employer does owe a duty to a former
employee to prepare the reference without negligence. See the case of
Spring v Guardian Assurance [1994].
11. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
A. the work undertaken by customer-facing staff
B. the human resources needed for the plan
C. the means by which the plan is implemented
D. the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore diagram
under the 'Creating and capturing value' tutorial
12. All except two of the following would be appropriate criteria to test
whether a potential segment should be a viable target. Select the two which
are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to
require some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales,
or to include the target customers willing to pay an acceptable price
to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for
a long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. D - although it is vital to have channels of communication and
distribution they do not have to be exclusive. E - a long established
segment is likely to be served already and using this criterion would in any
case eliminate interesting emerging segments.
13. In the business game, The Way Forward, if a company sold a simple
but very effective product that was designed many years ago.
Which one of the following words would be the most appropriate to use in
its advertising?
Your answer (in bold):
A. Distinctive
B. Fashionable
C. Green
D. Reliable
Correct
The correct answer is D as ‘reliable' would suggest a non-complicated
product that has stood the test of time. ‘Distinctive' would suggest a more
modern product that has been specially designed to be different from other
available products. ‘Fashionable' would suggest a very recently designed
product. ‘Green' is a modern phenomenon and would not be a product
designed many years ago.
14. The Actuarial Profession has, in the past, regulated itself by setting
ethical standards, administering its education system and CPD, monitoring
compliance with professional standards, and administering disciplinary
procedures.
Which one of the following will happen in the future?
Your answer (in bold):
A. The Profession will continue to self-regulate in this way.
B. The Professional Oversight Board will oversee The Actuarial
Profession's role in these matters.
C. The FSA will regulate for these matters.
D. The Morris Review team will spend more time considering these
matters and will make recommendations in due course.
Correct
Answer B is correct and you are recommended to read at least the Forward
and the Executive Summary of the Morris Review. You will find the
Review on the Profession's website.
15. Errors have been occurring quite often in the work of actuarial students
in your company.
Which of the following control processes has an apparent weakness, based
on the information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the
work can be followed by another person who has the appropriate
level of knowledge and skills.
B. Documentation is in place describing how the bases and
assumptions adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry
out their checks very quickly in order to avoid missing
deadlines.
D. Checks are carried out on the computer systems that produce many
of the calculations
Correct
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems that
produce calculations. The latter would only be a problem if these checks
had not been carried out rigorously. The weakness in the controls described
would be in the peer review process if the peer reviewer is not given
sufficient time to carry out the peer review in sufficient detail. The peer
reviewer is as responsible as the originator. If you sign, you are
responsible.
16. Peter owes Dent & Co £2,000. Peter asks Dent & Co if they will accept
£1,500 in full settlement. Dent & Co agree and Peter hands over the
£1,500.
Is the following statement false or true? Dent & Co cannot sue Peter for the
balance as promissory estoppel can only be used as a defence.
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A. Dent & Co. will not be relying on promissory
estoppel. Dent & Co. can sue for the balance relying on the contract and
the rule in Foakes v Beer - it is Peter who may then try to rely on
promissory estoppel as a defence.
17. You are considering opening a record store in a major shopping area.
As there are other record stores located nearby, you will have to find
sources of competitive advantage.
Only one of the following would be a real source of competitive advantage
- which is it?
Your answer (in bold):
A. An award-winning advertising campaign
B. Exclusive promotional relationship with a major record label.
C. An unusual store design and internal layout.
D. Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built
on a strategic relationship that cannot be copied or imitated. All of the
other answers represent something that is easy to imitate, and are not built
upon superior assets, distinctive capabilities or strategic relationships.
18. The main purpose of a business strategy is...
Your answer (in bold):
A. to follow every opportunity available.
B. to determine how best to use management talent.
C. to decide on the best way to promote the business to customers.
D. to maximise the value of the company.
Correct
The answer is D in accordance with the 'Creating and capturing value'
tutorial
19. In formulating advice, a member must pay proper regard to any
relevant professional standards.
These are defined as...
Your answer (in bold):
A. BAS standards only
B. The PCS only
C. BAS standards, AP standards and the PCS
D. BAS standards, the PCS and external standards
The correct answer is C. An explanation can be found in Section 3 and the
Definitions of the PCS
20. The defendant is only liable for the extent of the injury which the
reasonable man would have suffered. If the claimant is particularly
sensitive and this means that he suffers greater loss, the defendant is not
liable for this 'extra' loss even though the type of injury was reasonably
foreseeable.
Is the statement above true or false?
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A (false). Provided the type of loss is reasonably
foreseeable, the defendant is liable for the full extent of the loss even
though the precise extent was not foreseeable. This is known as the eggshell skull rule.
21. One source of competitive advantage is 'strategic relationships'. If you
were running a well-known Advertising Agency, select the one option in
the list below relating to the agency's relationships that you would consider
as offering a sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two
years.
B. Extensive selection of testimonials from satisfied customers from a
diverse range of industries.
C. The only parent company in the agency world whose policy is
to invest centrally in building capabilities it then shares across
business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful
business, it is option C that is said to be an exception, is harder to copy
than the other options.
22. If you have a major surprise to impart to your colleagues concerning
the business, the way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week
before the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to
the meeting.
Correct
The answer is A in accordance with the 'No surprises' tutorial.
23. If work which a member considers necessary is precluded by cost or
time constraints, the member must...
Your answer (in bold):
A. perform only that portion of the work permitted by cost and time,
and say nothing further
B. recommend that the work is undertaken by another firm whose fees
are lower
C. refer the matter to the Professional Affairs Board
D. either decline to act or qualify the advice given
Correct
The correct answer is D. An explanation can be found in Section 2 of the
PCS.
24. Assume that in The Actuarial Profession there are two respected bodies
of opinion as to how to tackle a particular task (methods 1 and 2). You
choose method 1. In the event it turns out that using method 2 would have
been more beneficial to the client.
Which one of the following statements is correct?
Your answer (in bold):
A. You are in breach of duty
B. You are not in breach of duty
C. You are in breach of duty, but damages will be reduced as you
acted reasonably
D. You are in breach of duty, but the client's damages will be reduced
as the client was guilty of contributory negligence by allowing you
to choose method 1
Correct
The correct answer is B. A is wrong because it there are two respected
bodies of opinion you are not in breach of duty by choosing one of them. C
is wrong because you are not in breach of duty if you follow a recognised
body of opinion. D is wrong because you are not in breach of duty by
choosing a recognised body of opinion.
25. If you were classifying a company in terms of how it made decisions
when responding to changing market conditions, which one of the
following descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on
detailed analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities.
Not keen to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal market
share from them. They have resources they can use to attack competitors.
Sometimes their relative strength can make them over confident. D describes Fast Follower organisations who are less happy with high risk
than Innovators, but can often achieve greater returns and visibility than
Innovators gain. B - describes a combination of Defenders, Innovators and
Fast Followers. C - describes Innovators.
26. When you are discussing work with actuarial friends from another
company you must be careful what you talk about. There is a risk that you
may be caught off guard, especially in a social environment. Which of the
following topics relating to your company would it normally be safe for
you to talk about without the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking
about B, C or D and you might be contravening your employment contract
by doing so. Therefore, A is the correct answer because there is no reason
why you should not talk about information that would be available in the
market place even if it could be quite hard for someone else to find that
information.
27. In the business game, The Way Forward, which one of the following
mix of strategies would you expect to be the most successful?
Your answer (in bold):
A. Modern, high quality product; medium price; conservative brand
image
B. Traditional product; high price; modern brand image
C. Fashionable product; high price; prestigious image
D. Sturdy basic product, high price, traditional image
Correct
The correct answer is C. The three features of C, taken together, offer a
consistent strategy. In each of A, B and D the three features are not
consistent.
28. You have been asked to define the competitive positioning for your
business unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component
of the business unit's competitive position?
Your answer (in bold):
A. Supply affordable laser printers and related supplies.
B. Target Home Office computer users.
C. Taking a phased approach to expanding the distribution
network.
D. Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of
either product/service, target customers, or channels, all of which are
competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
29. There are four main types of external shock that are relevant to an
organisation's strategy. A PEST analysis can help think through what these
potential shocks might be, where PEST stands for...
Your answer (in bold):
A. Physical; economic; structural; timing
B. Political; external; staffing; technological
C. Physical; external; social; timing
D. Political; economic; social; technological
Correct
The answer is D in accordance with the 'Pest analysis' tutorial
30. Muriel, Molly and Marilyn have been in partnership since 1990. They
all work full-time for the business. They share profits equally and have no
relevant express agreement between them.
Which one of the following is correct?
Your answer (in bold):
A. If Molly leaves the business she could be prevented from setting up
a competing business.
B. Each partner is entitled to receive a salary in addition to her share
of the profits.
C. Muriel and Molly together could expel Marilyn.
D. Any of the 3 partners could dissolve the partnership at any time
without giving a reason.
Correct
The correct answer is D. Section 26 Partnership Act 1890 provides that if
there is no fixed term any partner may dissolve the partnership by giving
notice to the others. Section 30 Partnership Act 1890 only provides for
restrictions on competition whilst Molly is still a partner. Section 24(6)
Partnership Act 1890 provides that a partner is not entitled to a salary.
Section 25 Partnership Act 1890 provides there is no power to expel unless
all the partners (including Marilyn) agree.
31. Which one of these is not applicable?
A member providing reserved advice must ensure that the client is aware
of...
Your answer (in bold):
A. the name and qualifications of the member providing the advice
B. the name of the member's firm
C. the name and qualifications of any non-members involved in
the assignment
D. the scope, purpose and terms of reference of the advice provided by
the member
Correct
The correct answer is C. The explanation can be found in Section 3 of the
PCS.
32. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A. A map of all the businesses operating in a strategic set i.e. targeting
the same market segment.
B. A system showing the industry competitors and all their suppliers.
C. A technological map used to capture all the technology links used
within a company.
D. A model of the primary and support functions of a business
with their key activities.
Correct
D is correct. It is often used to map functions and activities within a
company to establish which create value and which create costs; or to
establish how activities are interlinked as a means of improving processes
and competence.
33. Which one of the following statements is incorrect?
Your answer (in bold):
A. Directors are generally prohibited from borrowing money from
their own company.
B. Members' approval is required for all transactions whereby a
director purchases an asset from his own company.
C. Directors must declare any interest in any transaction/arrangement
with the company to the board.
D. A director is under a duty not to accept benefits from third
parties.
Incorrect
The correct answer is B. Approval is required only for transactions of
‘requisite value'. A is incorrect because Section 197 Companies Act 2006
generally prohibits borrowing. C is incorrect because Sections 177 and 183
Companies Act 2006 require the making of such a declaration. D is
incorrect because Section 176 Companies Act 2006 imposes such a duty.
15
Quiz Feedback
16
You got 29 out of 32 answers correct (91%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9031417
(This question is not included in the score.)
2. One source of competitive advantage is 'strategic relationships'. If you were
running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a
sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a
diverse range of industries.
C. The only parent company in the agency world whose policy is to
invest centrally in building capabilities it then shares across
business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful business, it is option
C that is said to be an exception, is harder to copy than the other options.
3. Peter owes Dent & Co £2,000. Peter asks Dent & Co if they will accept £1,500
in full settlement. Dent & Co agree and Peter hands over the £1,500.
Is the following statement false or true? Dent & Co cannot sue Peter for the
balance as promissory estoppel can only be used as a defence.
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A. Dent & Co. will not be relying on promissory estoppel. Dent & Co.
can sue for the balance relying on the contract and the rule in Foakes v Beer - it is Peter
who may then try to rely on promissory estoppel as a defence.
4. There are four main types of external shock that are relevant to an
organisation's strategy. A PEST analysis can help think through what these
potential shocks might be, where PEST stands for...
Your answer (in bold):
A. Physical; economic; structural; timing
B. Political; external; staffing; technological
C. Physical; external; social; timing
D. Political; economic; social; technological
Correct
The answer is D in accordance with the 'Pest analysis' tutorial
5. Which of the statements 1,2,3 and 4 below are correct?
The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct
2. The PCS are comprehensive and all members must comply with each
section
3. Members must comply with the spirit and letter of the PCS
4. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct
1.
Your answer (in bold):
A. 1, 2 and 3
B. 1, 3 and 4
C. 2, 3 and 4
D. All of them
Correct
The correct answer is B. An explanation can be found in Section 1 of the PCS.
6. Which one of the following commercial scenarios is a trust not commonly
used for?
Your answer (in bold):
A. Pension funds
B. Tax planning
C. To protect customers who have paid in advance when a company is close
to insolvency
D. To hold investments in non-common law jurisdictions
Correct
The correct answer is D. Non – common law jurisdictions do not generally recognise trusts
7. You are the marketing director for Svenson, a technology manufacturer. You
have just introduced a new 'mobile entertainment' device, which will offer users
the opportunity to play videos, take digital photographs, send emails and text
messages, play music and communicate via telephone. It has state-of-the-art
features, allowing compatibility with all the top service providers. The Svenson
brand is relatively new, yet it already has a reputation for being innovative, cool
and funky. The Svenson 'mini entertainer' is priced at $600. You now have
information from your Customer Management team showing the profiles of your
key customer segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good
disposable income, increasingly mobile for work and leisure, take
huge interest in gadget advertising, and love the funky status
they acquire with Svenson products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable
disposable income, buy on functionality, willing to pay for whichever
technology combines all the functions they need and fits their mobile
lifestyle
C. Family First - the largest segment (33% of your base), although it has
shrunk over the last year. Mobility based around supporting the family.
High income restricted by outlays on children and aged parents. Willing
to purchase any technology proven to make their lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable segment. Segment
size is reasonable, and it is growing, disposable income is high (for what is quite a
reasonably expensive, one-off purchase) and there is strong desire for the product. It is an
ideal fit with Svenson's advantages in innovation, plus its brand reputation - gadget lovers
matched with funky gadget provider. Youth of Today (B) is a reasonable-sized, growing
segment. Svenson's advantages match their needs, but the segment is more attracted by
generic functionality than the Svenson brand, making it less attractive to the company.
Family First (C) is less attractive. Although this segment is large, the profile suggests people
in this segment are more likely to pay for features that provide convenience rather than pure
entertainment. Although they have high income, their profile suggests they are likely to have
priorities for spending rather than a high-priced entertainment item.
8. It is now becoming accepted practice that actuaries record an audit trail for
any substantive piece of work.
Why?
Your answer (in bold):
A. In order to document better the value added for their clients, enabling
them to charge accordingly.
B. Because it provides a means of self-checking their work so that peer
review is not necessary.
C. In order to provide a record of the process they have followed,
enabling another actuary to take over, or check, their work
D. Because this is now a requirement of the Professional Conduct
Standards.
Correct
Answer C is correct. Answer A would not in practice justify the need for an audit trail.
Answer B would be correct to the extent that an audit trail can help self-check one's work,
which should be done anyway, but an actuary should always get someone else to check
their work i.e. peer review it. Answer D is not right because an audit trail is not covered
specifically by the Professional Conduct Standards.
9. Which one of these is not applicable?
A member providing reserved advice must ensure that the client is aware of...
Your answer (in bold):
A. the name and qualifications of the member providing the advice
B. the name of the member's firm
C. the name and qualifications of any non-members involved in the
assignment
D. the scope, purpose and terms of reference of the advice provided by the
member
Correct
The correct answer is C. The explanation can be found in Section 3 of the PCS.
10. John, Andrew and Robert have been in partnership together for 3 years.
They have no partnership agreement. John has recently been declared
bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership without
John who will have to retire."
Your answer (in bold):
A. True
B. False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under s33 Partnership Act
1890. In any event there is no right of retirement in the Partnership Act 1890.
11. You are considering investing in the car manufacturing industry, but you are
concerned about competitive forces changing the market. You've decided to
organise an analysis on the five major competitive forces acting on the industry.
Which of the following represents the five forces that you should investigate?
Your answer (in bold):
A. Product, price, people, placement, positioning. of substitute products,
B. Threat of substitute products, rivalry, supplier power, customer
power, threat of new entrants.
C. Missions, objectives, goals, strategies, objectives.
D. Access to capital, ease of integration, synergy with existing operations,
distribution channels, sustainable competitive advantages.
Correct
Answer B is correct. The other options do not represent the five competitive forces acting on
an industry.
12. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A. A map of all the businesses operating in a strategic set i.e. targeting the
same market segment.
B. A system showing the industry competitors and all their suppliers.
C. A technological map used to capture all the technology links used within
a company.
D. A model of the primary and support functions of a business with
their key activities.
Correct
D is correct. It is often used to map functions and activities within a company to establish
which create value and which create costs; or to establish how activities are interlinked as a
means of improving processes and competence.
13. In the business game, The Way Forward, if a company sold a simple but
very effective product that was designed many years ago.
Which one of the following words would be the most appropriate to use in its
advertising?
Your answer (in bold):
A. Distinctive
B. Fashionable
C. Green
D. Reliable
Correct
The correct answer is D as ‘reliable' would suggest a non-complicated product that has
stood the test of time. ‘Distinctive' would suggest a more modern product that has been
specially designed to be different from other available products. ‘Fashionable' would suggest
a very recently designed product. ‘Green' is a modern phenomenon and would not be a
product designed many years ago.
14. There are certain roles for actuaries that are 'reserved' solely for them.
These are roles laid down by statute that only an actuary can carry out.
Which two of the following are not statutory roles reserved for actuaries only?
Your answer (in bold):
A. Scheme Actuary (pensions).
B.
C.
D.
E.
Correct
With Profits Actuary (life insurance).
Reserving actuary (general insurance).
Lloyd's Syndicate Actuary (Lloyd's of London market).
Appointed Actuary (life insurance).
Answers C and E are correct. Although the Morris Review has recommended that the FSA
should require a general insurer to take advice from an approved person regarding risk
assessment and the valuation of liabilities, this approved person would not have to be an
actuary (C). The Appointed Actuary role was a statutory one until 31 December 2004 when
it was replaced by an Actuarial Function Holder and a With Profits Actuary (E). A, B and D
are all statutory roles.
15. You may be offered a gift by a company with whom you, or your company,
has a business / professional relationship. In deciding whether to accept the gift,
which of the following would not be true?
Your answer (in bold):
A. You must consider carefully whether acceptance of a gift could in any
way influence your judgement.
B. You must find out what your company's policy is on gifts.
C. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a particular
piece of work.
D. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the termination of a
particular task of some importance, is less likely to be objectionable than a series of gifts
implying the possibility of undue influence. The other alternatives, A, B and D, are all true.
An example under D is that a substantial gift to a newly-qualified actuary might be more
suspect than the same gift to an established actuary of some standing.
16. Which one of the following always requires approval by shareholders to be
valid?
Your answer (in bold):
A. Sale of company assets to an unconnected third party
B. Sale of assets worth £10 to a director
C. Awarding a director a fixed term service contract over 6 years in
length
D. Registering a transfer of shares
Correct
The correct answer is C. A is wrong because unless there is provision in the articles to the
contrary this can be done by directors. B is wrong because sale of assets to directors over a
certain level requires approval of shareholders. However, small value sales do not require
approval. D is wrong because this is usually done by directors.
17. All except two of the following would be appropriate criteria to test whether
a potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although
it is vital to have channels of communication and distribution they do not have to be
exclusive. E - a long established segment is likely to be served already and using this
criterion would in any case eliminate interesting emerging segments.
18. Synthesis is the process of combining two or more facts to produce other
facts, hypotheses or questions. There are two kinds of synthesis.
Which one of the following are they?
Your answer (in bold):
A. Negative and deductive.
B. Creative and corrective.
C. Corrective and negative.
D. Deductive and creative.
Correct
The answer is D in accordance with the 'Synthesis' tutorial
19. If work which a member considers necessary is precluded by cost or time
constraints, the member must...
Your answer (in bold):
A. perform only that portion of the work permitted by cost and time, and
say nothing further
B. recommend that the work is undertaken by another firm whose fees are
lower
C. refer the matter to the Professional Affairs Board
D. either decline to act or qualify the advice given
Correct
The correct answer is D. An explanation can be found in Section 2 of the PCS.
20. The defendant is only liable for the extent of the injury which the reasonable
man would have suffered. If the claimant is particularly sensitive and this means
that he suffers greater loss, the defendant is not liable for this 'extra' loss even
though the type of injury was reasonably foreseeable.
Is the statement above true or false?
Your answer (in bold):
A. False
B. True
Incorrect
The correct answer is A (false). Provided the type of loss is reasonably foreseeable, the
defendant is liable for the full extent of the loss even though the precise extent was not
foreseeable. This is known as the egg-shell skull rule.
21. You have been asked to define the competitive positioning for your business
unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component of the
business unit's competitive position?
Your answer (in bold):
A. Supply affordable laser printers and related supplies.
B. Target Home Office computer users.
C. Taking a phased approach to expanding the distribution network.
D. Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of either
product/service, target customers, or channels, all of which are competitive positioning
decisions. Answer C is more concerned with timing and resource decisions for building the
company.
22. Select the one statement below that correctly defines the difference
between deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while in
creative synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from an
hypothesis, while in creative synthesis facts are created by some
additional insight.
C. In deductive synthesis facts are found by reducing the data down
to the fact, while in creative synthesis facts are created by some
additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the outcome, while in creative
synthesis facts are not relevant to the outcome.
23. If not possessing the requisite knowledge and personal competence, a
member must only give advice if...
Your answer (in bold):
A. the fees are reduced significantly
B. protected by professional indemnity insurance
C. acting in cooperation with someone (member or not) who has
the required competence
D. the member acts as an individual, making clear the advice is not
associated with the member's firm
Correct
The correct answer is C. An explanation can be found in Section 3 of the PCS.
24. Nina is the sole shareholder and director of Tarvin Limited. She owns
100,000 £1 shares, all of which are fully paid. The company goes into
liquidation. It has assets of £50,000 but owes creditors £250,000.
How much will Nina be required to contribute to the company's funds? Which
one of the following is correct?
Your answer (in bold):
A. Nothing
B. £50,000
C. £100,000
D. £200,000
Correct
A is correct. A shareholder is protected by limited liability and will only be liable to pay for the
amount they have agreed to pay for their shares. Nina has fully paid up shares and cannot
be asked to contribute further funds.
25. The company you work for, TransGlobal Multinational Limited, is considering
entering a new market. The decision-making process has involved reviewing
other similar organisations' attempted entries, identifying successes and
failures, suggesting improvements that TransGlobal could make over
competitors' offers, and an analysis of the market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational
cultural types listed do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders.
B. Innovators.
C. Fast followers.
D. Slow reactors.
Correct
Answer C is correct. This behaviour illustrates an organisation not willing to take the risk of
moving first, but opportunistic enough to enter where an opportunity has appeared, and then
attempt to improve upon the market entry, process, or product introduced by the innovator.
26. Errors have been occurring quite often in the work of actuarial students in
your company.
Which of the following control processes has an apparent weakness, based on
the information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the
work can be followed by another person who has the appropriate
level of knowledge and skills.
B. Documentation is in place describing how the bases and assumptions
adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry out their
checks very quickly in order to avoid missing deadlines.
D. Checks are carried out on the computer systems that produce many of
the calculations
Incorrect
Answer C is correct. It is very important that control procedures include audit trails. In turn,
these should include documentation detailing how bases and assumptions were adopted,
and checks on computer systems that produce calculations. The latter would only be a
problem if these checks had not been carried out rigorously. The weakness in the controls
described would be in the peer review process if the peer reviewer is not given sufficient
time to carry out the peer review in sufficient detail. The peer reviewer is as responsible as
the originator. If you sign, you are responsible.
27. In the business game, The Way Forward, which one of the following is the
primary purpose of the Profit and Loss Account?
Your answer (in bold):
A. So that a team knows how much money it has got
B. So that a team knows whether it traded profitably or not in the
period concerned
C. So that a team knows its overhead costs in relation to its turnover
D. So that a team knows how much money to set aside for Corporation Tax
Correct
The correct answer is B. The prime purpose of a Profit and Loss Account is to show the
trading profit or loss for the period of the accounts.
28. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and telephone
system to enable smarter working on the move. However, the Mobilo is not
selling as well as expected into the company's core customer segments. Recent
research has revealed that the core segments are seeking mobile efficiency as
well as enhanced status for being 'early adopters' in this market.
Which of the company's advantages would you use as the core of a campaign to
increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which has
an unrivalled reputation for new ideas in mobile living/working.
B. The strong relationships the company has with its suppliers, who provide
highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the competition,
to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for awareness
three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency as well as their
need to be early adopters in the market. Customers will value the highly-reputed
technological components (B), but alone they do not meet customer needs for mobile
efficiency. Speed of delivery (C) will help in getting the products to customers early, to
support them being early adopters, but it does not match their need for innovation. There is
little benefit in purely having high awareness of the company brand (D), if this product
campaign is not communicating the benefits relevant to the target groups.
29. Which one of the following lists contains items that are all included in
Maslow's hierarchy of needs?
Your answer (in bold):
A. Self-actualisation; financial; social
B. Safety; psychological; esteem
C. Working; physiological; financial
D. Social; safety; esteem
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under
the 'Identifying consumer needs' tutorial.
30. Which one or more of the following claims can companies bring against third
parties who have received company property in breach of a director's fiduciary
duties?
Your answer (in bold):
A. Recipient liability (constructive trusteeship).
B. Restitution for unjust enrichment.
C. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the equitable claim of a
constructive trusteeship and use equitable tracing in connection with a proprietary claim
because the director owed the company fiduciary duties. The company owns legal title to its
assets and can therefore claim restitution.
31. Which one of the following is correct?
Your answer (in bold):
A. Members must always comply with the PCS as well as with
professional standards that are Practice Standards and
Recommended Practices
B. Members need not comply with the PCS if they are complying with
professional standards that are Practice Standards
C. A member's judgement will always take precedence over professional
standards
D. Members must always comply with the PCS and with professional
standards that are Practice Standards
Incorrect
The correct answer is D. An explanation can be found in Sections 1 and 4 of the PCS.
32. You are an industry analyst in a venture capital company, preparing a report
for potential investors on a restaurant chain, Fervour, which is looking to expand
abroad. Fervour specialises in converting churches into restaurants, capitalising
on the architecture to create atmospheric surroundings, supported by live jazz.
The menus - created by Michelin chef Jean-Pierre Noir - are highly acclaimed in
culinary circles for their imagination and flair. Fervour looks to cater for a wide
range of clientele, offering a dining experience 'for all the senses'. While it is still
relatively unknown, it has bought the majority of unused church buildings across
the country, ready for conversion.
In trying to make the investment proposition sound as attractive as possible, it
is important that you highlight where Fervour has advantages in the
marketplace.
Which one of the following statements do you feel represents a real and
sustainable competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the country.
C. Superior locations - church buildings stand out against ordinary
restaurants, and are located close to the desired audience.
D. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at
all its venues.
E. Relationships with its key suppliers - to ensure the freshest food and the
right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused churches means that
other competitors will be unable to replicate the Fervour surroundings, making this a
sustainable advantage. While the menus are imaginative (A), they can also be copied, which
means that this advantage is difficult to sustain. The Fervour brand (B) is unknown outside
the country, so it cannot yet be exploited as an advantage. While a website (D) is useful, it is
likely that most other restaurants will also have a website supporting their core offering, so
this does not represent an advantage. Relationships with suppliers to ensure fresh food (E)
are a necessity in this market, rather than an advantage.
33. You apply for a job as the PA to the Managing Director of Maximus Limited
and are interviewed for the job by the Managing Director himself. Samuel Brown
(the Personnel Director) later writes to you to offer you the job and, when you
ring up to ask for some further details on pay and holiday entitlement, your
queries are answered by the Human Resources Manager (Heather Freeman).
You decide to accept the job.
Who is your employer?
Your answer (in bold):
A. The Managing Director
B. Samuel Brown
C. Heather Freeman
D. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of entering into
contracts, and as such is the employer. The directors are not acting in their own capacity but
as agents of the company.
17 Quiz Feedback
17.1
View Instructions
You got 24 out of 28 answers correct (86%)
Congratulations! You have passed the Business Awareness Module test.
1. One source of competitive advantage is 'strategic relationships'. If you were
running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a
sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from
a diverse range of industries.
C. The only parent company in the agency world whose policy is to invest
centrally in building capabilities it then shares across business units.
D. An award-winning creative team.
Incorrect
Correct Answer: C While all the options will contribute to a successful
business, it is option C that is said to be an exception, is harder to copy
than the other options.
2. Which one of the following lists contains items that are all included in
Maslow's hierarchy of needs?
Your answer (in bold):
A.
B.
C.
D.
Self-actualisation; financial; social
Safety; psychological; esteem
Working; physiological; financial
Social; safety; esteem
Incorrect
The answer is D in accordance with the 'Maslow's hierarchy of needs'.
Explore item under the 'Identifying consumer needs' tutorial.
3. Which of these statements is not correct?
Your answer (in bold):
A. The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct.
B. The PCS are comprehensive and all members must comply with
each section.
C. Members must comply with the spirit and letter of the PCS.
D. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
4. Which one or more of the following claims can companies bring against third
parties who have received company property in breach of a director's fiduciary
duties?
Your answer (in bold):
A. Recipient liability (constructive trusteeship).
B. Restitution for unjust enrichment.
C. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the
equitable claim of a constructive trusteeship and use equitable tracing in
connection with a proprietary claim because the director owed the
company fiduciary duties. The company owns legal title to its assets and
can therefore claim restitution.
5. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A
central power source is usually associated with young companies, or
those where the founder has not wished to expand greatly. B - describes
a characteristic of a hierarchical organisation. C - is a characteristic of
matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision
makers cannot continue and no successors have been identified.
6. Many pension schemes are currently underfunded. Which of these are two of
the main reasons for this?
Your answer (in bold):
A.
B.
C.
D.
People are living longer.
Asset values have fallen.
Employers have taken long contribution holidays.
More people than expected have been retiring early.
Correct
Answers A and B are correct, and these reasons are often being stated
in the media. Contribution rates and therefore the scope for periods of
paying nil or low contributions have been determined on best estimates
of future experience and the significant falls in asset values since 2000,
in particular, could not have been foreseen. Therefore, in this context, it
cannot be claimed that a main reason is contribution holidays. Although
early retirements may have been running at a higher level than assumed,
and may have proved to be under funded, this is not a main reason given
for many schemes being under funded.
7. Clients are entitled to assume that advice given by a member is unaffected
by interests other than those of the client, taking account of...
Your answer (in bold):
A. any identifiable duty of care of the client in respect of a third
party.
B. any prior work done for the client.
C. the level of fees payable by the client.
D. the other clients for whom the member is working simultaneously.
Correct
The correct answer is A. An explanation can be found in Section 5 of the
PCS.
8. You apply for a job as the PA to the Managing Director of Maximus Limited
and are interviewed for the job by the Managing Director himself. Samuel Brown
(the Personnel Director) later writes to you to offer you the job and, when you
ring up to ask for some further details on pay and holiday entitlement, your
queries are answered by the Human Resources Manager (Heather Freeman).
You decide to accept the job.
Who is your employer?
Your answer (in bold):
A. The Managing Director
B. Samuel Brown
C. Heather Freeman
D. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are
not acting in their own capacity but as agents of the company.
9. In order to achieve a business plan, strategy and tactics must be considered.
Tactics is defined as...
Your answer (in bold):
A.
B.
C.
D.
the work undertaken by customer-facing staff
the human resources needed for the plan
the means by which the plan is implemented
the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore
diagram under the 'Creating and capturing value' tutorial
10. You run the office cleaning division at International GlobalCorp, and you are
setting your group's objectives. IGC's corporate goal is to grow market share in
all its businesses.
Which of the following objectives for your area directly supports the corporate
objective?
Your answer (in bold):
A.
B.
C.
D.
Increase the number of active customers by 15%
Reduce costs of purchased cleaning products by 10%
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute
to the ability to grow market share, answer A is the only one that directly
results in increased share (assuming that the market as a whole grows
less than 15%!).
11. There are certain roles for actuaries that are 'reserved' solely for them.
These are roles laid down by statute that only an actuary can carry out.
Which two of the following are not statutory roles reserved for actuaries only?
Your answer (in bold):
A.
B.
C.
D.
Scheme Actuary (pensions).
With Profits Actuary (life insurance).
Reserving actuary (general insurance).
Lloyd's Syndicate Actuary (Lloyd's of London market).
E. Appointed Actuary (life insurance).
Correct
Answers C and E are correct. Although the Morris Review has
recommended that the FSA should require a general insurer to take
advice from an approved person regarding risk assessment and the
valuation of liabilities, this approved person would not have to be an
actuary (C). The Appointed Actuary role was a statutory one until 31
December 2004 when it was replaced by an Actuarial Function Holder
and a With Profits Actuary (E). A, B and D are all statutory roles.
12. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics
relating to your company would it normally be safe for you to talk about without
the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking
about B, C or D and you might be contravening your employment
contract by doing so. Therefore, A is the correct answer because there is
no reason why you should not talk about information that would be
available in the market place even if it could be quite hard for someone
else to find that information.
13. Jane agrees to buy goods from Ben for £1,000, payment on delivery. Ben
refuses to deliver the goods. In fact he has sold them elsewhere for £1,800.
Jane can buy similar goods for £1,500.
Assuming the court uses the usual method of assessing damages in contract,
which one of the following amounts is Jane likely to get?
Your answer (in bold):
A.
B.
C.
D.
Nominal damages only.
£800
£500
£1,500
Correct
The correct answer is C. Jane would have paid £1,000 but because of
Ben's breach she now has to pay £1,500 for similar goods. Therefore
she needs £500 to put her in the position as if her contract with Ben had
been properly performed.
14. You are the marketing director for Svenson, a technology manufacturer. You
have just introduced a new 'mobile entertainment' device, which will offer users
the opportunity to play videos, take digital photographs, send emails and text
messages, play music and communicate via telephone. It has state-of-the-art
features, allowing compatibility with all the top service providers. The Svenson
brand is relatively new, yet it already has a reputation for being innovative, cool
and funky. The Svenson 'mini entertainer' is priced at $600. You now have
information from your Customer Management team showing the profiles of your
key customer segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good
disposable income, increasingly mobile for work and leisure, take
huge interest in gadget advertising, and love the funky status
they acquire with Svenson products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable
disposable income, buy on functionality, willing to pay for whichever
technology combines all the functions they need and fits their mobile
lifestyle
C. Family First - the largest segment (33% of your base), although it has
shrunk over the last year. Mobility based around supporting the family.
High income restricted by outlays on children and aged parents. Willing
to purchase any technology proven to make their lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable
segment. Segment size is reasonable, and it is growing, disposable
income is high (for what is quite a reasonably expensive, one-off
purchase) and there is strong desire for the product. It is an ideal fit with
Svenson's advantages in innovation, plus its brand reputation - gadget
lovers matched with funky gadget provider. Youth of Today (B) is a
reasonable-sized, growing segment. Svenson's advantages match their
needs, but the segment is more attracted by generic functionality than
the Svenson brand, making it less attractive to the company. Family First
(C) is less attractive. Although this segment is large, the profile suggests
people in this segment are more likely to pay for features that provide
convenience rather than pure entertainment. Although they have high
income, their profile suggests they are likely to have priorities for
spending rather than a high-priced entertainment item.
15. Select the one statement below that correctly defines the difference
between deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while in
creative synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from an
hypothesis, while in creative synthesis facts are created by some
additional insight.
C. In deductive synthesis facts are found by reducing the data down
to the fact, while in creative synthesis facts are created by some
additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the
outcome, while in creative synthesis facts are not relevant to the
outcome.
16. In criticising another member's work, care must be taken to acknowledge
that...
Your answer (in bold):
A. there can only ever be one correct set of professional opinions.
B. special circumstances may exist in any particular case.
C. the other member may work for a large firm with its own firm-specific
professional guidance.
D. members who have provided advice on a particular assignment for many
years are extremely unlikely to be wrong
Correct
The correct answer is B. An explanation can be found in Section 8 of the
PCS
17. Harold, Margaret and Arthur set up a hat shop together 10 years ago. They
have no formal partnership agreement. On 13 August, without consulting the
others, Arthur made an oral contract with U Bend Limited, builders' merchants,
for the purchase of an expensive Italian porcelain bathroom suite. Arthur
confirmed his order and sent out delivery instructions on the firm's headed
notepaper several days later. On 12 September Margaret left the firm and was
replaced by Neil. U Bend Limited has not been paid for the bathroom suite and
wants to know who is liable for the debt.
Which one of the following is correct?
Your answer (in bold):
A.
B.
C.
D.
Harold, Margaret and Arthur.
Harold, Arthur and Neil.
Arthur only.
Harold and Arthur.
Correct
The correct answer is C. Arthur had no actual authority and under s.5 PA
1890 can only bind the firm if the contract is for business usually carried
on by the firm. Here you would not expect a bathroom suite to be
purchased by a hat shop. It is also not clear whether U Bend Limited
knew or believed Arthur was a partner as his confirmation letter on the
firm's headed notepaper did not arrive until after the contract was
entered into.
18. All except two of the following would be appropriate criteria to test whether
a potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in
any case eliminate interesting emerging segments.
19. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is
needed.
B. Decide on the form of analysis, establish the right questions, discover
the facts.
C. Ask the right question, decide what analysis to undertake, collect
the relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an
analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
20. If there is, or might be, a conflict of interest between two clients of a
member's firm, the member must...
Which of these is not correct?
Your answer (in bold):
A. advise the clients at the earliest opportunity.
B. decide which client to advise and must inform the other client
that he / she is unable to provide advice.
C. disclose, in the advice given to one or both of the clients that the advice
is, or will be, influenced by interests other than those of the client.
D. decide whether it would be improper for the member to give advice to
one or both of the clients.
Correct
The correct answer is B. An explanation can be found in Section 5 of the
PCS
21. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme
you run for customers.
B. Pledge to protect the environment by increasing new policies and
processes.
C. Leverage distribution network more effectively by establishing
shops on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update
facilities.
Correct
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic,
and B is non-strategic and non financial (although often it is difficult to
draw a clear-cut line between profits and social responsibility). D is
financial - it is a specific goal with specific timeframe.
22. ABC Ltd were asked to provide a reference for their former employee, Jane,
by XYZ Ltd who had provisionally offered her a job. Unfortunately, when
preparing the reference Jane's record was confused with another employee's
record. The reference given was completely inaccurate, stating that Jane was a
bad time-keeper. Jane was not offered the job as a result of the information
contained in the reference.
Which one of the following statements correctly identifies Jane's position?
Your answer (in bold):
A. Jane cannot bring a claim against ABC Ltd as she did not ask for the
reference and therefore no duty is owed to her.
B. Jane has suffered no loss and cannot bring a claim.
C. Jane may bring a claim against XYZ Ltd for relying on an inaccurate
reference.
D. Jane may bring a claim against ABC Ltd as a former employer
does owe a duty to a former employee to prepare the reference
without negligence.
Correct
The correct answer is D. A former employer does owe a duty to a former
employee to prepare the reference without negligence. See the case of
Spring v Guardian Assurance [1994].
23. You may be offered a gift by a company with whom you, or your company,
has a business / professional relationship. In deciding whether to accept the gift,
which of the following would not be true?
Your answer (in bold):
A. You must consider carefully whether acceptance of a gift could in any
way influence your judgement.
B. You must find out what your company's policy is on gifts.
C. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a particular
piece of work.
D. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the
termination of a particular task of some importance, is less likely to be
objectionable than a series of gifts implying the possibility of undue
influence. The other alternatives, A, B and D, are all true. An example
under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some
standing.
24. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A. A map of all the businesses operating in a strategic set i.e. targeting the
same market segment.
B. A system showing the industry competitors and all their suppliers.
C. A technological map used to capture all the technology links used within
a company.
D. A model of the primary and support functions of a business with
their key activities.
Correct
D is correct. It is often used to map functions and activities within a
company to establish which create value and which create costs; or to
establish how activities are interlinked as a means of improving
processes and competence.
25. When considering financial and non-financial objectives, which of the
following would be true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial
ones, and they can be a lot less obvious.
B. Financial objectives will always be more important than non-financial
ones, and are usually more obvious.
C. Non-financial objectives will usually be more obvious than financial ones
and will be better understood by the staff.
D. Financial objectives are key to the success of a company so non-financial
ones are not usually relevant.
Correct
The answer is A in accordance with the 'Non-financial objectives' tutorial
26. If work which a member considers necessary is precluded by cost or time
constraints the member should normally...
Your answer (in bold):
A. perform only that portion of the work permitted by cost and time, and
say nothing further.
B. recommend that the work is undertaken by another firm whose fees are
lower.
C. either decline to act or qualify the advice given.
D. refer the matter to the PAB.
Correct
The correct answer is C. An explanation can be found in Section 2 of the
PCS
27. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to
meet the company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Incorrect
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to
functional strategy and C relates to corporate strategy.
28. Patricia Smith is a director of Smithsons Limited ('the Company').
Which two of the following are correct?
Your answer (in bold):
A. Patricia owes a duty to the Company.
B. Patricia owes a duty to the shareholders of the Company.
C. Patricia must have regard to the interests of the employees of the
Company.
Incorrect
The correct answer is A and C. As a fiduciary, Patricia owes a duty to the
Company and not to the shareholders. In addition, s 309(2) CA 85
imposes an obligation on the directors to have regard to the interests of
the employees of the Company.
18 Quiz Feedback
18.1
View Instructions
You got 23 out of 28 answers correct (82%)
Congratulations! You have passed the Business Awareness Module test.
1. You are considering opening a record store in a major shopping area. As
there are other record stores located nearby, you will have to find sources of
competitive advantage.
Only one of the following would be a real source of competitive advantage which is it?
Your answer (in bold):
A.
B.
C.
D.
An award-winning advertising campaign
Exclusive promotional relationship with a major record label.
An unusual store design and internal layout.
Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage,
built on a strategic relationship that cannot be copied or imitated. All of
the other answers represent something that is easy to imitate, and are
not built upon superior assets, distinctive capabilities or strategic
relationships.
2. If you have a major surprise to impart to your colleagues concerning the
business, the way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week before
the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to the
meeting.
Correct
The answer is A in accordance with the 'No surprises' tutorial.
3. When a member who is invited to take up an appointment to provide nonreserved advice is aware that the prospective client has been involved in a
dispute with a previous adviser, the member..
Your answer (in bold):
A. must always consult the previous adviser before accepting the
appointment.
B. must always discuss the matter with the prospective client
before accepting the appointment.
C. should decline the appointment.
D. should consider whether to consult the previous adviser or the
prospective client before accepting the appointment.
Incorrect
The correct answer is D. An explanation can be found in Section 7 of the
PCS
4. Charles is the purchasing director of Westron Limited. He recently purchased
some chemicals from Joe Sullivan, a sales manager for Chems Limited. The
chemicals that have been delivered are the wrong concentration and unusable
by Westron Limited. Chems Limited is refusing to replace them. If proceedings
are commenced, who would be the parties to the action?
Choose the two correct parties.
Your answer (in bold):
A.
B.
C.
D.
Charles
Joe Sullivan
Westron Limited
Chems Limited
Correct
Answers C and D are correct. The contract is made by Charles and Joe
as agents for, and signing on behalf of, the two companies. Therefore,
the companies would be the parties to any legal action.
5. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A
central power source is usually associated with young companies, or
those where the founder has not wished to expand greatly. B - describes
a characteristic of a hierarchical organisation. C - is a characteristic of
matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision
makers cannot continue and no successors have been identified.
6. Which one of the following would not be a current issue for general insurance
companies?
Your answer (in bold):
A.
B.
C.
D.
Capital adequacy.
Increasing longevity.
Treating customers fairly.
Claims compensation culture.
Correct
Answer B is correct because increasing longevity is a current issue for
life insurance companies and pension schemes, particularly when annual
or monthly benefits are being paid out for the rest of a person's life.
However, this would not be an issue for a general insurance company
that does not offer benefits related to a person's lifetime. Answers A, C
and D are all current issues for a general insurance company.
7. Which of these statements is not correct?
Your answer (in bold):
A. The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct.
B. The PCS are comprehensive and all members must comply with
each section.
C. Members must comply with the spirit and letter of the PCS.
D. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
8. Peter owes Dent & Co £2,000. Peter asks Dent & Co if they will accept £1,500
in full settlement. Dent & Co agree and Peter hands over the £1,500.
Is the following statement false or true? Dent & Co cannot sue Peter for the
balance as promissory estoppel can only be used as a defence.
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A. Dent & Co. will not be relying on promissory
estoppel. Dent & Co. can sue for the balance relying on the contract and
the rule in Foakes v Beer - it is Peter who may then try to rely on
promissory estoppel as a defence.
9.
Your company is assessing whether to enter new markets and has asked you to carry
out a check on one of these to gain a clearer picture of its potential profitability.
Which one of the following frameworks might you apply to structure your thinking for
this purpose?
Your answer (in bold):
A.
B.
C.
D.
A 'competitive forces' analysis.
A 'PEST' analysis.
An analysis of your company's business system.
A 'competitive advantage' analysis of your strategic assets, capabilities
and relationships.
Correct
Correct Answer: A. The purpose of analysing the strength of the
combined power of the competitive forces that bear on an industry or
market segment is to first, assess how much pressure they will exert and
hence squeeze profits on companies trying to operate in that industry or
market. Having assessed that, a company should next consider what it
could do to push back against these forces to see if the market is viable
for it. The other frameworks only provide you with elements of the
information you need.
10. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A.
B.
C.
D.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and
tend to involve little structure or formality, high risk-taking, and the
decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of
approval, and in a matrix organisation (C) you would expect more people
to be involved in the process bringing their own views and expertise.
11. The Actuarial Profession has, in the past, regulated itself by setting ethical
standards, administering its education system and CPD, monitoring compliance
with professional standards, and administering disciplinary procedures.
Which one of the following will happen in the future?
Your answer (in bold):
A. The Profession will continue to self-regulate in this way.
B. The Professional Oversight Board will oversee The Actuarial
Profession's role in these matters.
C. The FSA will regulate for these matters.
D. The Morris Review team will spend more time considering these matters
and will make recommendations in due course.
Correct
Answer B is correct and you are recommended to read at least the
Forward and the Executive Summary of the Morris Review. You will find
the Review on the Profession's website.
12. You may be offered a gift by a company with whom you, or your company,
has a business / professional relationship. In deciding whether to accept the gift,
which of the following would not be true?
Your answer (in bold):
A. You must consider carefully whether acceptance of a gift could in any
way influence your judgement.
B. You must find out what your company's policy is on gifts.
C. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a particular
piece of work.
D. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the
termination of a particular task of some importance, is less likely to be
objectionable than a series of gifts implying the possibility of undue
influence. The other alternatives, A, B and D, are all true. An example
under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some
standing.
13. Muriel, Molly and Marilyn have been in partnership since 1990. They all work
full-time for the business. They share profits equally and have no relevant
express agreement between them.
Which one of the following is correct?
Your answer (in bold):
A. If Molly leaves the business she could be prevented from setting up a
competing business.
B. Each partner is entitled to receive a salary in addition to her share of the
profits.
C. Muriel and Molly together could expel Marilyn.
D. Any of the 3 partners could dissolve the partnership at any time without
giving a reason.
Incorrect
The correct answer is D. Section 26 Partnership Act 1890 provides that if
there is no fixed term any partner may dissolve the partnership by giving
notice to the others. Section 30 Partnership Act 1890 only provides for
restrictions on competition whilst Molly is still a partner. Section 24(6)
Partnership Act 1890 provides that a partner is not entitled to a salary.
Section 25 Partnership Act 1890 provides there is no power to expel
unless all the partners (including Marilyn) agree.
14. All except two of the following would be appropriate criteria to test whether
a potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in
any case eliminate interesting emerging segments.
15. The main purpose of a business strategy is...
Your answer (in bold):
A.
B.
C.
D.
Correct
to follow every opportunity available.
to determine how best to use management talent.
to decide on the best way to promote the business to customers.
to maximise the value of the company.
The answer is D in accordance with the 'Creating and capturing value'
tutorial
16. Which of the options A, B, C or D is incorrect?
Confidential information acquired by a member in the course of professional
work...
Your answer (in bold):
A. should never be disclosed unless consent has been received from the
member's client or employer.
B. should not normally be disclosed unless required to do so by statutory
authority.
C. should not normally be disclosed unless it is in the public interest to do
so.
D. should not normally be disclosed unless required to do so by
judicial authority.
Incorrect
The correct answer is A. An explanation can be found in Section 2 of the
PCS
17. Jane agrees to buy goods from Ben for £1,000, payment on delivery. Ben
refuses to deliver the goods. In fact he has sold them elsewhere for £1,800.
Jane can buy similar goods for £1,500.
Assuming the court uses the usual method of assessing damages in contract,
which one of the following amounts is Jane likely to get?
Your answer (in bold):
A.
B.
C.
D.
Nominal damages only.
£800
£500
£1,500
Correct
The correct answer is C. Jane would have paid £1,000 but because of
Ben's breach she now has to pay £1,500 for similar goods. Therefore
she needs £500 to put her in the position as if her contract with Ben had
been properly performed.
18. You are the new Managing Director of Korsan, a city-based chain of
medium-priced hotels catering primarily for late-night business travellers. Trade
is reasonable, and you have a high level of repeat business (and thus good
projected future occupancy), but costs seem high and profits slim, particularly
for the hotel's restaurant. It serves few customers at night, although the chefs
have done innovative things to the menus to increase their appeal. A rival chain
- Luxuria - is also setting up its high-class hotels for discerning travellers in the
same cities, and your board is panicking that significant business will be lost.
They present some recent research showing that customers' core needs are a
good night's sleep and a convenient location. They also present a large dossier
of suggestions for maximising the value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience
(discerning travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of
potential customers for Korsan.
C. Invest in a major marketing campaign to promote the location
benefits of Korsan to new customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a
city-based restaurant for your customers to have discounted evening
meals.
Incorrect
Answer D is correct. By only serving the needs most desired by
customers (sleep and location) Korsan can reduce unnecessary
overheads and increase value captured. The deal with a city restaurant
will also be attractive to those customers wanting to eat in the evening.
Korsan's target audience is different to Luxuria, and there is no evidence
to suggest that Luxuria's target audience would be attracted, even with a
refurbished hotel. A - could be a costly error. B - would require
investment by way of a marketing campaign to get it off the ground, and
there is no guarantee that non-hotel customers would be attracted.
Korsan has high repeat business and high projected future occupancy,
so a campaign to attract new customers (C) would be wasteful.
19. You are considering investing in the car manufacturing industry, but you are
concerned about competitive forces changing the market. You've decided to
organise an analysis on the five major competitive forces acting on the industry.
Which of the following represents the five forces that you should investigate?
Your answer (in bold):
A. Product, price, people, placement, positioning. of substitute products,
B. Threat of substitute products, rivalry, supplier power, customer
power, threat of new entrants.
C. Missions, objectives, goals, strategies, objectives.
D. Access to capital, ease of integration, synergy with existing operations,
distribution channels, sustainable competitive advantages.
Correct
Answer B is correct. The other options do not represent the five
competitive forces acting on an industry.
20. If work which a member considers necessary is precluded by cost or time
constraints the member should normally...
Your answer (in bold):
A. perform only that portion of the work permitted by cost and time, and
say nothing further.
B. recommend that the work is undertaken by another firm whose fees are
lower.
C. either decline to act or qualify the advice given.
D. refer the matter to the PAB.
Correct
The correct answer is C. An explanation can be found in Section 2 of the
PCS
21. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and telephone
system to enable smarter working on the move. However, the Mobilo is not
selling as well as expected into the company's core customer segments. Recent
research has revealed that the core segments are seeking mobile efficiency as
well as enhanced status for being 'early adopters' in this market.
Which of the company's advantages would you use as the core of a campaign to
increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which has
an unrivalled reputation for new ideas in mobile living/working.
B. The strong relationships the company has with its suppliers, who provide
highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the competition,
to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for awareness
three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency
as well as their need to be early adopters in the market. Customers will
value the highly-reputed technological components (B), but alone they do
not meet customer needs for mobile efficiency. Speed of delivery (C) will
help in getting the products to customers early, to support them being
early adopters, but it does not match their need for innovation. There is
little benefit in purely having high awareness of the company brand (D), if
this product campaign is not communicating the benefits relevant to the
target groups.
22. John, Andrew and Robert have been in partnership together for 3 years.
They have no partnership agreement. John has recently been declared
bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership without
John who will have to retire."
Your answer (in bold):
A. True
B. False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under
s33 Partnership Act 1890. In any event there is no right of retirement in
the Partnership Act 1890.
23. A father of one of your friends feels he has lost out by his insurance
company merging with another. Your friend believes you know something about
how insurance companies work and asks you to find out something for her
father. Which of the following actions would it be sensible for you to take?
Your answer (in bold):
A. Tell your friend everything you know about the merging of insurance
companies.
B. Tell your friend that her father may have been disadvantaged because a
main aim of any merger would be to benefit the shareholders rather than
the policyholders.
C. Tell your friend that you know one of the actuaries who worked on the
merger and that you will ask him to write to her father.
D. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version
of the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of
situation and remember that you are never "off duty". There will always
be a risk that what you say gets construed as expert actuarial opinion,
and may get quoted, or misquoted, by third parties. It would be
potentially very dangerous to act per A or B and not reasonable to act as
C because the actuary you know should not be expected to write to
individual policyholders - in fact his company may not allow him to.
24. The company you work for, TransGlobal Multinational Limited, is considering
entering a new market. The decision-making process has involved reviewing
other similar organisations' attempted entries, identifying successes and
failures, suggesting improvements that TransGlobal could make over
competitors' offers, and an analysis of the market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational
cultural types listed do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders.
B. Innovators.
C. Fast followers.
D. Slow reactors.
Incorrect
Answer C is correct. This behaviour illustrates an organisation not willing
to take the risk of moving first, but opportunistic enough to enter where
an opportunity has appeared, and then attempt to improve upon the
market entry, process, or product introduced by the innovator.
25. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
A.
B.
C.
D.
the work undertaken by customer-facing staff
the human resources needed for the plan
the means by which the plan is implemented
the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore
diagram under the 'Creating and capturing value' tutorial
26. Select one option from A, B, C or D to show which members the PCS applies
to, where the categories are:
1 = a Fellow of the Institute or Faculty
2 = an associate of the Institute or Faculty
3 = a student of the Institute
4 = a Faculty student
Your answer (in bold):
A.
B.
C.
D.
only 1
1 and 2
1, 2 and 3
1, 2, 3 and 4
Correct
The correct answer is D. An explanation can be found in the Definitions
section of the PCS
27. You are an industry analyst in a venture capital company, preparing a report
for potential investors on a restaurant chain, Fervour, which is looking to expand
abroad. Fervour specialises in converting churches into restaurants, capitalising
on the architecture to create atmospheric surroundings, supported by live jazz.
The menus - created by Michelin chef Jean-Pierre Noir - are highly acclaimed in
culinary circles for their imagination and flair. Fervour looks to cater for a wide
range of clientele, offering a dining experience 'for all the senses'. While it is still
relatively unknown, it has bought the majority of unused church buildings across
the country, ready for conversion.
In trying to make the investment proposition sound as attractive as possible, it
is important that you highlight where Fervour has advantages in the
marketplace.
Which one of the following statements do you feel represents a real and
sustainable competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the country.
C. Superior locations - church buildings stand out against ordinary
restaurants, and are located close to the desired audience.
D. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at
all its venues.
E. Relationships with its key suppliers - to ensure the freshest food and the
right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused
churches means that other competitors will be unable to replicate the
Fervour surroundings, making this a sustainable advantage. While the
menus are imaginative (A), they can also be copied, which means that
this advantage is difficult to sustain. The Fervour brand (B) is unknown
outside the country, so it cannot yet be exploited as an advantage. While
a website (D) is useful, it is likely that most other restaurants will also
have a website supporting their core offering, so this does not represent
an advantage. Relationships with suppliers to ensure fresh food (E) are a
necessity in this market, rather than an advantage.
28. We see the term "objects", as in "certainty of objects". Which one of the
following most clearly describes the meaning of the term in relation to trusts?
Your answer (in bold):
A. The trustees.
B. The reasons or motives behind the settlor's decision to create a trust.
C. The beneficiaries, or, in the case of a discretionary trust, the
potential beneficiaries.
D. The chattels, or things, the settlor is making into trust property.
Correct
The correct answer is C. The term “objects” equates to the (already
chosen) beneficiaries of a fixed trust, and the (potentially chosen)
beneficiaries of a discretionary trust.
19 Quiz Feedback
19.1
View Instructions
You got 23 out of 28 answers correct (82%)
Congratulations! You have passed the Business Awareness Module test.
1. If you were classifying a company in terms of how it made decisions when
responding to changing market conditions, which one of the following
descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market
position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed
analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen
to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal
market share from them. They have resources they can use to attack
competitors. Sometimes their relative strength can make them over
confident. D - describes Fast Follower organisations who are less happy
with high risk than Innovators, but can often achieve greater returns and
visibility than Innovators gain. B - describes a combination of Defenders,
Innovators and Fast Followers. C - describes Innovators.
2.
Your company is assessing whether to enter new markets and has asked you to carry
out a check on one of these to gain a clearer picture of its potential profitability.
Which one of the following frameworks might you apply to structure your thinking for this
purpose?
Your answer (in bold):
A.
B.
C.
D.
A 'competitive forces' analysis.
A 'PEST' analysis.
An analysis of your company's business system.
A 'competitive advantage' analysis of your strategic assets, capabilities
and relationships.
Correct
Correct Answer: A. The purpose of analysing the strength of the
combined power of the competitive forces that bear on an industry or
market segment is to first, assess how much pressure they will exert and
hence squeeze profits on companies trying to operate in that industry or
market. Having assessed that, a company should next consider what it
could do to push back against these forces to see if the market is viable
for it. The other frameworks only provide you with elements of the
information you need.
3. With regard to publicity, which of the following statements is incorrect?
Your answer (in bold):
A. Members may publicise the professional services offered
B. Members must ensure their publicity is appropriate to the profession
C. Members speaking in public must make it clear that their
presentation has the backing of the profession
D. Members who have any doubts about material they wish to publicise
should seek advice from the professional body
Correct
The correct answer is C. An explanation can be found in Section 9 of the
PCS
4. Nina is the sole shareholder and director of Tarvin Limited. She owns 100,000
£1 shares, all of which are fully paid. The company goes into liquidation. It has
assets of £50,000 but owes creditors £250,000.
How much will Nina be required to contribute to the company's funds? Which one
of the following is correct?
Your answer (in bold):
A.
B.
C.
D.
Nothing
£50,000
£100,000
£200,000
Correct
A is correct. A shareholder is protected by limited liability and will only be
liable to pay for the amount they have agreed to pay for their shares. Nina
has fully paid up shares and cannot be asked to contribute further funds.
5. Your 'street-style' youth-orientated fashion-house needs extra suppliers to
allow you to get a constant flow of your new designs quickly to young
customers. Based on the strengths and weaknesses of potential overseas
manufacturers listed below.
Which one would help you fulfil your strategy?
Your answer (in bold):
A. This company handles high volumes. (they've supplied identical
Government uniforms for years) It has many machinists, but is not highly
automated. It can deliver on schedule if given long lead times. Low wages
guarantee low cost per unit.
B. This small factory will take instructions electronically and transfer
data to computerised cutting machines. It can produce items
quickly, though usually in smaller batches than manufacturer A. It
produces its own designs for local markets. It has fewer, higher
paid staff than manufacturer A.
C. Company C can - and will - copy anything - they don't need many written
instructions. They make near-identical copies of design from international
fashion shows within a week, usually without the designer's permission.
They emphasise speed over quality.
Correct
Correct Answer: B Manufacturer B would be best as it seems responsive
and flexible and could offer volume by delivering smaller batches across
staggered dates, allowing orders to be adapted according to market
uptake. Staff have better conditions and their skills for original design may
be an asset. Company A's strengths appear to be in large scale, repetitive
orders. Indications are that their systems and staff may not be geared to
fast turnaround on changing requirements. Company C may present
some risks. They provide speed, but if their success is built on 'stealing'
designs, your own reputation may suffer by using them - or your own
designs could be stolen, too!
6. One of the actions you should take to develop your business awareness is to
read as much as you can about the financial services industry in the national
press, on websites, in financial magazines, and in The Actuary.
How much time should you commit yourself to spending on a regular basis?
Your answer (in bold):
A.
B.
C.
D.
1 hour per day.
1 hour per week.
1 hour per month.
1 hour per quarter.
Incorrect
Answer B is correct. One hour per day would tend to be too high a
proportion of a working day. One hour per month or per quarter would be
better than nothing but not sufficient to build up a clear enough picture of
what is going on in the financial services industry.
7. Which of the following contains a point that is not reflected by the Professional
Conduct Standards ('PCS') in the way stated?
Your answer (in bold):
A. You need to disclose a financial interest; you must have proper regard for
professional guidance; publicity that detracts from the standing of the
Profession is not allowed.
B. You must not give advice unless competent; you have an obligation to
serve the public interest; you must conform with the spirit and letter of
the PCS.
C. Your conscience must cause you to maintain the highest standards;
people must have absolute confidence in our Profession; if you breach the
PCS you may be disciplined.
D. The definition of misconduct is set out in the disciplinary scheme:
you must disclose a conflict of interest; the standing of the
Profession relies on the judgment of individual members.
Incorrect
Answer A is correct because the last point, 'publicity that detracts from the
standing of the Profession is not allowed' is not true. Such publicity would
be acceptable, in terms of the PCS, if it was in the public interest.
8. Harold, Margaret and Arthur set up a hat shop together 10 years ago. They
have no formal partnership agreement. On 13 August, without consulting the
others, Arthur made an oral contract with U Bend Limited, builders' merchants,
for the purchase of an expensive Italian porcelain bathroom suite. Arthur
confirmed his order and sent out delivery instructions on the firm's headed
notepaper several days later. On 12 September Margaret left the firm and was
replaced by Neil. U Bend Limited has not been paid for the bathroom suite and
wants to know who is liable for the debt.
Which one of the following is correct?
Your answer (in bold):
A.
B.
C.
D.
Harold, Margaret and Arthur.
Harold, Arthur and Neil.
Arthur only.
Harold and Arthur.
Correct
The correct answer is C. Arthur had no actual authority and under s.5 PA
1890 can only bind the firm if the contract is for business usually carried
on by the firm. Here you would not expect a bathroom suite to be
purchased by a hat shop. It is also not clear whether U Bend Limited
knew or believed Arthur was a partner as his confirmation letter on the
firm's headed notepaper did not arrive until after the contract was entered
into.
9. In order to achieve a business plan, strategy and tactics must be considered.
Tactics is defined as...
Your answer (in bold):
A.
B.
C.
D.
the work undertaken by customer-facing staff
the human resources needed for the plan
the means by which the plan is implemented
the competitive advantages the company will aspire to in order to achieve
its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore
diagram under the 'Creating and capturing value' tutorial
10. All except two of the following would be appropriate criteria to test whether a
potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in
any case eliminate interesting emerging segments.
11. The Actuarial Profession has, in the past, regulated itself by setting ethical
standards, administering its education system and CPD, monitoring compliance
with professional standards, and administering disciplinary procedures.
Which one of the following will happen in the future?
Your answer (in bold):
A. The Profession will continue to self-regulate in this way.
B. The Professional Oversight Board will oversee The Actuarial
Profession's role in these matters.
C. The FSA will regulate for these matters.
D. The Morris Review team will spend more time considering these matters
and will make recommendations in due course.
Correct
Answer B is correct and you are recommended to read at least the
Forward and the Executive Summary of the Morris Review. You will find
the Review on the Profession's website.
12. A father of one of your friends feels he has lost out by his insurance company
merging with another. Your friend believes you know something about how
insurance companies work and asks you to find out something for her father.
Which of the following actions would it be sensible for you to take?
Your answer (in bold):
A. Tell your friend everything you know about the merging of insurance
companies.
B. Tell your friend that her father may have been disadvantaged because a
main aim of any merger would be to benefit the shareholders rather than
the policyholders.
C. Tell your friend that you know one of the actuaries who worked on the
merger and that you will ask him to write to her father.
D. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version of
the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of
situation and remember that you are never "off duty". There will always be
a risk that what you say gets construed as expert actuarial opinion, and
may get quoted, or misquoted, by third parties. It would be potentially very
dangerous to act per A or B and not reasonable to act as C because the
actuary you know should not be expected to write to individual
policyholders - in fact his company may not allow him to.
13. You see a vase in an antique shop. You think it is very rare and worth far
more than the price asked. The owner of the shop hears you telling your friend
your views about the vase but does not say anything. You buy the vase but it
turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
A. The owner of the shop has made a misrepresentation as she should have
corrected your mistake.
B. The owner of the shop has made a misrepresentation as she was under a
duty to disclose all material facts.
C. The owner of the shop has made a negligent misstatement.
D. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a
misrepresentation or a negligent misstatement as there was no false
statement.
14. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend
to involve little structure or formality, high risk-taking, and the decisionmaking power concentrated in a few people. In a hierarchy (B) you would
expect a big decision to go through a more formal process of approval,
and in a matrix organisation (C) you would expect more people to be
involved in the process bringing their own views and expertise.
15. In maximising the value of a company, which of the following is the best
measure of value to use?
Your answer (in bold):
A.
B.
C.
D.
Annual profit.
Annual return on assets.
Net present value of future profits.
There is no one perfect measure.
Incorrect
The answer is D as there is no single measure of value in accordance
with the 'Financial objectives' tutorial, it is best to consider that specific
measures are providing information on specific aspects of the business.
16. Which of these statements is not correct?
Your answer (in bold):
A. The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct.
B. The PCS are comprehensive and all members must comply with
each section.
C. Members must comply with the spirit and letter of the PCS.
D. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
17. Charles is the purchasing director of Westron Limited. He recently purchased
some chemicals from Joe Sullivan, a sales manager for Chems Limited. The
chemicals that have been delivered are the wrong concentration and unusable by
Westron Limited. Chems Limited is refusing to replace them. If proceedings are
commenced, who would be the parties to the action?
Choose the two correct parties.
Your answer (in bold):
A.
B.
C.
D.
Charles
Joe Sullivan
Westron Limited
Chems Limited
Correct
Answers C and D are correct. The contract is made by Charles and Joe
as agents for, and signing on behalf of, the two companies. Therefore, the
companies would be the parties to any legal action.
18. You are considering opening a record store in a major shopping area. As
there are other record stores located nearby, you will have to find sources of
competitive advantage.
Only one of the following would be a real source of competitive advantage which is it?
Your answer (in bold):
A.
B.
C.
D.
An award-winning advertising campaign
Exclusive promotional relationship with a major record label.
An unusual store design and internal layout.
Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage,
built on a strategic relationship that cannot be copied or imitated. All of
the other answers represent something that is easy to imitate, and are not
built upon superior assets, distinctive capabilities or strategic
relationships.
19. There are four main types of external shock that are relevant to an
organisation's strategy. A PEST analysis can help think through what these
potential shocks might be, where PEST stands for...
Your answer (in bold):
A.
B.
C.
D.
Physical; economic; structural; timing
Political; external; staffing; technological
Physical; external; social; timing
Political; economic; social; technological
Correct
The answer is D in accordance with the 'Pest analysis' tutorial
20. An actuary is producing a report about an actuarial topic that has some legal
implications. The actuary has not come across these implications before.
Which of the following courses of action would probably be the most appropriate?
Your answer (in bold):
A. To research the implications by reference to legal publications and make a
personal judgement based on the findings.
B. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not come
across these implications before.
C. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
D. To make a judgement based on personal intuition but to make the report
non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and
correct. An actuary should not hesitate to obtain advice from someone
outside the Actuarial Profession if that is the best way to produce the
correct advice. Therefore, C is the correct answer.
21. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A
central power source is usually associated with young companies, or
those where the founder has not wished to expand greatly. B - describes
a characteristic of a hierarchical organisation. C - is a characteristic of
matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision makers
cannot continue and no successors have been identified.
22. Which one of the following is correct?
Your answer (in bold):
A. If a condition is broken, the innocent party may be able to
terminate the contract as well as sue for damages.
B. If a warranty is broken, the innocent party may be able to terminate the
contract as well as sue for damages.
C. If a condition is broken and the innocent party terminates the contract, he
cannot also sue for damages
D. If an innominate term is broken, the innocent party can sue for damages
but cannot terminate the contract.
Correct
The correct answer is A. B is not correct because if a warranty is broken
the innocent party can sue for damages but cannot terminate the
contract. C is not correct because a party entitled to terminate a contract
for breach of a condition is also entitled to claim damages for any loss
suffered. D is not correct because if an innominate term is broken the
innocent party can terminate the contract if the effects of the breach are
major.
23. Errors have been occurring quite often in the work of actuarial students in
your company.
Which of the following control processes has an apparent weakness, based on the
information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the work
can be followed by another person who has the appropriate level of
knowledge and skills.
B. Documentation is in place describing how the bases and
assumptions adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry out their
checks very quickly in order to avoid missing deadlines.
D. Checks are carried out on the computer systems that produce many of
the calculations
Incorrect
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems
that produce calculations. The latter would only be a problem if these
checks had not been carried out rigorously. The weakness in the controls
described would be in the peer review process if the peer reviewer is not
given sufficient time to carry out the peer review in sufficient detail. The
peer reviewer is as responsible as the originator. If you sign, you are
responsible.
24. You have been asked to define the competitive positioning for your business
unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component of the
business unit's competitive position?
Your answer (in bold):
A.
B.
C.
D.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Incorrect
Answer C is correct. All of the other responses represent a definition of
either product/service, target customers, or channels, all of which are
competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
25. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is
needed.
B. Decide on the form of analysis, establish the right questions, discover the
facts.
C. Ask the right question, decide what analysis to undertake, collect
the relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an
analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
26. The senior actuary in a firm must draw the provisions of the PCS to the
attention of which one of the following, with a view to ensuring that members are
not put in breach of professional guidance?
Your answer (in bold):
A. Senior non-actuarial colleagues and other members in the firm.
B. Senior non-actuarial colleagues and Fellows of the Institute or Faculty in
the firm.
C. Only Fellows of the Institute or Faculty in the firm.
D. Only other members in the firm.
Correct
The correct answer is A. An explanation can be found in Section 1 of the
PCS.
27. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme
you run for customers.
B. Pledge to protect the environment by increasing new policies and
processes.
C. Leverage distribution network more effectively by establishing
shops on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic,
and B is non-strategic and non financial (although often it is difficult to
draw a clear-cut line between profits and social responsibility). D is
financial - it is a specific goal with specific timeframe.
28. Which one or more of the following claims can companies bring against third
parties who have received company property in breach of a director's fiduciary
duties?
Your answer (in bold):
A. Recipient liability (constructive trusteeship).
B. Restitution for unjust enrichment.
C. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the equitable
claim of a constructive trusteeship and use equitable tracing in connection
with a proprietary claim because the director owed the company fiduciary
duties. The company owns legal title to its assets and can therefore claim
restitution.
Quiz Feedback
View Instructions
You got 31 out of 32 answers correct (97%)
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9033767
(This question is not included in the score.)
2. All except two of the following would be appropriate criteria to test whether a
potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although
it is vital to have channels of communication and distribution they do not have to be
exclusive. E - a long established segment is likely to be served already and using this
criterion would in any case eliminate interesting emerging segments.
3. Which one of the following always requires approval by shareholders to be
valid?
Your answer (in bold):
A. Sale of company assets to an unconnected third party
B. Sale of assets worth £10 to a director
C. Awarding a director a fixed term service contract over 6 years in
length
D. Registering a transfer of shares
Correct
The correct answer is C. A is wrong because unless there is provision in the articles to the
contrary this can be done by directors. B is wrong because sale of assets to directors over a
certain level requires approval of shareholders. However, small value sales do not require
approval. D is wrong because this is usually done by directors.
4. The main purpose of a business strategy is...
Your answer (in bold):
A. to follow every opportunity available.
B. to determine how best to use management talent.
C. to decide on the best way to promote the business to customers.
D. to maximise the value of the company.
Correct
The answer is D in accordance with the 'Creating and capturing value' tutorial
5. An actuary is producing a report about an actuarial topic that has some legal
implications. The actuary has not come across these implications before.
Which of the following courses of action would probably be the most
appropriate?
Your answer (in bold):
A. To research the implications by reference to legal publications and make
a personal judgement based on the findings.
B. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not come
across these implications before.
C. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
D. To make a judgement based on personal intuition but to make the report
non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and correct. An actuary
should not hesitate to obtain advice from someone outside the Actuarial Profession if that is
the best way to produce the correct advice. Therefore, C is the correct answer.
6. You are preparing a report on a final salary pension scheme for A Ltd. You
are aware B Ltd is in negotiation to purchase the entire issued share capital of A
Ltd. You are also aware that A Ltd has promised to pass the report to B Ltd.
Which one of the following statements is most likely to be incorrect?
Your answer (in bold):
A. You owe a duty of care to A Ltd
B. You will never owe a duty of care to B Ltd
C. You might owe a duty of care to B Ltd
D. You are unlikely to owe a duty of care to other third parties who rely on
the report
Correct
The correct answer is B. Given that you are aware of the purpose for which the report is to
be used you might owe B Ltd a duty of care. A is wrong as A Ltd is your client. You clearly
owe your client a duty of care. C is wrong because given you know the purpose for which
the report is to be used you might owe B Ltd a duty of care. D is wrong because as you are
not aware of who else might rely on the report it is unlikely you will owe them a duty of care.
7. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A central power
source is usually associated with young companies, or those where the founder has not
wished to expand greatly. B - describes a characteristic of a hierarchical organisation. C - is
a characteristic of matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few individuals are
compromising their future stability if those decision makers cannot continue and no
successors have been identified.
8. Which one of the following would not be a current issue for general insurance
companies?
Your answer (in bold):
A. Capital adequacy.
B. Increasing longevity.
C. Treating customers fairly.
D. Claims compensation culture.
Correct
Answer B is correct because increasing longevity is a current issue for life insurance
companies and pension schemes, particularly when annual or monthly benefits are being
paid out for the rest of a person's life. However, this would not be an issue for a general
insurance company that does not offer benefits related to a person's lifetime. Answers A, C
and D are all current issues for a general insurance company.
9. Which of the following contains a point that is not reflected by the
Professional Conduct Standards ('PCS') in the way stated?
Your answer (in bold):
A. You need to disclose a financial interest; you must have proper
regard for professional guidance; publicity that detracts from the
standing of the Profession is not allowed.
B. You must not give advice unless competent; you have an obligation to
serve the public interest; you must conform with the spirit and letter of
the PCS.
C. Your conscience must cause you to maintain the highest standards;
people must have absolute confidence in our Profession; if you breach
the PCS you may be disciplined.
D. The definition of misconduct is set out in the disciplinary scheme: you
must disclose a conflict of interest; the standing of the Profession relies
on the judgment of individual members.
Correct
Answer A is correct because the last point, 'publicity that detracts from the standing of the
Profession is not allowed' is not true. Such publicity would be acceptable, in terms of the
PCS, if it was in the public interest.
10. Assume that in The Actuarial Profession there are two respected bodies of
opinion as to how to tackle a particular task (methods 1 and 2). You choose
method 1. In the event it turns out that using method 2 would have been more
beneficial to the client.
Which one of the following statements is correct?
Your answer (in bold):
A. You are in breach of duty
B. You are not in breach of duty
C. You are in breach of duty, but damages will be reduced as you acted
reasonably
D. You are in breach of duty, but the client's damages will be reduced as
the client was guilty of contributory negligence by allowing you to choose
method 1
Correct
The correct answer is B. A is wrong because it there are two respected bodies of opinion
you are not in breach of duty by choosing one of them. C is wrong because you are not in
breach of duty if you follow a recognised body of opinion. D is wrong because you are not in
breach of duty by choosing a recognised body of opinion.
11. In meeting customer or client needs which of the following would not
normally be true?
Your answer (in bold):
A. It is important for a company to know who its customers are and to be
clear about the needs it is meeting.
B. A company will not normally make assumptions about what its
customers want without asking them.
C. Customers' needs change over time.
D. Customers often find that a company will do things for them that
they do not care about.
Incorrect
The answer is B in accordance with the 'Are we meeting customer needs?' tutorial.
12. If you were classifying a company in terms of how it made decisions when
responding to changing market conditions, which one of the following
descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed
analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen
to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position
that needs defending from others seeking to steal market share from them. They have
resources they can use to attack competitors. Sometimes their relative strength can make
them over confident. D - describes Fast Follower organisations who are less happy with high
risk than Innovators, but can often achieve greater returns and visibility than Innovators
gain. B - describes a combination of Defenders, Innovators and Fast Followers. C describes Innovators.
13. In the business game, The Way Forward, which one of the following is the
primary purpose of the Profit and Loss Account?
Your answer (in bold):
A. So that a team knows how much money it has got
B. So that a team knows whether it traded profitably or not in the
period concerned
C. So that a team knows its overhead costs in relation to its turnover
D. So that a team knows how much money to set aside for Corporation Tax
Correct
The correct answer is B. The prime purpose of a Profit and Loss Account is to show the
trading profit or loss for the period of the accounts.
14. Who carried out a review of The Actuarial Profession in 2004/05?
Your answer (in bold):
A. Lord Penrose.
B. Sir Derek Morris.
C. John Myners.
D. Gordon Brown.
Correct
Answer B is correct. Sir Derek Morris carried out the review at the request of Gordon
Brown's Treasury Department following the report by Lord Penrose about Equitable Life.
15. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics
relating to your company would it normally be safe for you to talk about without
the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking about B, C or D and
you might be contravening your employment contract by doing so. Therefore, A is the
correct answer because there is no reason why you should not talk about information that
would be available in the market place even if it could be quite hard for someone else to find
that information.
16. Which one or more of the following claims can companies bring against third
parties who have received company property in breach of a director's fiduciary
duties?
Your answer (in bold):
A. Recipient liability (constructive trusteeship).
B. Restitution for unjust enrichment.
C. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the equitable claim of a
constructive trusteeship and use equitable tracing in connection with a proprietary claim
because the director owed the company fiduciary duties. The company owns legal title to its
assets and can therefore claim restitution.
17. The company you work for, TransGlobal Multinational Limited, is considering
entering a new market. The decision-making process has involved reviewing
other similar organisations' attempted entries, identifying successes and
failures, suggesting improvements that TransGlobal could make over
competitors' offers, and an analysis of the market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational
cultural types listed do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders.
B. Innovators.
C. Fast followers.
D. Slow reactors.
Correct
Answer C is correct. This behaviour illustrates an organisation not willing to take the risk of
moving first, but opportunistic enough to enter where an opportunity has appeared, and then
attempt to improve upon the market entry, process, or product introduced by the innovator.
18. Select the one statement below that correctly defines the difference
between deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while in
creative synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from an
hypothesis, while in creative synthesis facts are created by some
additional insight.
C. In deductive synthesis facts are found by reducing the data down
to the fact, while in creative synthesis facts are created by some
additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the outcome, while in creative
synthesis facts are not relevant to the outcome.
19. In criticising another member's work in the context of any form of publicity,
care must be taken to acknowledge that..
Your answer (in bold):
A. there can only ever be one correct set of professional opinions
B. special circumstances may exist in any particular case
C. the other member may work for a large firm with influence on the
Professional Affairs Board
D. members who have provided advice on a particular assignment for many
years are extremely unlikely to be wrong
Correct
The correct answer is B. An explanation can be found in Section 8 of the PCS.
20. You see a vase in an antique shop. You think it is very rare and worth far
more than the price asked. The owner of the shop hears you telling your friend
your views about the vase but does not say anything. You buy the vase but it
turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
A. The owner of the shop has made a misrepresentation as she should have
corrected your mistake.
B. The owner of the shop has made a misrepresentation as she was under a
duty to disclose all material facts.
C. The owner of the shop has made a negligent misstatement.
D. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a misrepresentation or a negligent
misstatement as there was no false statement.
21. As part of a 'PEST' analysis of external factors that might affect your
industry, which of the following areas might you investigate?
Your answer (in bold):
A. Political changes.
B. Environmental factors - how climate changes will affect your operation.
C. Strategic choices being made by your main competitor.
D. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST
framework that is used to scan for external influences impacting an industry.
22. Which one of the following lists contains items that are all included in
Maslow's hierarchy of needs?
Your answer (in bold):
A. Self-actualisation; financial; social
B. Safety; psychological; esteem
C. Working; physiological; financial
D. Social; safety; esteem
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under
the 'Identifying consumer needs' tutorial.
23. Which one of these is not applicable?
A member providing reserved advice must ensure that the client is aware of...
Your answer (in bold):
A. the name and qualifications of the member providing the advice
B. the name of the member's firm
C. the name and qualifications of any non-members involved in the
assignment
D. the scope, purpose and terms of reference of the advice provided by the
member
Correct
The correct answer is C. The explanation can be found in Section 3 of the PCS.
24. Muriel, Molly and Marilyn have been in partnership since 1990. They all work
full-time for the business. They share profits equally and have no relevant
express agreement between them.
Which one of the following is correct?
Your answer (in bold):
A. If Molly leaves the business she could be prevented from setting up a
competing business.
B. Each partner is entitled to receive a salary in addition to her share of the
profits.
C. Muriel and Molly together could expel Marilyn.
D. Any of the 3 partners could dissolve the partnership at any time
without giving a reason.
Correct
The correct answer is D. Section 26 Partnership Act 1890 provides that if there is no fixed
term any partner may dissolve the partnership by giving notice to the others. Section 30
Partnership Act 1890 only provides for restrictions on competition whilst Molly is still a
partner. Section 24(6) Partnership Act 1890 provides that a partner is not entitled to a
salary. Section 25 Partnership Act 1890 provides there is no power to expel unless all the
partners (including Marilyn) agree.
25. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend to involve little
structure or formality, high risk-taking, and the decision-making power concentrated in a few
people. In a hierarchy (B) you would expect a big decision to go through a more formal
process of approval, and in a matrix organisation (C) you would expect more people to be
involved in the process bringing their own views and expertise.
bb
26. A father of one of your friends feels he has lost out by his insurance
company merging with another. Your friend believes you know something about
how insurance companies work and asks you to find out something for her
father. Which of the following actions would it be sensible for you to take?
Your answer (in bold):
A. Tell your friend everything you know about the merging of insurance
companies.
B. Tell your friend that her father may have been disadvantaged because a
main aim of any merger would be to benefit the shareholders rather than
the policyholders.
C. Tell your friend that you know one of the actuaries who worked on the
merger and that you will ask him to write to her father.
D. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version
of the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of situation and
remember that you are never "off duty". There will always be a risk that what you say gets
construed as expert actuarial opinion, and may get quoted, or misquoted, by third parties. It
would be potentially very dangerous to act per A or B and not reasonable to act as C
because the actuary you know should not be expected to write to individual policyholders in fact his company may not allow him to.
27. In the business game, The Way Forward, which one of the following effects
would be most likely if public relations was chosen as the first management
priority in all areas?
Your answer (in bold):
A. Increased sales
B. Decreased sales price
C. Decreased debtors
D. Higher profit
Correct
The correct answer is A. If the highest management priority was public relations this is most
likely to cause the public to buy more of the company's products. Public relations would not
in itself decrease the sales price, reduce the debtors, or necessarily result in higher profit, so
B, C and D are not correct in the context of the question asked.
28. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet the
company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its competitive
positioning and the advantages it will use. A relates to functional strategy and C relates to
corporate strategy.
29. There are four main types of external shock that are relevant to an
organisation's strategy. A PEST analysis can help think through what these
potential shocks might be, where PEST stands for...
Your answer (in bold):
A. Physical; economic; structural; timing
B. Political; external; staffing; technological
C. Physical; external; social; timing
D. Political; economic; social; technological
Correct
The answer is D in accordance with the 'Pest analysis' tutorial
30. Which one of the following statements is correct?
Your answer (in bold):
A. The provisions of the Companies Act 2006 never apply to shadow
directors
B. The provisions of the Companies Act 2006 never apply to de facto
directors
C. If a director cannot attend a board meeting he might be able to appoint
a proxy to stand in his place
D. A de jure director is a properly appointed director
Correct
The correct answer is D. A is incorrect because many provisions of the Act apply to shadow
directors. B is incorrect because many provisions of the Act apply to de facto directors. C is
incorrect because proxies are used by members. Directors use alternate directors to stand
in their place.
31. Which of the options A, B, C or D is incorrect?
Confidential information acquired by a member in the course of professional
work...
Your answer (in bold):
A. should never be disclosed unless consent has been received from
the member's client or employer.
B. should not normally be disclosed unless required to do so by statutory
authority.
C. should not normally be disclosed unless it is in the public interest to do
so.
D. should not normally be disclosed unless required to do so by judicial
authority.
Correct
The correct answer is A. An explanation can be found in Section 2 of the PCS
32. You have been asked to define the competitive positioning for your business
unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component of the
business unit's competitive position?
Your answer (in bold):
A. Supply affordable laser printers and related supplies.
B. Target Home Office computer users.
C. Taking a phased approach to expanding the distribution network.
D. Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of either
product/service, target customers, or channels, all of which are competitive positioning
decisions. Answer C is more concerned with timing and resource decisions for building the
company.
33. You apply for a job as the PA to the Managing Director of Maximus Limited
and are interviewed for the job by the Managing Director himself. Samuel Brown
(the Personnel Director) later writes to you to offer you the job and, when you
ring up to ask for some further details on pay and holiday entitlement, your
queries are answered by the Human Resources Manager (Heather Freeman).
You decide to accept the job.
Who is your employer?
Your answer (in bold):
A. The Managing Director
B. Samuel Brown
C. Heather Freeman
D. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of entering into
contracts, and as such is the employer. The directors are not acting in their own capacity but
as agents of the company.
20 Quiz Feedback
20.1
View Instructions
You got 20 out of 28 answers correct (71%)
Well tried. You need 75% to pass, so please read your feedback and revise
again all the material covered by the Module. You may take the test again
once at least 4 weeks has elapsed.
1. You are an industry analyst in a venture capital company, preparing a report
for potential investors on a restaurant chain, Fervour, which is looking to expand
abroad. Fervour specialises in converting churches into restaurants, capitalising
on the architecture to create atmospheric surroundings, supported by live jazz.
The menus - created by Michelin chef Jean-Pierre Noir - are highly acclaimed in
culinary circles for their imagination and flair. Fervour looks to cater for a wide
range of clientele, offering a dining experience 'for all the senses'. While it is still
relatively unknown, it has bought the majority of unused church buildings across
the country, ready for conversion.
In trying to make the investment proposition sound as attractive as possible, it is
important that you highlight where Fervour has advantages in the marketplace.
Which one of the following statements do you feel represents a real and
sustainable competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the country.
C. Superior locations - church buildings stand out against ordinary
restaurants, and are located close to the desired audience.
D. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at
all its venues.
E. Relationships with its key suppliers - to ensure the freshest food and the
right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused
churches means that other competitors will be unable to replicate the
Fervour surroundings, making this a sustainable advantage. While the
menus are imaginative (A), they can also be copied, which means that
this advantage is difficult to sustain. The Fervour brand (B) is unknown
outside the country, so it cannot yet be exploited as an advantage. While
a website (D) is useful, it is likely that most other restaurants will also
have a website supporting their core offering, so this does not represent
an advantage. Relationships with suppliers to ensure fresh food (E) are a
necessity in this market, rather than an advantage.
2.
Your company is assessing whether to enter new markets and has asked you to carry
out a check on one of these to gain a clearer picture of its potential profitability.
Which one of the following frameworks might you apply to structure your thinking for this
purpose?
Your answer (in bold):
A.
B.
C.
D.
A 'competitive forces' analysis.
A 'PEST' analysis.
An analysis of your company's business system.
A 'competitive advantage' analysis of your strategic assets,
capabilities and relationships.
Incorrect
Correct Answer: A. The purpose of analysing the strength of the
combined power of the competitive forces that bear on an industry or
market segment is to first, assess how much pressure they will exert and
hence squeeze profits on companies trying to operate in that industry or
market. Having assessed that, a company should next consider what it
could do to push back against these forces to see if the market is viable
for it. The other frameworks only provide you with elements of the
information you need.
3. On discovering a breach of professional or other guidance by another member,
and deciding the nature of the breach is such that action is called for, a member
must, in the first instance...
Your answer (in bold):
A.
B.
C.
D.
consider discussing the apparent breach with the other member.
report the matter to the Professional Affairs Board.
report the matter to the other member's manager.
consider discussing the apparent breach with his / her own
manager.
Incorrect
The correct answer is A. An explanation can be found in Section 4 of the
PCS
4. You apply for a job as the PA to the Managing Director of Maximus Limited and
are interviewed for the job by the Managing Director himself. Samuel Brown (the
Personnel Director) later writes to you to offer you the job and, when you ring up
to ask for some further details on pay and holiday entitlement, your queries are
answered by the Human Resources Manager (Heather Freeman). You decide to
accept the job.
Who is your employer?
Your answer (in bold):
A.
B.
C.
D.
The Managing Director
Samuel Brown
Heather Freeman
Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are not
acting in their own capacity but as agents of the company.
5. You run the office cleaning division at International GlobalCorp, and you are
setting your group's objectives. IGC's corporate goal is to grow market share in
all its businesses.
Which of the following objectives for your area directly supports the corporate
objective?
Your answer (in bold):
A.
B.
C.
D.
Increase the number of active customers by 15%
Reduce costs of purchased cleaning products by 10%
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute
to the ability to grow market share, answer A is the only one that directly
results in increased share (assuming that the market as a whole grows
less than 15%!).
6. One of the actions you should take to develop your business awareness is to
read as much as you can about the financial services industry in the national
press, on websites, in financial magazines, and in The Actuary.
How much time should you commit yourself to spending on a regular basis?
Your answer (in bold):
A.
B.
C.
D.
1 hour per day.
1 hour per week.
1 hour per month.
1 hour per quarter.
Incorrect
Answer B is correct. One hour per day would tend to be too high a
proportion of a working day. One hour per month or per quarter would be
better than nothing but not sufficient to build up a clear enough picture of
what is going on in the financial services industry.
7. With regard to publicity, which of the following statements is incorrect?
Your answer (in bold):
A. Members may publicise the professional services offered
B. Members must ensure their publicity is appropriate to the profession
C. Members speaking in public must make it clear that their
presentation has the backing of the profession
D. Members who have any doubts about material they wish to publicise
should seek advice from the professional body
Correct
The correct answer is C. An explanation can be found in Section 9 of the
PCS
8. Jane agrees to buy goods from Ben for £1,000, payment on delivery. Ben
refuses to deliver the goods. In fact he has sold them elsewhere for £1,800. Jane
can buy similar goods for £1,500.
Assuming the court uses the usual method of assessing damages in contract,
which one of the following amounts is Jane likely to get?
Your answer (in bold):
A.
B.
C.
D.
Nominal damages only.
£800
£500
£1,500
Correct
The correct answer is C. Jane would have paid £1,000 but because of
Ben's breach she now has to pay £1,500 for similar goods. Therefore she
needs £500 to put her in the position as if her contract with Ben had been
properly performed.
9. The main purpose of a business strategy is...
Your answer (in bold):
A.
B.
C.
D.
to follow every opportunity available.
to determine how best to use management talent.
to decide on the best way to promote the business to customers.
to maximise the value of the company.
Correct
The answer is D in accordance with the 'Creating and capturing value'
tutorial
10. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty
scheme you run for customers.
B. Pledge to protect the environment by increasing new policies and
processes.
C. Leverage distribution network more effectively by establishing
shops on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Incorrect
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic,
and B is non-strategic and non financial (although often it is difficult to
draw a clear-cut line between profits and social responsibility). D is
financial - it is a specific goal with specific timeframe.
11. Many pension schemes are currently underfunded. Which of these are two of
the main reasons for this?
Your answer (in bold):
A.
B.
C.
D.
People are living longer.
Asset values have fallen.
Employers have taken long contribution holidays.
More people than expected have been retiring early.
Incorrect
Answers A and B are correct, and these reasons are often being stated in
the media. Contribution rates and therefore the scope for periods of
paying nil or low contributions have been determined on best estimates of
future experience and the significant falls in asset values since 2000, in
particular, could not have been foreseen. Therefore, in this context, it
cannot be claimed that a main reason is contribution holidays. Although
early retirements may have been running at a higher level than assumed,
and may have proved to be under funded, this is not a main reason given
for many schemes being under funded.
12. Errors have been occurring quite often in the work of actuarial students in
your company.
Which of the following control processes has an apparent weakness, based on the
information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the work
can be followed by another person who has the appropriate level of
knowledge and skills.
B. Documentation is in place describing how the bases and assumptions
adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry out
their checks very quickly in order to avoid missing deadlines.
D. Checks are carried out on the computer systems that produce many of
the calculations
Correct
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems
that produce calculations. The latter would only be a problem if these
checks had not been carried out rigorously. The weakness in the controls
described would be in the peer review process if the peer reviewer is not
given sufficient time to carry out the peer review in sufficient detail. The
peer reviewer is as responsible as the originator. If you sign, you are
responsible.
13. John, Andrew and Robert have been in partnership together for 3 years.
They have no partnership agreement. John has recently been declared bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership without
John who will have to retire."
Your answer (in bold):
A. True
B. False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under
s33 Partnership Act 1890. In any event there is no right of retirement in
the Partnership Act 1890.
14. If you were classifying a company in terms of how it made decisions when
responding to changing market conditions, which one of the following
descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market
position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed
analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen
to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal
market share from them. They have resources they can use to attack
competitors. Sometimes their relative strength can make them over
confident. D - describes Fast Follower organisations who are less happy
with high risk than Innovators, but can often achieve greater returns and
visibility than Innovators gain. B - describes a combination of Defenders,
Innovators and Fast Followers. C - describes Innovators.
15. Synthesis is the process of combining two or more facts to produce other
facts, hypotheses or questions. There are two kinds of synthesis.
Which one of the following are they?
Your answer (in bold):
A.
B.
C.
D.
Negative and deductive.
Creative and corrective.
Corrective and negative.
Deductive and creative.
Correct
The answer is D in accordance with the 'Synthesis' tutorial
16. Which of these statements is not correct?
Your answer (in bold):
A. The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct.
B. The PCS are comprehensive and all members must comply with
each section.
C. Members must comply with the spirit and letter of the PCS.
D. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
17. You see a vase in an antique shop. You think it is very rare and worth far
more than the price asked. The owner of the shop hears you telling your friend
your views about the vase but does not say anything. You buy the vase but it
turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
A. The owner of the shop has made a misrepresentation as she should have
corrected your mistake.
B. The owner of the shop has made a misrepresentation as she was under a
duty to disclose all material facts.
C. The owner of the shop has made a negligent misstatement.
D. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a
misrepresentation or a negligent misstatement as there was no false
statement.
18. One form of research used with consumers to explore their needs is called
Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct
statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value
of different attributes of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the
product or service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A Conjoint means 'CONsiderJOINTly and is devised to
help people explain what trade-offs they would make between attributes.
19. When considering financial and non-financial objectives, which of the
following would be true?
Your answer (in bold):
A. Non-financial objectives are often just as important as financial
ones, and they can be a lot less obvious.
B. Financial objectives will always be more important than non-financial
ones, and are usually more obvious.
C. Non-financial objectives will usually be more obvious than financial ones
and will be better understood by the staff.
D. Financial objectives are key to the success of a company so non-financial
ones are not usually relevant.
Correct
The answer is A in accordance with the 'Non-financial objectives' tutorial
20. If, as a result of a Disciplinary Scheme Tribunal, an actuary is fined, what is
the maximum amount he or she can be fined?
Your answer (in bold):
A.
B.
C.
D.
£5,000
£20,000
£50,000
there is no limit.
Correct
Answer D is correct because in theory there is no limit as to how much a
guilty actuary could be fined though in practice the amount must be in
proportion to the misdemeanor. This will be based on the panel's
judgement and at its discretion.
21. You have been asked to define the competitive positioning for your business
unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component of the
business unit's competitive position?
Your answer (in bold):
A.
B.
C.
D.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of
either product/service, target customers, or channels, all of which are
competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
22. We see the term "objects", as in "certainty of objects". Which one of the
following most clearly describes the meaning of the term in relation to trusts?
Your answer (in bold):
A. The trustees.
B. The reasons or motives behind the settlor's decision to create a trust.
C. The beneficiaries, or, in the case of a discretionary trust, the potential
beneficiaries.
D. The chattels, or things, the settlor is making into trust property.
Incorrect
The correct answer is C. The term “objects” equates to the (already
chosen) beneficiaries of a fixed trust, and the (potentially chosen)
beneficiaries of a discretionary trust.
23. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics
relating to your company would it normally be safe for you to talk about without
the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking about
B, C or D and you might be contravening your employment contract by
doing so. Therefore, A is the correct answer because there is no reason
why you should not talk about information that would be available in the
market place even if it could be quite hard for someone else to find that
information.
24. One source of competitive advantage is 'strategic relationships'. If you were
running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a
sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from
a diverse range of industries.
C. The only parent company in the agency world whose policy is to invest
centrally in building capabilities it then shares across business units.
D. An award-winning creative team.
Incorrect
Correct Answer: C While all the options will contribute to a successful
business, it is option C that is said to be an exception, is harder to copy
than the other options.
25. If you have a major surprise to impart to your colleagues concerning the
business, the way NOT to communicate this would be...
Your answer (in bold):
A. at the next team meeting with your colleagues.
B. by talking to key influencers well before the meeting.
C. by checking your ideas with selected colleagues at least a week before
the meeting.
D. by pre-selling your ideas to individual colleagues in the run-up to
the meeting.
Incorrect
The answer is A in accordance with the 'No surprises' tutorial.
26. Which of the following described in options A, B, C or D is not in itself a
ground for referral under the disciplinary procedures?
1 = material breach of the PCS
2 = material breach of a Guidance Note classified as Recommended Practice
3 = material breach of a Guidance Note classified as Practice Standard
Your answer (in bold):
A.
B.
C.
D.
1 only.
2 only.
3 only.
None of them.
Correct
The correct answer is B. An explanation can be found in Section 4 of the
PCS
27. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A.
B.
C.
D.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend
to involve little structure or formality, high risk-taking, and the decisionmaking power concentrated in a few people. In a hierarchy (B) you would
expect a big decision to go through a more formal process of approval,
and in a matrix organisation (C) you would expect more people to be
involved in the process bringing their own views and expertise.
28. ABC Ltd were asked to provide a reference for their former employee, Jane,
by XYZ Ltd who had provisionally offered her a job. Unfortunately, when
preparing the reference Jane's record was confused with another employee's
record. The reference given was completely inaccurate, stating that Jane was a
bad time-keeper. Jane was not offered the job as a result of the information
contained in the reference.
Which one of the following statements correctly identifies Jane's position?
Your answer (in bold):
A. Jane cannot bring a claim against ABC Ltd as she did not ask for the
reference and therefore no duty is owed to her.
B. Jane has suffered no loss and cannot bring a claim.
C. Jane may bring a claim against XYZ Ltd for relying on an inaccurate
reference.
D. Jane may bring a claim against ABC Ltd as a former employer does
owe a duty to a former employee to prepare the reference without
negligence.
Correct
The correct answer is D. A former employer does owe a duty to a former
employee to prepare the reference without negligence. See the case of
Spring v Guardian Assurance [1994].
21 Quiz Feedback
21.1
View Instructions
You got 24 out of 28 answers correct (86%)
Congratulations! You have passed the Business Awareness Module test.
1. One source of competitive advantage is 'strategic relationships'. If you were
running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a
sustainable competitive advantage.
Your answer (in bold):
E. Client business is built into fixed term contracts of one or two years.
F. Extensive selection of testimonials from satisfied customers from
a diverse range of industries.
G. The only parent company in the agency world whose policy is to invest
centrally in building capabilities it then shares across business units.
H. An award-winning creative team.
Incorrect
Correct Answer: C While all the options will contribute to a successful
business, it is option C that is said to be an exception, is harder to copy
than the other options.
2. Which one of the following lists contains items that are all included in
Maslow's hierarchy of needs?
Your answer (in bold):
E.
F.
G.
H.
Self-actualisation; financial; social
Safety; psychological; esteem
Working; physiological; financial
Social; safety; esteem
Incorrect
The answer is D in accordance with the 'Maslow's hierarchy of needs'.
Explore item under the 'Identifying consumer needs' tutorial.
3. Which of these statements is not correct?
Your answer (in bold):
E. The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct.
F. The PCS are comprehensive and all members must comply with
each section.
G. Members must comply with the spirit and letter of the PCS.
H. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
4. Which one or more of the following claims can companies bring against third
parties who have received company property in breach of a director's fiduciary
duties?
Your answer (in bold):
D. Recipient liability (constructive trusteeship).
E. Restitution for unjust enrichment.
F. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the
equitable claim of a constructive trusteeship and use equitable tracing in
connection with a proprietary claim because the director owed the
company fiduciary duties. The company owns legal title to its assets and
can therefore claim restitution.
5. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
F. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
G. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
H. Two or more functions are critical to the company's success.
I. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
J. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A
central power source is usually associated with young companies, or
those where the founder has not wished to expand greatly. B - describes
a characteristic of a hierarchical organisation. C - is a characteristic of
matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision
makers cannot continue and no successors have been identified.
6. Many pension schemes are currently underfunded. Which of these are two of
the main reasons for this?
Your answer (in bold):
E.
F.
G.
H.
People are living longer.
Asset values have fallen.
Employers have taken long contribution holidays.
More people than expected have been retiring early.
Correct
Answers A and B are correct, and these reasons are often being stated
in the media. Contribution rates and therefore the scope for periods of
paying nil or low contributions have been determined on best estimates
of future experience and the significant falls in asset values since 2000,
in particular, could not have been foreseen. Therefore, in this context, it
cannot be claimed that a main reason is contribution holidays. Although
early retirements may have been running at a higher level than assumed,
and may have proved to be under funded, this is not a main reason given
for many schemes being under funded.
7. Clients are entitled to assume that advice given by a member is unaffected
by interests other than those of the client, taking account of...
Your answer (in bold):
E. any identifiable duty of care of the client in respect of a third
party.
F. any prior work done for the client.
G. the level of fees payable by the client.
H. the other clients for whom the member is working simultaneously.
Correct
The correct answer is A. An explanation can be found in Section 5 of the
PCS.
8. You apply for a job as the PA to the Managing Director of Maximus Limited
and are interviewed for the job by the Managing Director himself. Samuel Brown
(the Personnel Director) later writes to you to offer you the job and, when you
ring up to ask for some further details on pay and holiday entitlement, your
queries are answered by the Human Resources Manager (Heather Freeman).
You decide to accept the job.
Who is your employer?
Your answer (in bold):
E. The Managing Director
F. Samuel Brown
G. Heather Freeman
H. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are
not acting in their own capacity but as agents of the company.
9. In order to achieve a business plan, strategy and tactics must be considered.
Tactics is defined as...
Your answer (in bold):
E.
F.
G.
H.
the work undertaken by customer-facing staff
the human resources needed for the plan
the means by which the plan is implemented
the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore
diagram under the 'Creating and capturing value' tutorial
10. You run the office cleaning division at International GlobalCorp, and you are
setting your group's objectives. IGC's corporate goal is to grow market share in
all its businesses.
Which of the following objectives for your area directly supports the corporate
objective?
Your answer (in bold):
E.
F.
G.
H.
Increase the number of active customers by 15%
Reduce costs of purchased cleaning products by 10%
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute
to the ability to grow market share, answer A is the only one that directly
results in increased share (assuming that the market as a whole grows
less than 15%!).
11. There are certain roles for actuaries that are 'reserved' solely for them.
These are roles laid down by statute that only an actuary can carry out.
Which two of the following are not statutory roles reserved for actuaries only?
Your answer (in bold):
F.
G.
H.
I.
Scheme Actuary (pensions).
With Profits Actuary (life insurance).
Reserving actuary (general insurance).
Lloyd's Syndicate Actuary (Lloyd's of London market).
J.
Appointed Actuary (life insurance).
Correct
Answers C and E are correct. Although the Morris Review has
recommended that the FSA should require a general insurer to take
advice from an approved person regarding risk assessment and the
valuation of liabilities, this approved person would not have to be an
actuary (C). The Appointed Actuary role was a statutory one until 31
December 2004 when it was replaced by an Actuarial Function Holder
and a With Profits Actuary (E). A, B and D are all statutory roles.
12. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics
relating to your company would it normally be safe for you to talk about without
the risk of divulging anything confidential?
Your answer (in bold):
E. Commercial information that would be available in the market
place.
F. Product development plans.
G. Results of recent internal mortality investigations.
H. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking
about B, C or D and you might be contravening your employment
contract by doing so. Therefore, A is the correct answer because there is
no reason why you should not talk about information that would be
available in the market place even if it could be quite hard for someone
else to find that information.
13. Jane agrees to buy goods from Ben for £1,000, payment on delivery. Ben
refuses to deliver the goods. In fact he has sold them elsewhere for £1,800.
Jane can buy similar goods for £1,500.
Assuming the court uses the usual method of assessing damages in contract,
which one of the following amounts is Jane likely to get?
Your answer (in bold):
E.
F.
G.
H.
Nominal damages only.
£800
£500
£1,500
Correct
The correct answer is C. Jane would have paid £1,000 but because of
Ben's breach she now has to pay £1,500 for similar goods. Therefore
she needs £500 to put her in the position as if her contract with Ben had
been properly performed.
14. You are the marketing director for Svenson, a technology manufacturer. You
have just introduced a new 'mobile entertainment' device, which will offer users
the opportunity to play videos, take digital photographs, send emails and text
messages, play music and communicate via telephone. It has state-of-the-art
features, allowing compatibility with all the top service providers. The Svenson
brand is relatively new, yet it already has a reputation for being innovative, cool
and funky. The Svenson 'mini entertainer' is priced at $600. You now have
information from your Customer Management team showing the profiles of your
key customer segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
D. Gadgets Galore - 27% of your base and rising slowly. Good
disposable income, increasingly mobile for work and leisure, take
huge interest in gadget advertising, and love the funky status
they acquire with Svenson products.
E. Youth of Today - 30% of your base, and rising fast. Reasonable
disposable income, buy on functionality, willing to pay for whichever
technology combines all the functions they need and fits their mobile
lifestyle
F. Family First - the largest segment (33% of your base), although it has
shrunk over the last year. Mobility based around supporting the family.
High income restricted by outlays on children and aged parents. Willing
to purchase any technology proven to make their lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable
segment. Segment size is reasonable, and it is growing, disposable
income is high (for what is quite a reasonably expensive, one-off
purchase) and there is strong desire for the product. It is an ideal fit with
Svenson's advantages in innovation, plus its brand reputation - gadget
lovers matched with funky gadget provider. Youth of Today (B) is a
reasonable-sized, growing segment. Svenson's advantages match their
needs, but the segment is more attracted by generic functionality than
the Svenson brand, making it less attractive to the company. Family First
(C) is less attractive. Although this segment is large, the profile suggests
people in this segment are more likely to pay for features that provide
convenience rather than pure entertainment. Although they have high
income, their profile suggests they are likely to have priorities for
spending rather than a high-priced entertainment item.
15. Select the one statement below that correctly defines the difference
between deductive synthesis and creative synthesis?
Your answer (in bold):
E. In deductive synthesis the new fact is implicit in the old ones, while in
creative synthesis the new fact is explicit in the old ones.
F. In deductive synthesis facts are found by building the data up from an
hypothesis, while in creative synthesis facts are created by some
additional insight.
G. In deductive synthesis facts are found by reducing the data down
to the fact, while in creative synthesis facts are created by some
additional insight.
H. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the
outcome, while in creative synthesis facts are not relevant to the
outcome.
16. In criticising another member's work, care must be taken to acknowledge
that...
Your answer (in bold):
E. there can only ever be one correct set of professional opinions.
F. special circumstances may exist in any particular case.
G. the other member may work for a large firm with its own firm-specific
professional guidance.
H. members who have provided advice on a particular assignment for many
years are extremely unlikely to be wrong
Correct
The correct answer is B. An explanation can be found in Section 8 of the
PCS
17. Harold, Margaret and Arthur set up a hat shop together 10 years ago. They
have no formal partnership agreement. On 13 August, without consulting the
others, Arthur made an oral contract with U Bend Limited, builders' merchants,
for the purchase of an expensive Italian porcelain bathroom suite. Arthur
confirmed his order and sent out delivery instructions on the firm's headed
notepaper several days later. On 12 September Margaret left the firm and was
replaced by Neil. U Bend Limited has not been paid for the bathroom suite and
wants to know who is liable for the debt.
Which one of the following is correct?
Your answer (in bold):
E.
F.
G.
H.
Harold, Margaret and Arthur.
Harold, Arthur and Neil.
Arthur only.
Harold and Arthur.
Correct
The correct answer is C. Arthur had no actual authority and under s.5 PA
1890 can only bind the firm if the contract is for business usually carried
on by the firm. Here you would not expect a bathroom suite to be
purchased by a hat shop. It is also not clear whether U Bend Limited
knew or believed Arthur was a partner as his confirmation letter on the
firm's headed notepaper did not arrive until after the contract was
entered into.
18. All except two of the following would be appropriate criteria to test whether
a potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
F. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
G. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
H. Defendable - can you serve the segment better than competitors?
I. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
J. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in
any case eliminate interesting emerging segments.
19. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
E. Ask the right question, research the facts, decide what type of analysis is
needed.
F. Decide on the form of analysis, establish the right questions, discover
the facts.
G. Ask the right question, decide what analysis to undertake, collect
the relevant facts.
H. Discover a range of facts, identify what questions arise, conduct an
analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
20. If there is, or might be, a conflict of interest between two clients of a
member's firm, the member must...
Which of these is not correct?
Your answer (in bold):
E. advise the clients at the earliest opportunity.
F. decide which client to advise and must inform the other client
that he / she is unable to provide advice.
G. disclose, in the advice given to one or both of the clients that the advice
is, or will be, influenced by interests other than those of the client.
H. decide whether it would be improper for the member to give advice to
one or both of the clients.
Correct
The correct answer is B. An explanation can be found in Section 5 of the
PCS
21. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
F. Devise a new package of benefits for the 'motorist's club' loyalty scheme
you run for customers.
G. Pledge to protect the environment by increasing new policies and
processes.
H. Leverage distribution network more effectively by establishing
shops on sites.
I. Increase return on investment by 5% over 2 years.
J. Increase share of national market by investing to update
facilities.
Correct
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic,
and B is non-strategic and non financial (although often it is difficult to
draw a clear-cut line between profits and social responsibility). D is
financial - it is a specific goal with specific timeframe.
22. ABC Ltd were asked to provide a reference for their former employee, Jane,
by XYZ Ltd who had provisionally offered her a job. Unfortunately, when
preparing the reference Jane's record was confused with another employee's
record. The reference given was completely inaccurate, stating that Jane was a
bad time-keeper. Jane was not offered the job as a result of the information
contained in the reference.
Which one of the following statements correctly identifies Jane's position?
Your answer (in bold):
E. Jane cannot bring a claim against ABC Ltd as she did not ask for the
reference and therefore no duty is owed to her.
F. Jane has suffered no loss and cannot bring a claim.
G. Jane may bring a claim against XYZ Ltd for relying on an inaccurate
reference.
H. Jane may bring a claim against ABC Ltd as a former employer
does owe a duty to a former employee to prepare the reference
without negligence.
Correct
The correct answer is D. A former employer does owe a duty to a former
employee to prepare the reference without negligence. See the case of
Spring v Guardian Assurance [1994].
23. You may be offered a gift by a company with whom you, or your company,
has a business / professional relationship. In deciding whether to accept the gift,
which of the following would not be true?
Your answer (in bold):
E. You must consider carefully whether acceptance of a gift could in any
way influence your judgement.
F. You must find out what your company's policy is on gifts.
G. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a particular
piece of work.
H. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the
termination of a particular task of some importance, is less likely to be
objectionable than a series of gifts implying the possibility of undue
influence. The other alternatives, A, B and D, are all true. An example
under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some
standing.
24. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
E. A map of all the businesses operating in a strategic set i.e. targeting the
same market segment.
F. A system showing the industry competitors and all their suppliers.
G. A technological map used to capture all the technology links used within
a company.
H. A model of the primary and support functions of a business with
their key activities.
Correct
D is correct. It is often used to map functions and activities within a
company to establish which create value and which create costs; or to
establish how activities are interlinked as a means of improving
processes and competence.
25. When considering financial and non-financial objectives, which of the
following would be true?
Your answer (in bold):
E. Non-financial objectives are often just as important as financial
ones, and they can be a lot less obvious.
F. Financial objectives will always be more important than non-financial
ones, and are usually more obvious.
G. Non-financial objectives will usually be more obvious than financial ones
and will be better understood by the staff.
H. Financial objectives are key to the success of a company so non-financial
ones are not usually relevant.
Correct
The answer is A in accordance with the 'Non-financial objectives' tutorial
26. If work which a member considers necessary is precluded by cost or time
constraints the member should normally...
Your answer (in bold):
E. perform only that portion of the work permitted by cost and time, and
say nothing further.
F. recommend that the work is undertaken by another firm whose fees are
lower.
G. either decline to act or qualify the advice given.
H. refer the matter to the PAB.
Correct
The correct answer is C. An explanation can be found in Section 2 of the
PCS
27. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
D. What functional capabilities should we build and leverage to
meet the company's needs?
E. How should the business compete?
F. Which business/es should we be in?
Incorrect
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to
functional strategy and C relates to corporate strategy.
28. Patricia Smith is a director of Smithsons Limited ('the Company').
Which two of the following are correct?
Your answer (in bold):
D. Patricia owes a duty to the Company.
E. Patricia owes a duty to the shareholders of the Company.
F. Patricia must have regard to the interests of the employees of the
Company.
Incorrect
The correct answer is A and C. As a fiduciary, Patricia owes a duty to the
Company and not to the shareholders. In addition, s 309(2) CA 85
imposes an obligation on the directors to have regard to the interests of
the employees of the Company.
22 Quiz Feedback
22.1
View Instructions
You got 23 out of 28 answers correct (82%)
Congratulations! You have passed the Business Awareness Module test.
1. You are considering opening a record store in a major shopping area. As
there are other record stores located nearby, you will have to find sources of
competitive advantage.
Only one of the following would be a real source of competitive advantage which is it?
Your answer (in bold):
E.
F.
G.
H.
An award-winning advertising campaign
Exclusive promotional relationship with a major record label.
An unusual store design and internal layout.
Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage,
built on a strategic relationship that cannot be copied or imitated. All of
the other answers represent something that is easy to imitate, and are
not built upon superior assets, distinctive capabilities or strategic
relationships.
2. If you have a major surprise to impart to your colleagues concerning the
business, the way NOT to communicate this would be...
Your answer (in bold):
E. at the next team meeting with your colleagues.
F. by talking to key influencers well before the meeting.
G. by checking your ideas with selected colleagues at least a week before
the meeting.
H. by pre-selling your ideas to individual colleagues in the run-up to the
meeting.
Correct
The answer is A in accordance with the 'No surprises' tutorial.
3. When a member who is invited to take up an appointment to provide nonreserved advice is aware that the prospective client has been involved in a
dispute with a previous adviser, the member..
Your answer (in bold):
E. must always consult the previous adviser before accepting the
appointment.
F. must always discuss the matter with the prospective client
before accepting the appointment.
G. should decline the appointment.
H. should consider whether to consult the previous adviser or the
prospective client before accepting the appointment.
Incorrect
The correct answer is D. An explanation can be found in Section 7 of the
PCS
4. Charles is the purchasing director of Westron Limited. He recently purchased
some chemicals from Joe Sullivan, a sales manager for Chems Limited. The
chemicals that have been delivered are the wrong concentration and unusable
by Westron Limited. Chems Limited is refusing to replace them. If proceedings
are commenced, who would be the parties to the action?
Choose the two correct parties.
Your answer (in bold):
E.
F.
G.
H.
Charles
Joe Sullivan
Westron Limited
Chems Limited
Correct
Answers C and D are correct. The contract is made by Charles and Joe
as agents for, and signing on behalf of, the two companies. Therefore,
the companies would be the parties to any legal action.
5. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
F. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
G. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
H. Two or more functions are critical to the company's success.
I. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
J. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A
central power source is usually associated with young companies, or
those where the founder has not wished to expand greatly. B - describes
a characteristic of a hierarchical organisation. C - is a characteristic of
matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision
makers cannot continue and no successors have been identified.
6. Which one of the following would not be a current issue for general insurance
companies?
Your answer (in bold):
E.
F.
G.
H.
Capital adequacy.
Increasing longevity.
Treating customers fairly.
Claims compensation culture.
Correct
Answer B is correct because increasing longevity is a current issue for
life insurance companies and pension schemes, particularly when annual
or monthly benefits are being paid out for the rest of a person's life.
However, this would not be an issue for a general insurance company
that does not offer benefits related to a person's lifetime. Answers A, C
and D are all current issues for a general insurance company.
7. Which of these statements is not correct?
Your answer (in bold):
E. The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct.
F. The PCS are comprehensive and all members must comply with
each section.
G. Members must comply with the spirit and letter of the PCS.
H. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
8. Peter owes Dent & Co £2,000. Peter asks Dent & Co if they will accept £1,500
in full settlement. Dent & Co agree and Peter hands over the £1,500.
Is the following statement false or true? Dent & Co cannot sue Peter for the
balance as promissory estoppel can only be used as a defence.
Your answer (in bold):
C. False
D. True
Correct
The correct answer is A. Dent & Co. will not be relying on promissory
estoppel. Dent & Co. can sue for the balance relying on the contract and
the rule in Foakes v Beer - it is Peter who may then try to rely on
promissory estoppel as a defence.
9.
Your company is assessing whether to enter new markets and has asked you to carry
out a check on one of these to gain a clearer picture of its potential profitability.
Which one of the following frameworks might you apply to structure your thinking for
this purpose?
Your answer (in bold):
E.
F.
G.
H.
A 'competitive forces' analysis.
A 'PEST' analysis.
An analysis of your company's business system.
A 'competitive advantage' analysis of your strategic assets, capabilities
and relationships.
Correct
Correct Answer: A. The purpose of analysing the strength of the
combined power of the competitive forces that bear on an industry or
market segment is to first, assess how much pressure they will exert and
hence squeeze profits on companies trying to operate in that industry or
market. Having assessed that, a company should next consider what it
could do to push back against these forces to see if the market is viable
for it. The other frameworks only provide you with elements of the
information you need.
10. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
E.
F.
G.
H.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and
tend to involve little structure or formality, high risk-taking, and the
decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of
approval, and in a matrix organisation (C) you would expect more people
to be involved in the process bringing their own views and expertise.
11. The Actuarial Profession has, in the past, regulated itself by setting ethical
standards, administering its education system and CPD, monitoring compliance
with professional standards, and administering disciplinary procedures.
Which one of the following will happen in the future?
Your answer (in bold):
E. The Profession will continue to self-regulate in this way.
F. The Professional Oversight Board will oversee The Actuarial
Profession's role in these matters.
G. The FSA will regulate for these matters.
H. The Morris Review team will spend more time considering these matters
and will make recommendations in due course.
Correct
Answer B is correct and you are recommended to read at least the
Forward and the Executive Summary of the Morris Review. You will find
the Review on the Profession's website.
12. You may be offered a gift by a company with whom you, or your company,
has a business / professional relationship. In deciding whether to accept the gift,
which of the following would not be true?
Your answer (in bold):
E. You must consider carefully whether acceptance of a gift could in any
way influence your judgement.
F. You must find out what your company's policy is on gifts.
G. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a particular
piece of work.
H. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the
termination of a particular task of some importance, is less likely to be
objectionable than a series of gifts implying the possibility of undue
influence. The other alternatives, A, B and D, are all true. An example
under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some
standing.
13. Muriel, Molly and Marilyn have been in partnership since 1990. They all work
full-time for the business. They share profits equally and have no relevant
express agreement between them.
Which one of the following is correct?
Your answer (in bold):
E. If Molly leaves the business she could be prevented from setting up a
competing business.
F. Each partner is entitled to receive a salary in addition to her share of the
profits.
G. Muriel and Molly together could expel Marilyn.
H. Any of the 3 partners could dissolve the partnership at any time without
giving a reason.
Incorrect
The correct answer is D. Section 26 Partnership Act 1890 provides that if
there is no fixed term any partner may dissolve the partnership by giving
notice to the others. Section 30 Partnership Act 1890 only provides for
restrictions on competition whilst Molly is still a partner. Section 24(6)
Partnership Act 1890 provides that a partner is not entitled to a salary.
Section 25 Partnership Act 1890 provides there is no power to expel
unless all the partners (including Marilyn) agree.
14. All except two of the following would be appropriate criteria to test whether
a potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
F. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
G. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
H. Defendable - can you serve the segment better than competitors?
I. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
J. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in
any case eliminate interesting emerging segments.
15. The main purpose of a business strategy is...
Your answer (in bold):
E.
F.
G.
H.
Correct
to follow every opportunity available.
to determine how best to use management talent.
to decide on the best way to promote the business to customers.
to maximise the value of the company.
The answer is D in accordance with the 'Creating and capturing value'
tutorial
16. Which of the options A, B, C or D is incorrect?
Confidential information acquired by a member in the course of professional
work...
Your answer (in bold):
E. should never be disclosed unless consent has been received from the
member's client or employer.
F. should not normally be disclosed unless required to do so by statutory
authority.
G. should not normally be disclosed unless it is in the public interest to do
so.
H. should not normally be disclosed unless required to do so by
judicial authority.
Incorrect
The correct answer is A. An explanation can be found in Section 2 of the
PCS
17. Jane agrees to buy goods from Ben for £1,000, payment on delivery. Ben
refuses to deliver the goods. In fact he has sold them elsewhere for £1,800.
Jane can buy similar goods for £1,500.
Assuming the court uses the usual method of assessing damages in contract,
which one of the following amounts is Jane likely to get?
Your answer (in bold):
E.
F.
G.
H.
Nominal damages only.
£800
£500
£1,500
Correct
The correct answer is C. Jane would have paid £1,000 but because of
Ben's breach she now has to pay £1,500 for similar goods. Therefore
she needs £500 to put her in the position as if her contract with Ben had
been properly performed.
18. You are the new Managing Director of Korsan, a city-based chain of
medium-priced hotels catering primarily for late-night business travellers. Trade
is reasonable, and you have a high level of repeat business (and thus good
projected future occupancy), but costs seem high and profits slim, particularly
for the hotel's restaurant. It serves few customers at night, although the chefs
have done innovative things to the menus to increase their appeal. A rival chain
- Luxuria - is also setting up its high-class hotels for discerning travellers in the
same cities, and your board is panicking that significant business will be lost.
They present some recent research showing that customers' core needs are a
good night's sleep and a convenient location. They also present a large dossier
of suggestions for maximising the value of the business.
Which one would you implement?
Your answer (in bold):
E. Refurbish the hotel, to attract some of Luxuria's target audience
(discerning travellers) to Korsan.
F. Open your restaurant to non-hotel guests, to increase the level of
potential customers for Korsan.
G. Invest in a major marketing campaign to promote the location
benefits of Korsan to new customers.
H. Reduce the restaurant to breakfast-only, setting up a relationship with a
city-based restaurant for your customers to have discounted evening
meals.
Incorrect
Answer D is correct. By only serving the needs most desired by
customers (sleep and location) Korsan can reduce unnecessary
overheads and increase value captured. The deal with a city restaurant
will also be attractive to those customers wanting to eat in the evening.
Korsan's target audience is different to Luxuria, and there is no evidence
to suggest that Luxuria's target audience would be attracted, even with a
refurbished hotel. A - could be a costly error. B - would require
investment by way of a marketing campaign to get it off the ground, and
there is no guarantee that non-hotel customers would be attracted.
Korsan has high repeat business and high projected future occupancy,
so a campaign to attract new customers (C) would be wasteful.
19. You are considering investing in the car manufacturing industry, but you are
concerned about competitive forces changing the market. You've decided to
organise an analysis on the five major competitive forces acting on the industry.
Which of the following represents the five forces that you should investigate?
Your answer (in bold):
E. Product, price, people, placement, positioning. of substitute products,
F. Threat of substitute products, rivalry, supplier power, customer
power, threat of new entrants.
G. Missions, objectives, goals, strategies, objectives.
H. Access to capital, ease of integration, synergy with existing operations,
distribution channels, sustainable competitive advantages.
Correct
Answer B is correct. The other options do not represent the five
competitive forces acting on an industry.
20. If work which a member considers necessary is precluded by cost or time
constraints the member should normally...
Your answer (in bold):
E. perform only that portion of the work permitted by cost and time, and
say nothing further.
F. recommend that the work is undertaken by another firm whose fees are
lower.
G. either decline to act or qualify the advice given.
H. refer the matter to the PAB.
Correct
The correct answer is C. An explanation can be found in Section 2 of the
PCS
21. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and telephone
system to enable smarter working on the move. However, the Mobilo is not
selling as well as expected into the company's core customer segments. Recent
research has revealed that the core segments are seeking mobile efficiency as
well as enhanced status for being 'early adopters' in this market.
Which of the company's advantages would you use as the core of a campaign to
increase uptake?
Your answer (in bold):
E. The quality of its research and development function, which has
an unrivalled reputation for new ideas in mobile living/working.
F. The strong relationships the company has with its suppliers, who provide
highly-reputed technological components.
G. The speed of delivery, fulfilling orders faster than any of the competition,
to supply early adopters.
H. The Mobilo brand name, which has topped industry polls for awareness
three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency
as well as their need to be early adopters in the market. Customers will
value the highly-reputed technological components (B), but alone they do
not meet customer needs for mobile efficiency. Speed of delivery (C) will
help in getting the products to customers early, to support them being
early adopters, but it does not match their need for innovation. There is
little benefit in purely having high awareness of the company brand (D), if
this product campaign is not communicating the benefits relevant to the
target groups.
22. John, Andrew and Robert have been in partnership together for 3 years.
They have no partnership agreement. John has recently been declared
bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership without
John who will have to retire."
Your answer (in bold):
C. True
D. False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under
s33 Partnership Act 1890. In any event there is no right of retirement in
the Partnership Act 1890.
23. A father of one of your friends feels he has lost out by his insurance
company merging with another. Your friend believes you know something about
how insurance companies work and asks you to find out something for her
father. Which of the following actions would it be sensible for you to take?
Your answer (in bold):
E. Tell your friend everything you know about the merging of insurance
companies.
F. Tell your friend that her father may have been disadvantaged because a
main aim of any merger would be to benefit the shareholders rather than
the policyholders.
G. Tell your friend that you know one of the actuaries who worked on the
merger and that you will ask him to write to her father.
H. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version
of the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of
situation and remember that you are never "off duty". There will always
be a risk that what you say gets construed as expert actuarial opinion,
and may get quoted, or misquoted, by third parties. It would be
potentially very dangerous to act per A or B and not reasonable to act as
C because the actuary you know should not be expected to write to
individual policyholders - in fact his company may not allow him to.
24. The company you work for, TransGlobal Multinational Limited, is considering
entering a new market. The decision-making process has involved reviewing
other similar organisations' attempted entries, identifying successes and
failures, suggesting improvements that TransGlobal could make over
competitors' offers, and an analysis of the market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational
cultural types listed do you think TransGlobal fits within?
Your answer (in bold):
E. Defenders.
F. Innovators.
G. Fast followers.
H. Slow reactors.
Incorrect
Answer C is correct. This behaviour illustrates an organisation not willing
to take the risk of moving first, but opportunistic enough to enter where
an opportunity has appeared, and then attempt to improve upon the
market entry, process, or product introduced by the innovator.
25. In order to achieve a business plan, strategy and tactics must be
considered. Tactics is defined as...
Your answer (in bold):
E.
F.
G.
H.
the work undertaken by customer-facing staff
the human resources needed for the plan
the means by which the plan is implemented
the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore
diagram under the 'Creating and capturing value' tutorial
26. Select one option from A, B, C or D to show which members the PCS applies
to, where the categories are:
1 = a Fellow of the Institute or Faculty
2 = an associate of the Institute or Faculty
3 = a student of the Institute
4 = a Faculty student
Your answer (in bold):
E.
F.
G.
H.
only 1
1 and 2
1, 2 and 3
1, 2, 3 and 4
Correct
The correct answer is D. An explanation can be found in the Definitions
section of the PCS
27. You are an industry analyst in a venture capital company, preparing a report
for potential investors on a restaurant chain, Fervour, which is looking to expand
abroad. Fervour specialises in converting churches into restaurants, capitalising
on the architecture to create atmospheric surroundings, supported by live jazz.
The menus - created by Michelin chef Jean-Pierre Noir - are highly acclaimed in
culinary circles for their imagination and flair. Fervour looks to cater for a wide
range of clientele, offering a dining experience 'for all the senses'. While it is still
relatively unknown, it has bought the majority of unused church buildings across
the country, ready for conversion.
In trying to make the investment proposition sound as attractive as possible, it
is important that you highlight where Fervour has advantages in the
marketplace.
Which one of the following statements do you feel represents a real and
sustainable competitive advantage?
Your answer (in bold):
F. Scarce assets - not many other restaurants offer such a varied menu.
G. The Fervour brand, which could be capitalised upon outside the country.
H. Superior locations - church buildings stand out against ordinary
restaurants, and are located close to the desired audience.
I. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at
all its venues.
J. Relationships with its key suppliers - to ensure the freshest food and the
right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused
churches means that other competitors will be unable to replicate the
Fervour surroundings, making this a sustainable advantage. While the
menus are imaginative (A), they can also be copied, which means that
this advantage is difficult to sustain. The Fervour brand (B) is unknown
outside the country, so it cannot yet be exploited as an advantage. While
a website (D) is useful, it is likely that most other restaurants will also
have a website supporting their core offering, so this does not represent
an advantage. Relationships with suppliers to ensure fresh food (E) are a
necessity in this market, rather than an advantage.
28. We see the term "objects", as in "certainty of objects". Which one of the
following most clearly describes the meaning of the term in relation to trusts?
Your answer (in bold):
E. The trustees.
F. The reasons or motives behind the settlor's decision to create a trust.
G. The beneficiaries, or, in the case of a discretionary trust, the
potential beneficiaries.
H. The chattels, or things, the settlor is making into trust property.
Correct
The correct answer is C. The term “objects” equates to the (already
chosen) beneficiaries of a fixed trust, and the (potentially chosen)
beneficiaries of a discretionary trust.
23 Quiz Feedback
23.1
View Instructions
You got 20 out of 28 answers correct (71%)
Well tried. You need 75% to pass, so please read your feedback and revise
again all the material covered by the Module. You may take the test again
once at least 4 weeks has elapsed.
1. You are an industry analyst in a venture capital company, preparing a report
for potential investors on a restaurant chain, Fervour, which is looking to expand
abroad. Fervour specialises in converting churches into restaurants, capitalising
on the architecture to create atmospheric surroundings, supported by live jazz.
The menus - created by Michelin chef Jean-Pierre Noir - are highly acclaimed in
culinary circles for their imagination and flair. Fervour looks to cater for a wide
range of clientele, offering a dining experience 'for all the senses'. While it is still
relatively unknown, it has bought the majority of unused church buildings across
the country, ready for conversion.
In trying to make the investment proposition sound as attractive as possible, it is
important that you highlight where Fervour has advantages in the marketplace.
Which one of the following statements do you feel represents a real and
sustainable competitive advantage?
Your answer (in bold):
F. Scarce assets - not many other restaurants offer such a varied menu.
G. The Fervour brand, which could be capitalised upon outside the country.
H. Superior locations - church buildings stand out against ordinary
restaurants, and are located close to the desired audience.
I. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at
all its venues.
J. Relationships with its key suppliers - to ensure the freshest food and the
right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused
churches means that other competitors will be unable to replicate the
Fervour surroundings, making this a sustainable advantage. While the
menus are imaginative (A), they can also be copied, which means that
this advantage is difficult to sustain. The Fervour brand (B) is unknown
outside the country, so it cannot yet be exploited as an advantage. While
a website (D) is useful, it is likely that most other restaurants will also
have a website supporting their core offering, so this does not represent
an advantage. Relationships with suppliers to ensure fresh food (E) are a
necessity in this market, rather than an advantage.
2.
Your company is assessing whether to enter new markets and has asked you to carry
out a check on one of these to gain a clearer picture of its potential profitability.
Which one of the following frameworks might you apply to structure your thinking for this
purpose?
Your answer (in bold):
E.
F.
G.
H.
A 'competitive forces' analysis.
A 'PEST' analysis.
An analysis of your company's business system.
A 'competitive advantage' analysis of your strategic assets,
capabilities and relationships.
Incorrect
Correct Answer: A. The purpose of analysing the strength of the
combined power of the competitive forces that bear on an industry or
market segment is to first, assess how much pressure they will exert and
hence squeeze profits on companies trying to operate in that industry or
market. Having assessed that, a company should next consider what it
could do to push back against these forces to see if the market is viable
for it. The other frameworks only provide you with elements of the
information you need.
3. On discovering a breach of professional or other guidance by another member,
and deciding the nature of the breach is such that action is called for, a member
must, in the first instance...
Your answer (in bold):
E.
F.
G.
H.
consider discussing the apparent breach with the other member.
report the matter to the Professional Affairs Board.
report the matter to the other member's manager.
consider discussing the apparent breach with his / her own
manager.
Incorrect
The correct answer is A. An explanation can be found in Section 4 of the
PCS
4. You apply for a job as the PA to the Managing Director of Maximus Limited and
are interviewed for the job by the Managing Director himself. Samuel Brown (the
Personnel Director) later writes to you to offer you the job and, when you ring up
to ask for some further details on pay and holiday entitlement, your queries are
answered by the Human Resources Manager (Heather Freeman). You decide to
accept the job.
Who is your employer?
Your answer (in bold):
E.
F.
G.
H.
The Managing Director
Samuel Brown
Heather Freeman
Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of
entering into contracts, and as such is the employer. The directors are not
acting in their own capacity but as agents of the company.
5. You run the office cleaning division at International GlobalCorp, and you are
setting your group's objectives. IGC's corporate goal is to grow market share in
all its businesses.
Which of the following objectives for your area directly supports the corporate
objective?
Your answer (in bold):
E.
F.
G.
H.
Increase the number of active customers by 15%
Reduce costs of purchased cleaning products by 10%
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute
to the ability to grow market share, answer A is the only one that directly
results in increased share (assuming that the market as a whole grows
less than 15%!).
6. One of the actions you should take to develop your business awareness is to
read as much as you can about the financial services industry in the national
press, on websites, in financial magazines, and in The Actuary.
How much time should you commit yourself to spending on a regular basis?
Your answer (in bold):
E.
F.
G.
H.
1 hour per day.
1 hour per week.
1 hour per month.
1 hour per quarter.
Incorrect
Answer B is correct. One hour per day would tend to be too high a
proportion of a working day. One hour per month or per quarter would be
better than nothing but not sufficient to build up a clear enough picture of
what is going on in the financial services industry.
7. With regard to publicity, which of the following statements is incorrect?
Your answer (in bold):
E. Members may publicise the professional services offered
F. Members must ensure their publicity is appropriate to the profession
G. Members speaking in public must make it clear that their
presentation has the backing of the profession
H. Members who have any doubts about material they wish to publicise
should seek advice from the professional body
Correct
The correct answer is C. An explanation can be found in Section 9 of the
PCS
8. Jane agrees to buy goods from Ben for £1,000, payment on delivery. Ben
refuses to deliver the goods. In fact he has sold them elsewhere for £1,800. Jane
can buy similar goods for £1,500.
Assuming the court uses the usual method of assessing damages in contract,
which one of the following amounts is Jane likely to get?
Your answer (in bold):
E.
F.
G.
H.
Nominal damages only.
£800
£500
£1,500
Correct
The correct answer is C. Jane would have paid £1,000 but because of
Ben's breach she now has to pay £1,500 for similar goods. Therefore she
needs £500 to put her in the position as if her contract with Ben had been
properly performed.
9. The main purpose of a business strategy is...
Your answer (in bold):
E.
F.
G.
H.
to follow every opportunity available.
to determine how best to use management talent.
to decide on the best way to promote the business to customers.
to maximise the value of the company.
Correct
The answer is D in accordance with the 'Creating and capturing value'
tutorial
10. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
F. Devise a new package of benefits for the 'motorist's club' loyalty
scheme you run for customers.
G. Pledge to protect the environment by increasing new policies and
processes.
H. Leverage distribution network more effectively by establishing
I.
J.
shops on sites.
Increase return on investment by 5% over 2 years.
Increase share of national market by investing to update facilities.
Incorrect
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic,
and B is non-strategic and non financial (although often it is difficult to
draw a clear-cut line between profits and social responsibility). D is
financial - it is a specific goal with specific timeframe.
11. Many pension schemes are currently underfunded. Which of these are two of
the main reasons for this?
Your answer (in bold):
E.
F.
G.
H.
People are living longer.
Asset values have fallen.
Employers have taken long contribution holidays.
More people than expected have been retiring early.
Incorrect
Answers A and B are correct, and these reasons are often being stated in
the media. Contribution rates and therefore the scope for periods of
paying nil or low contributions have been determined on best estimates of
future experience and the significant falls in asset values since 2000, in
particular, could not have been foreseen. Therefore, in this context, it
cannot be claimed that a main reason is contribution holidays. Although
early retirements may have been running at a higher level than assumed,
and may have proved to be under funded, this is not a main reason given
for many schemes being under funded.
12. Errors have been occurring quite often in the work of actuarial students in
your company.
Which of the following control processes has an apparent weakness, based on the
information provided below?
Your answer (in bold):
E. There is an audit trail requirement, meaning that each step in the work
can be followed by another person who has the appropriate level of
knowledge and skills.
F. Documentation is in place describing how the bases and assumptions
adopted were determined.
G. All work is peer reviewed and the peer reviewers usually carry out
their checks very quickly in order to avoid missing deadlines.
H. Checks are carried out on the computer systems that produce many of
the calculations
Correct
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems
that produce calculations. The latter would only be a problem if these
checks had not been carried out rigorously. The weakness in the controls
described would be in the peer review process if the peer reviewer is not
given sufficient time to carry out the peer review in sufficient detail. The
peer reviewer is as responsible as the originator. If you sign, you are
responsible.
13. John, Andrew and Robert have been in partnership together for 3 years.
They have no partnership agreement. John has recently been declared bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership without
John who will have to retire."
Your answer (in bold):
C. True
D. False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under
s33 Partnership Act 1890. In any event there is no right of retirement in
the Partnership Act 1890.
14. If you were classifying a company in terms of how it made decisions when
responding to changing market conditions, which one of the following
descriptions would define a 'defender'?
Your answer (in bold):
E. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market
position.
F. Historically successful, by adopting high-risk strategies. Keen on detailed
analyses to improve ideas.
G. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen
to wait around for detailed analyses.
H. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal
market share from them. They have resources they can use to attack
competitors. Sometimes their relative strength can make them over
confident. D - describes Fast Follower organisations who are less happy
with high risk than Innovators, but can often achieve greater returns and
visibility than Innovators gain. B - describes a combination of Defenders,
Innovators and Fast Followers. C - describes Innovators.
15. Synthesis is the process of combining two or more facts to produce other
facts, hypotheses or questions. There are two kinds of synthesis.
Which one of the following are they?
Your answer (in bold):
E.
F.
G.
H.
Negative and deductive.
Creative and corrective.
Corrective and negative.
Deductive and creative.
Correct
The answer is D in accordance with the 'Synthesis' tutorial
16. Which of these statements is not correct?
Your answer (in bold):
E. The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct.
F. The PCS are comprehensive and all members must comply with
each section.
G. Members must comply with the spirit and letter of the PCS.
H. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
17. You see a vase in an antique shop. You think it is very rare and worth far
more than the price asked. The owner of the shop hears you telling your friend
your views about the vase but does not say anything. You buy the vase but it
turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
E. The owner of the shop has made a misrepresentation as she should have
corrected your mistake.
F. The owner of the shop has made a misrepresentation as she was under a
duty to disclose all material facts.
G. The owner of the shop has made a negligent misstatement.
H. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a
misrepresentation or a negligent misstatement as there was no false
statement.
18. One form of research used with consumers to explore their needs is called
Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct
statement.
Your answer (in bold):
E. To discover how they rate the importance and quantify the value
of different attributes of a product or service.
F. To find out which types of people would buy the product or service.
G. To see in what different types of circumstances people might use the
product or service.
H. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A Conjoint means 'CONsiderJOINTly and is devised to
help people explain what trade-offs they would make between attributes.
19. When considering financial and non-financial objectives, which of the
following would be true?
Your answer (in bold):
E. Non-financial objectives are often just as important as financial
ones, and they can be a lot less obvious.
F. Financial objectives will always be more important than non-financial
ones, and are usually more obvious.
G. Non-financial objectives will usually be more obvious than financial ones
and will be better understood by the staff.
H. Financial objectives are key to the success of a company so non-financial
ones are not usually relevant.
Correct
The answer is A in accordance with the 'Non-financial objectives' tutorial
20. If, as a result of a Disciplinary Scheme Tribunal, an actuary is fined, what is
the maximum amount he or she can be fined?
Your answer (in bold):
E.
F.
G.
H.
£5,000
£20,000
£50,000
there is no limit.
Correct
Answer D is correct because in theory there is no limit as to how much a
guilty actuary could be fined though in practice the amount must be in
proportion to the misdemeanor. This will be based on the panel's
judgement and at its discretion.
21. You have been asked to define the competitive positioning for your business
unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component of the
business unit's competitive position?
Your answer (in bold):
E.
F.
G.
H.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of
either product/service, target customers, or channels, all of which are
competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
22. We see the term "objects", as in "certainty of objects". Which one of the
following most clearly describes the meaning of the term in relation to trusts?
Your answer (in bold):
E. The trustees.
F. The reasons or motives behind the settlor's decision to create a trust.
G. The beneficiaries, or, in the case of a discretionary trust, the potential
beneficiaries.
H. The chattels, or things, the settlor is making into trust property.
Incorrect
The correct answer is C. The term “objects” equates to the (already
chosen) beneficiaries of a fixed trust, and the (potentially chosen)
beneficiaries of a discretionary trust.
23. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics
relating to your company would it normally be safe for you to talk about without
the risk of divulging anything confidential?
Your answer (in bold):
E. Commercial information that would be available in the market
place.
F. Product development plans.
G. Results of recent internal mortality investigations.
H. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking about
B, C or D and you might be contravening your employment contract by
doing so. Therefore, A is the correct answer because there is no reason
why you should not talk about information that would be available in the
market place even if it could be quite hard for someone else to find that
information.
24. One source of competitive advantage is 'strategic relationships'. If you were
running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a
sustainable competitive advantage.
Your answer (in bold):
E. Client business is built into fixed term contracts of one or two years.
F. Extensive selection of testimonials from satisfied customers from
a diverse range of industries.
G. The only parent company in the agency world whose policy is to invest
centrally in building capabilities it then shares across business units.
H. An award-winning creative team.
Incorrect
Correct Answer: C While all the options will contribute to a successful
business, it is option C that is said to be an exception, is harder to copy
than the other options.
25. If you have a major surprise to impart to your colleagues concerning the
business, the way NOT to communicate this would be...
Your answer (in bold):
E. at the next team meeting with your colleagues.
F. by talking to key influencers well before the meeting.
G. by checking your ideas with selected colleagues at least a week before
the meeting.
H. by pre-selling your ideas to individual colleagues in the run-up to
the meeting.
Incorrect
The answer is A in accordance with the 'No surprises' tutorial.
26. Which of the following described in options A, B, C or D is not in itself a
ground for referral under the disciplinary procedures?
1 = material breach of the PCS
2 = material breach of a Guidance Note classified as Recommended Practice
3 = material breach of a Guidance Note classified as Practice Standard
Your answer (in bold):
E.
F.
G.
H.
1 only.
2 only.
3 only.
None of them.
Correct
The correct answer is B. An explanation can be found in Section 4 of the
PCS
27. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
E.
F.
G.
H.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend
to involve little structure or formality, high risk-taking, and the decisionmaking power concentrated in a few people. In a hierarchy (B) you would
expect a big decision to go through a more formal process of approval,
and in a matrix organisation (C) you would expect more people to be
involved in the process bringing their own views and expertise.
28. ABC Ltd were asked to provide a reference for their former employee, Jane,
by XYZ Ltd who had provisionally offered her a job. Unfortunately, when
preparing the reference Jane's record was confused with another employee's
record. The reference given was completely inaccurate, stating that Jane was a
bad time-keeper. Jane was not offered the job as a result of the information
contained in the reference.
Which one of the following statements correctly identifies Jane's position?
Your answer (in bold):
E. Jane cannot bring a claim against ABC Ltd as she did not ask for the
reference and therefore no duty is owed to her.
F. Jane has suffered no loss and cannot bring a claim.
G. Jane may bring a claim against XYZ Ltd for relying on an inaccurate
reference.
H. Jane may bring a claim against ABC Ltd as a former employer does
owe a duty to a former employee to prepare the reference without
negligence.
Correct
The correct answer is D. A former employer does owe a duty to a former
employee to prepare the reference without negligence. See the case of
Spring v Guardian Assurance [1994].
24 Quiz Feedback
24.1
View Instructions
You got 23 out of 28 answers correct (82%)
Congratulations! You have passed the Business Awareness Module test.
1. If you were classifying a company in terms of how it made decisions when
responding to changing market conditions, which one of the following
descriptions would define a 'defender'?
Your answer (in bold):
E. Historically successful, but conservative, and potentially becoming
complacent. Will raise quality and cut prices to improve market
position.
F. Historically successful, by adopting high-risk strategies. Keen on detailed
analyses to improve ideas.
G. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen
to wait around for detailed analyses.
H. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with
a strong position that needs defending from others seeking to steal
market share from them. They have resources they can use to attack
competitors. Sometimes their relative strength can make them over
confident. D - describes Fast Follower organisations who are less happy
with high risk than Innovators, but can often achieve greater returns and
visibility than Innovators gain. B - describes a combination of Defenders,
Innovators and Fast Followers. C - describes Innovators.
2.
Your company is assessing whether to enter new markets and has asked you to carry
out a check on one of these to gain a clearer picture of its potential profitability.
Which one of the following frameworks might you apply to structure your thinking for this
purpose?
Your answer (in bold):
E.
F.
G.
H.
A 'competitive forces' analysis.
A 'PEST' analysis.
An analysis of your company's business system.
A 'competitive advantage' analysis of your strategic assets, capabilities
and relationships.
Correct
Correct Answer: A. The purpose of analysing the strength of the
combined power of the competitive forces that bear on an industry or
market segment is to first, assess how much pressure they will exert and
hence squeeze profits on companies trying to operate in that industry or
market. Having assessed that, a company should next consider what it
could do to push back against these forces to see if the market is viable
for it. The other frameworks only provide you with elements of the
information you need.
3. With regard to publicity, which of the following statements is incorrect?
Your answer (in bold):
E. Members may publicise the professional services offered
F. Members must ensure their publicity is appropriate to the profession
G. Members speaking in public must make it clear that their
presentation has the backing of the profession
H. Members who have any doubts about material they wish to publicise
should seek advice from the professional body
Correct
The correct answer is C. An explanation can be found in Section 9 of the
PCS
4. Nina is the sole shareholder and director of Tarvin Limited. She owns 100,000
£1 shares, all of which are fully paid. The company goes into liquidation. It has
assets of £50,000 but owes creditors £250,000.
How much will Nina be required to contribute to the company's funds? Which one
of the following is correct?
Your answer (in bold):
E.
F.
G.
H.
Nothing
£50,000
£100,000
£200,000
Correct
A is correct. A shareholder is protected by limited liability and will only be
liable to pay for the amount they have agreed to pay for their shares. Nina
has fully paid up shares and cannot be asked to contribute further funds.
5. Your 'street-style' youth-orientated fashion-house needs extra suppliers to
allow you to get a constant flow of your new designs quickly to young
customers. Based on the strengths and weaknesses of potential overseas
manufacturers listed below.
Which one would help you fulfil your strategy?
Your answer (in bold):
D. This company handles high volumes. (they've supplied identical
Government uniforms for years) It has many machinists, but is not highly
automated. It can deliver on schedule if given long lead times. Low wages
guarantee low cost per unit.
E. This small factory will take instructions electronically and transfer
data to computerised cutting machines. It can produce items
quickly, though usually in smaller batches than manufacturer A. It
produces its own designs for local markets. It has fewer, higher
paid staff than manufacturer A.
F. Company C can - and will - copy anything - they don't need many written
instructions. They make near-identical copies of design from international
fashion shows within a week, usually without the designer's permission.
They emphasise speed over quality.
Correct
Correct Answer: B Manufacturer B would be best as it seems responsive
and flexible and could offer volume by delivering smaller batches across
staggered dates, allowing orders to be adapted according to market
uptake. Staff have better conditions and their skills for original design may
be an asset. Company A's strengths appear to be in large scale, repetitive
orders. Indications are that their systems and staff may not be geared to
fast turnaround on changing requirements. Company C may present
some risks. They provide speed, but if their success is built on 'stealing'
designs, your own reputation may suffer by using them - or your own
designs could be stolen, too!
6. One of the actions you should take to develop your business awareness is to
read as much as you can about the financial services industry in the national
press, on websites, in financial magazines, and in The Actuary.
How much time should you commit yourself to spending on a regular basis?
Your answer (in bold):
E.
F.
G.
H.
1 hour per day.
1 hour per week.
1 hour per month.
1 hour per quarter.
Incorrect
Answer B is correct. One hour per day would tend to be too high a
proportion of a working day. One hour per month or per quarter would be
better than nothing but not sufficient to build up a clear enough picture of
what is going on in the financial services industry.
7. Which of the following contains a point that is not reflected by the Professional
Conduct Standards ('PCS') in the way stated?
Your answer (in bold):
E. You need to disclose a financial interest; you must have proper regard for
professional guidance; publicity that detracts from the standing of the
Profession is not allowed.
F. You must not give advice unless competent; you have an obligation to
serve the public interest; you must conform with the spirit and letter of
the PCS.
G. Your conscience must cause you to maintain the highest standards;
people must have absolute confidence in our Profession; if you breach the
PCS you may be disciplined.
H. The definition of misconduct is set out in the disciplinary scheme:
you must disclose a conflict of interest; the standing of the
Profession relies on the judgment of individual members.
Incorrect
Answer A is correct because the last point, 'publicity that detracts from the
standing of the Profession is not allowed' is not true. Such publicity would
be acceptable, in terms of the PCS, if it was in the public interest.
8. Harold, Margaret and Arthur set up a hat shop together 10 years ago. They
have no formal partnership agreement. On 13 August, without consulting the
others, Arthur made an oral contract with U Bend Limited, builders' merchants,
for the purchase of an expensive Italian porcelain bathroom suite. Arthur
confirmed his order and sent out delivery instructions on the firm's headed
notepaper several days later. On 12 September Margaret left the firm and was
replaced by Neil. U Bend Limited has not been paid for the bathroom suite and
wants to know who is liable for the debt.
Which one of the following is correct?
Your answer (in bold):
E.
F.
G.
H.
Harold, Margaret and Arthur.
Harold, Arthur and Neil.
Arthur only.
Harold and Arthur.
Correct
The correct answer is C. Arthur had no actual authority and under s.5 PA
1890 can only bind the firm if the contract is for business usually carried
on by the firm. Here you would not expect a bathroom suite to be
purchased by a hat shop. It is also not clear whether U Bend Limited
knew or believed Arthur was a partner as his confirmation letter on the
firm's headed notepaper did not arrive until after the contract was entered
into.
9. In order to achieve a business plan, strategy and tactics must be considered.
Tactics is defined as...
Your answer (in bold):
E.
F.
G.
H.
the work undertaken by customer-facing staff
the human resources needed for the plan
the means by which the plan is implemented
the competitive advantages the company will aspire to in order to achieve
its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore
diagram under the 'Creating and capturing value' tutorial
10. All except two of the following would be appropriate criteria to test whether a
potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
F. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
G. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
H. Defendable - can you serve the segment better than competitors?
I. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
J. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. E - although it is vital to have channels of communication and
distribution they do not have to be exclusive. F - a long established
segment is likely to be served already and using this criterion would in
any case eliminate interesting emerging segments.
11. The Actuarial Profession has, in the past, regulated itself by setting ethical
standards, administering its education system and CPD, monitoring compliance
with professional standards, and administering disciplinary procedures.
Which one of the following will happen in the future?
Your answer (in bold):
E. The Profession will continue to self-regulate in this way.
F. The Professional Oversight Board will oversee The Actuarial
Profession's role in these matters.
G. The FSA will regulate for these matters.
H. The Morris Review team will spend more time considering these matters
and will make recommendations in due course.
Correct
Answer B is correct and you are recommended to read at least the
Forward and the Executive Summary of the Morris Review. You will find
the Review on the Profession's website.
12. A father of one of your friends feels he has lost out by his insurance company
merging with another. Your friend believes you know something about how
insurance companies work and asks you to find out something for her father.
Which of the following actions would it be sensible for you to take?
Your answer (in bold):
E. Tell your friend everything you know about the merging of insurance
companies.
F. Tell your friend that her father may have been disadvantaged because a
main aim of any merger would be to benefit the shareholders rather than
the policyholders.
G. Tell your friend that you know one of the actuaries who worked on the
merger and that you will ask him to write to her father.
H. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version of
the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of
situation and remember that you are never "off duty". There will always be
a risk that what you say gets construed as expert actuarial opinion, and
may get quoted, or misquoted, by third parties. It would be potentially very
dangerous to act per A or B and not reasonable to act as C because the
actuary you know should not be expected to write to individual
policyholders - in fact his company may not allow him to.
13. You see a vase in an antique shop. You think it is very rare and worth far
more than the price asked. The owner of the shop hears you telling your friend
your views about the vase but does not say anything. You buy the vase but it
turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
E. The owner of the shop has made a misrepresentation as she should have
corrected your mistake.
F. The owner of the shop has made a misrepresentation as she was under a
duty to disclose all material facts.
G. The owner of the shop has made a negligent misstatement.
H. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a
misrepresentation or a negligent misstatement as there was no false
statement.
14. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
E. A complex matrix organisation.
F. A hierarchical organisation.
G. A power-based organisation.
H. A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend
to involve little structure or formality, high risk-taking, and the decisionmaking power concentrated in a few people. In a hierarchy (B) you would
expect a big decision to go through a more formal process of approval,
and in a matrix organisation (C) you would expect more people to be
involved in the process bringing their own views and expertise.
15. In maximising the value of a company, which of the following is the best
measure of value to use?
Your answer (in bold):
E.
F.
G.
H.
Annual profit.
Annual return on assets.
Net present value of future profits.
There is no one perfect measure.
Incorrect
The answer is D as there is no single measure of value in accordance
with the 'Financial objectives' tutorial, it is best to consider that specific
measures are providing information on specific aspects of the business.
16. Which of these statements is not correct?
Your answer (in bold):
E. The PCS are not exhaustive so considerable reliance is placed on the
conscience of each individual member to maintain the highest standards
of conduct.
F. The PCS are comprehensive and all members must comply with
each section.
G. Members must comply with the spirit and letter of the PCS.
H. The PCS are not comprehensive and rely on the collective conscience of
all members to maintain the highest standards of conduct.
Correct
The correct answer is B. An explanation can be found in Section 1 of the
PCS.
17. Charles is the purchasing director of Westron Limited. He recently purchased
some chemicals from Joe Sullivan, a sales manager for Chems Limited. The
chemicals that have been delivered are the wrong concentration and unusable by
Westron Limited. Chems Limited is refusing to replace them. If proceedings are
commenced, who would be the parties to the action?
Choose the two correct parties.
Your answer (in bold):
E.
F.
G.
H.
Charles
Joe Sullivan
Westron Limited
Chems Limited
Correct
Answers C and D are correct. The contract is made by Charles and Joe
as agents for, and signing on behalf of, the two companies. Therefore, the
companies would be the parties to any legal action.
18. You are considering opening a record store in a major shopping area. As
there are other record stores located nearby, you will have to find sources of
competitive advantage.
Only one of the following would be a real source of competitive advantage which is it?
Your answer (in bold):
E.
F.
G.
H.
An award-winning advertising campaign
Exclusive promotional relationship with a major record label.
An unusual store design and internal layout.
Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage,
built on a strategic relationship that cannot be copied or imitated. All of
the other answers represent something that is easy to imitate, and are not
built upon superior assets, distinctive capabilities or strategic
relationships.
19. There are four main types of external shock that are relevant to an
organisation's strategy. A PEST analysis can help think through what these
potential shocks might be, where PEST stands for...
Your answer (in bold):
E.
F.
G.
H.
Physical; economic; structural; timing
Political; external; staffing; technological
Physical; external; social; timing
Political; economic; social; technological
Correct
The answer is D in accordance with the 'Pest analysis' tutorial
20. An actuary is producing a report about an actuarial topic that has some legal
implications. The actuary has not come across these implications before.
Which of the following courses of action would probably be the most appropriate?
Your answer (in bold):
E. To research the implications by reference to legal publications and make a
personal judgement based on the findings.
F. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not come
across these implications before.
G. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
H. To make a judgement based on personal intuition but to make the report
non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and
correct. An actuary should not hesitate to obtain advice from someone
outside the Actuarial Profession if that is the best way to produce the
correct advice. Therefore, C is the correct answer.
21. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
F. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
G. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
H. Two or more functions are critical to the company's success.
I. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
J. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A
central power source is usually associated with young companies, or
those where the founder has not wished to expand greatly. B - describes
a characteristic of a hierarchical organisation. C - is a characteristic of
matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision makers
cannot continue and no successors have been identified.
22. Which one of the following is correct?
Your answer (in bold):
E. If a condition is broken, the innocent party may be able to
terminate the contract as well as sue for damages.
F. If a warranty is broken, the innocent party may be able to terminate the
contract as well as sue for damages.
G. If a condition is broken and the innocent party terminates the contract, he
cannot also sue for damages
H. If an innominate term is broken, the innocent party can sue for damages
but cannot terminate the contract.
Correct
The correct answer is A. B is not correct because if a warranty is broken
the innocent party can sue for damages but cannot terminate the
contract. C is not correct because a party entitled to terminate a contract
for breach of a condition is also entitled to claim damages for any loss
suffered. D is not correct because if an innominate term is broken the
innocent party can terminate the contract if the effects of the breach are
major.
23. Errors have been occurring quite often in the work of actuarial students in
your company.
Which of the following control processes has an apparent weakness, based on the
information provided below?
Your answer (in bold):
E. There is an audit trail requirement, meaning that each step in the work
can be followed by another person who has the appropriate level of
knowledge and skills.
F. Documentation is in place describing how the bases and
assumptions adopted were determined.
G. All work is peer reviewed and the peer reviewers usually carry out their
checks very quickly in order to avoid missing deadlines.
H. Checks are carried out on the computer systems that produce many of
the calculations
Incorrect
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems
that produce calculations. The latter would only be a problem if these
checks had not been carried out rigorously. The weakness in the controls
described would be in the peer review process if the peer reviewer is not
given sufficient time to carry out the peer review in sufficient detail. The
peer reviewer is as responsible as the originator. If you sign, you are
responsible.
24. You have been asked to define the competitive positioning for your business
unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component of the
business unit's competitive position?
Your answer (in bold):
E.
F.
G.
H.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Incorrect
Answer C is correct. All of the other responses represent a definition of
either product/service, target customers, or channels, all of which are
competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
25. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
E. Ask the right question, research the facts, decide what type of analysis is
needed.
F. Decide on the form of analysis, establish the right questions, discover the
facts.
G. Ask the right question, decide what analysis to undertake, collect
the relevant facts.
H. Discover a range of facts, identify what questions arise, conduct an
analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
26. The senior actuary in a firm must draw the provisions of the PCS to the
attention of which one of the following, with a view to ensuring that members are
not put in breach of professional guidance?
Your answer (in bold):
E. Senior non-actuarial colleagues and other members in the firm.
F. Senior non-actuarial colleagues and Fellows of the Institute or Faculty in
the firm.
G. Only Fellows of the Institute or Faculty in the firm.
H. Only other members in the firm.
Correct
The correct answer is A. An explanation can be found in Section 1 of the
PCS.
27. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
F. Devise a new package of benefits for the 'motorist's club' loyalty scheme
you run for customers.
G. Pledge to protect the environment by increasing new policies and
processes.
H. Leverage distribution network more effectively by establishing
shops on sites.
I. Increase return on investment by 5% over 2 years.
J. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic,
and B is non-strategic and non financial (although often it is difficult to
draw a clear-cut line between profits and social responsibility). D is
financial - it is a specific goal with specific timeframe.
28. Which one or more of the following claims can companies bring against third
parties who have received company property in breach of a director's fiduciary
duties?
Your answer (in bold):
D. Recipient liability (constructive trusteeship).
E. Restitution for unjust enrichment.
F. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the equitable
claim of a constructive trusteeship and use equitable tracing in connection
with a proprietary claim because the director owed the company fiduciary
duties. The company owns legal title to its assets and can therefore claim
restitution.
Quiz Feedback
View Instructions
You got 31 out of 32 answers correct (97%)
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9033767
(This question is not included in the score.)
2. All except two of the following would be appropriate criteria to test whether a
potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
F. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
G. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
H. Defendable - can you serve the segment better than competitors?
I. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
J. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although
it is vital to have channels of communication and distribution they do not have to be
exclusive. E - a long established segment is likely to be served already and using this
criterion would in any case eliminate interesting emerging segments.
3. Which one of the following always requires approval by shareholders to be
valid?
Your answer (in bold):
E. Sale of company assets to an unconnected third party
F. Sale of assets worth £10 to a director
G. Awarding a director a fixed term service contract over 6 years in
length
H. Registering a transfer of shares
Correct
The correct answer is C. A is wrong because unless there is provision in the articles to the
contrary this can be done by directors. B is wrong because sale of assets to directors over a
certain level requires approval of shareholders. However, small value sales do not require
approval. D is wrong because this is usually done by directors.
4. The main purpose of a business strategy is...
Your answer (in bold):
E. to follow every opportunity available.
F. to determine how best to use management talent.
G. to decide on the best way to promote the business to customers.
H. to maximise the value of the company.
Correct
The answer is D in accordance with the 'Creating and capturing value' tutorial
5. An actuary is producing a report about an actuarial topic that has some legal
implications. The actuary has not come across these implications before.
Which of the following courses of action would probably be the most
appropriate?
Your answer (in bold):
E. To research the implications by reference to legal publications and make
a personal judgement based on the findings.
F. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not come
across these implications before.
G. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
H. To make a judgement based on personal intuition but to make the report
non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and correct. An actuary
should not hesitate to obtain advice from someone outside the Actuarial Profession if that is
the best way to produce the correct advice. Therefore, C is the correct answer.
6. You are preparing a report on a final salary pension scheme for A Ltd. You
are aware B Ltd is in negotiation to purchase the entire issued share capital of A
Ltd. You are also aware that A Ltd has promised to pass the report to B Ltd.
Which one of the following statements is most likely to be incorrect?
Your answer (in bold):
E. You owe a duty of care to A Ltd
F. You will never owe a duty of care to B Ltd
G. You might owe a duty of care to B Ltd
H. You are unlikely to owe a duty of care to other third parties who rely on
the report
Correct
The correct answer is B. Given that you are aware of the purpose for which the report is to
be used you might owe B Ltd a duty of care. A is wrong as A Ltd is your client. You clearly
owe your client a duty of care. C is wrong because given you know the purpose for which
the report is to be used you might owe B Ltd a duty of care. D is wrong because as you are
not aware of who else might rely on the report it is unlikely you will owe them a duty of care.
7. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
F. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
G. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
H. Two or more functions are critical to the company's success.
I. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
J. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A central power
source is usually associated with young companies, or those where the founder has not
wished to expand greatly. B - describes a characteristic of a hierarchical organisation. C - is
a characteristic of matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few individuals are
compromising their future stability if those decision makers cannot continue and no
successors have been identified.
8. Which one of the following would not be a current issue for general insurance
companies?
Your answer (in bold):
E. Capital adequacy.
F. Increasing longevity.
G. Treating customers fairly.
H. Claims compensation culture.
Correct
Answer B is correct because increasing longevity is a current issue for life insurance
companies and pension schemes, particularly when annual or monthly benefits are being
paid out for the rest of a person's life. However, this would not be an issue for a general
insurance company that does not offer benefits related to a person's lifetime. Answers A, C
and D are all current issues for a general insurance company.
9. Which of the following contains a point that is not reflected by the
Professional Conduct Standards ('PCS') in the way stated?
Your answer (in bold):
E. You need to disclose a financial interest; you must have proper
regard for professional guidance; publicity that detracts from the
standing of the Profession is not allowed.
F. You must not give advice unless competent; you have an obligation to
serve the public interest; you must conform with the spirit and letter of
the PCS.
G. Your conscience must cause you to maintain the highest standards;
people must have absolute confidence in our Profession; if you breach
the PCS you may be disciplined.
H. The definition of misconduct is set out in the disciplinary scheme: you
must disclose a conflict of interest; the standing of the Profession relies
on the judgment of individual members.
Correct
Answer A is correct because the last point, 'publicity that detracts from the standing of the
Profession is not allowed' is not true. Such publicity would be acceptable, in terms of the
PCS, if it was in the public interest.
10. Assume that in The Actuarial Profession there are two respected bodies of
opinion as to how to tackle a particular task (methods 1 and 2). You choose
method 1. In the event it turns out that using method 2 would have been more
beneficial to the client.
Which one of the following statements is correct?
Your answer (in bold):
E. You are in breach of duty
F. You are not in breach of duty
G. You are in breach of duty, but damages will be reduced as you acted
reasonably
H. You are in breach of duty, but the client's damages will be reduced as
the client was guilty of contributory negligence by allowing you to choose
method 1
Correct
The correct answer is B. A is wrong because it there are two respected bodies of opinion
you are not in breach of duty by choosing one of them. C is wrong because you are not in
breach of duty if you follow a recognised body of opinion. D is wrong because you are not in
breach of duty by choosing a recognised body of opinion.
11. In meeting customer or client needs which of the following would not
normally be true?
Your answer (in bold):
E. It is important for a company to know who its customers are and to be
clear about the needs it is meeting.
F. A company will not normally make assumptions about what its
customers want without asking them.
G. Customers' needs change over time.
H. Customers often find that a company will do things for them that
they do not care about.
Incorrect
The answer is B in accordance with the 'Are we meeting customer needs?' tutorial.
12. If you were classifying a company in terms of how it made decisions when
responding to changing market conditions, which one of the following
descriptions would define a 'defender'?
Your answer (in bold):
E. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
F. Historically successful, by adopting high-risk strategies. Keen on detailed
analyses to improve ideas.
G. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen
to wait around for detailed analyses.
H. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position
that needs defending from others seeking to steal market share from them. They have
resources they can use to attack competitors. Sometimes their relative strength can make
them over confident. D - describes Fast Follower organisations who are less happy with high
risk than Innovators, but can often achieve greater returns and visibility than Innovators
gain. B - describes a combination of Defenders, Innovators and Fast Followers. C describes Innovators.
13. In the business game, The Way Forward, which one of the following is the
primary purpose of the Profit and Loss Account?
Your answer (in bold):
E. So that a team knows how much money it has got
F. So that a team knows whether it traded profitably or not in the
period concerned
G. So that a team knows its overhead costs in relation to its turnover
H. So that a team knows how much money to set aside for Corporation Tax
Correct
The correct answer is B. The prime purpose of a Profit and Loss Account is to show the
trading profit or loss for the period of the accounts.
14. Who carried out a review of The Actuarial Profession in 2004/05?
Your answer (in bold):
E. Lord Penrose.
F. Sir Derek Morris.
G. John Myners.
H. Gordon Brown.
Correct
Answer B is correct. Sir Derek Morris carried out the review at the request of Gordon
Brown's Treasury Department following the report by Lord Penrose about Equitable Life.
15. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics
relating to your company would it normally be safe for you to talk about without
the risk of divulging anything confidential?
Your answer (in bold):
E. Commercial information that would be available in the market
place.
F. Product development plans.
G. Results of recent internal mortality investigations.
H. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking about B, C or D and
you might be contravening your employment contract by doing so. Therefore, A is the
correct answer because there is no reason why you should not talk about information that
would be available in the market place even if it could be quite hard for someone else to find
that information.
16. Which one or more of the following claims can companies bring against third
parties who have received company property in breach of a director's fiduciary
duties?
Your answer (in bold):
D. Recipient liability (constructive trusteeship).
E. Restitution for unjust enrichment.
F. Proprietary claim using equitable tracing to identify the
company's property.
Correct
The correct answer is A, B and C. The company can pursue the equitable claim of a
constructive trusteeship and use equitable tracing in connection with a proprietary claim
because the director owed the company fiduciary duties. The company owns legal title to its
assets and can therefore claim restitution.
17. The company you work for, TransGlobal Multinational Limited, is considering
entering a new market. The decision-making process has involved reviewing
other similar organisations' attempted entries, identifying successes and
failures, suggesting improvements that TransGlobal could make over
competitors' offers, and an analysis of the market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational
cultural types listed do you think TransGlobal fits within?
Your answer (in bold):
E. Defenders.
F. Innovators.
G. Fast followers.
H. Slow reactors.
Correct
Answer C is correct. This behaviour illustrates an organisation not willing to take the risk of
moving first, but opportunistic enough to enter where an opportunity has appeared, and then
attempt to improve upon the market entry, process, or product introduced by the innovator.
18. Select the one statement below that correctly defines the difference
between deductive synthesis and creative synthesis?
Your answer (in bold):
E. In deductive synthesis the new fact is implicit in the old ones, while in
creative synthesis the new fact is explicit in the old ones.
F. In deductive synthesis facts are found by building the data up from an
hypothesis, while in creative synthesis facts are created by some
additional insight.
G. In deductive synthesis facts are found by reducing the data down
to the fact, while in creative synthesis facts are created by some
additional insight.
H. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the outcome, while in creative
synthesis facts are not relevant to the outcome.
19. In criticising another member's work in the context of any form of publicity,
care must be taken to acknowledge that..
Your answer (in bold):
E. there can only ever be one correct set of professional opinions
F. special circumstances may exist in any particular case
G. the other member may work for a large firm with influence on the
Professional Affairs Board
H. members who have provided advice on a particular assignment for many
years are extremely unlikely to be wrong
Correct
The correct answer is B. An explanation can be found in Section 8 of the PCS.
20. You see a vase in an antique shop. You think it is very rare and worth far
more than the price asked. The owner of the shop hears you telling your friend
your views about the vase but does not say anything. You buy the vase but it
turns out to be worth less than the price asked for it.
Which one of the following statements is correct?
Your answer (in bold):
E. The owner of the shop has made a misrepresentation as she should have
corrected your mistake.
F. The owner of the shop has made a misrepresentation as she was under a
duty to disclose all material facts.
G. The owner of the shop has made a negligent misstatement.
H. The owner of the shop has not made a misrepresentation or a
negligent misstatement.
Correct
The answer is D. The owner of the shop has not made a misrepresentation or a negligent
misstatement as there was no false statement.
21. As part of a 'PEST' analysis of external factors that might affect your
industry, which of the following areas might you investigate?
Your answer (in bold):
E. Political changes.
F. Environmental factors - how climate changes will affect your operation.
G. Strategic choices being made by your main competitor.
H. Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST
framework that is used to scan for external influences impacting an industry.
22. Which one of the following lists contains items that are all included in
Maslow's hierarchy of needs?
Your answer (in bold):
E. Self-actualisation; financial; social
F. Safety; psychological; esteem
G. Working; physiological; financial
H. Social; safety; esteem
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under
the 'Identifying consumer needs' tutorial.
23. Which one of these is not applicable?
A member providing reserved advice must ensure that the client is aware of...
Your answer (in bold):
E. the name and qualifications of the member providing the advice
F. the name of the member's firm
G. the name and qualifications of any non-members involved in the
assignment
H. the scope, purpose and terms of reference of the advice provided by the
member
Correct
The correct answer is C. The explanation can be found in Section 3 of the PCS.
24. Muriel, Molly and Marilyn have been in partnership since 1990. They all work
full-time for the business. They share profits equally and have no relevant
express agreement between them.
Which one of the following is correct?
Your answer (in bold):
E. If Molly leaves the business she could be prevented from setting up a
competing business.
F. Each partner is entitled to receive a salary in addition to her share of the
profits.
G. Muriel and Molly together could expel Marilyn.
H. Any of the 3 partners could dissolve the partnership at any time
without giving a reason.
Correct
The correct answer is D. Section 26 Partnership Act 1890 provides that if there is no fixed
term any partner may dissolve the partnership by giving notice to the others. Section 30
Partnership Act 1890 only provides for restrictions on competition whilst Molly is still a
partner. Section 24(6) Partnership Act 1890 provides that a partner is not entitled to a
salary. Section 25 Partnership Act 1890 provides there is no power to expel unless all the
partners (including Marilyn) agree.
25. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
E. A complex matrix organisation.
F. A hierarchical organisation.
G. A power-based organisation.
H. A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend to involve little
structure or formality, high risk-taking, and the decision-making power concentrated in a few
people. In a hierarchy (B) you would expect a big decision to go through a more formal
process of approval, and in a matrix organisation (C) you would expect more people to be
involved in the process bringing their own views and expertise.
26. A father of one of your friends feels he has lost out by his insurance
company merging with another. Your friend believes you know something about
how insurance companies work and asks you to find out something for her
father. Which of the following actions would it be sensible for you to take?
Your answer (in bold):
E. Tell your friend everything you know about the merging of insurance
companies.
F. Tell your friend that her father may have been disadvantaged because a
main aim of any merger would be to benefit the shareholders rather than
the policyholders.
G. Tell your friend that you know one of the actuaries who worked on the
merger and that you will ask him to write to her father.
H. Tell your friend that she should ask her father to check that he
has received from his insurance company an outline of the
reasons for the merger and that he should ask for a full version
of the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of situation and
remember that you are never "off duty". There will always be a risk that what you say gets
construed as expert actuarial opinion, and may get quoted, or misquoted, by third parties. It
would be potentially very dangerous to act per A or B and not reasonable to act as C
because the actuary you know should not be expected to write to individual policyholders in fact his company may not allow him to.
27. In the business game, The Way Forward, which one of the following effects
would be most likely if public relations was chosen as the first management
priority in all areas?
Your answer (in bold):
E. Increased sales
F. Decreased sales price
G. Decreased debtors
H. Higher profit
Correct
The correct answer is A. If the highest management priority was public relations this is most
likely to cause the public to buy more of the company's products. Public relations would not
in itself decrease the sales price, reduce the debtors, or necessarily result in higher profit, so
B, C and D are not correct in the context of the question asked.
28. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
D. What functional capabilities should we build and leverage to meet the
company's needs?
E. How should the business compete?
F. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its competitive
positioning and the advantages it will use. A relates to functional strategy and C relates to
corporate strategy.
29. There are four main types of external shock that are relevant to an
organisation's strategy. A PEST analysis can help think through what these
potential shocks might be, where PEST stands for...
Your answer (in bold):
E. Physical; economic; structural; timing
F. Political; external; staffing; technological
G. Physical; external; social; timing
H. Political; economic; social; technological
Correct
The answer is D in accordance with the 'Pest analysis' tutorial
30. Which one of the following statements is correct?
Your answer (in bold):
E. The provisions of the Companies Act 2006 never apply to shadow
directors
F. The provisions of the Companies Act 2006 never apply to de facto
directors
G. If a director cannot attend a board meeting he might be able to appoint
a proxy to stand in his place
H. A de jure director is a properly appointed director
Correct
The correct answer is D. A is incorrect because many provisions of the Act apply to shadow
directors. B is incorrect because many provisions of the Act apply to de facto directors. C is
incorrect because proxies are used by members. Directors use alternate directors to stand
in their place.
31. Which of the options A, B, C or D is incorrect?
Confidential information acquired by a member in the course of professional
work...
Your answer (in bold):
E. should never be disclosed unless consent has been received from
the member's client or employer.
F. should not normally be disclosed unless required to do so by statutory
authority.
G. should not normally be disclosed unless it is in the public interest to do
so.
H. should not normally be disclosed unless required to do so by judicial
authority.
Correct
The correct answer is A. An explanation can be found in Section 2 of the PCS
32. You have been asked to define the competitive positioning for your business
unit, a supplier of laser printers.
Which one of the following statements would NOT represent a component of the
business unit's competitive position?
Your answer (in bold):
E. Supply affordable laser printers and related supplies.
F. Target Home Office computer users.
G. Taking a phased approach to expanding the distribution network.
H. Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of either
product/service, target customers, or channels, all of which are competitive positioning
decisions. Answer C is more concerned with timing and resource decisions for building the
company.
33. You apply for a job as the PA to the Managing Director of Maximus Limited
and are interviewed for the job by the Managing Director himself. Samuel Brown
(the Personnel Director) later writes to you to offer you the job and, when you
ring up to ask for some further details on pay and holiday entitlement, your
queries are answered by the Human Resources Manager (Heather Freeman).
You decide to accept the job.
Who is your employer?
Your answer (in bold):
E. The Managing Director
F. Samuel Brown
G. Heather Freeman
H. Maximus Limited
Correct
The answer is D. The company is a separate legal person, capable of entering into
contracts, and as such is the employer. The directors are not acting in their own capacity but
as agents of the company.
25 Quiz Feedback
25.1
View Instructions
You got 29 out of 32 answers correct (91%)
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
(This question is not included in the score.)
2. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A. A map of all the businesses operating in a strategic set i.e. targeting the
same market segment.
B. A system showing the industry competitors and all their suppliers.
C. A technological map used to capture all the technology links used within
a company.
D. A model of the primary and support functions of a business with
their key activities.
Correct
D is correct. It is often used to map functions and activities within a
company to establish which create value and which create costs; or to
establish how activities are interlinked as a means of improving
processes and competence.
3. Paul ordered new machinery from Buildco Ltd for use in his business and to
be delivered on 14 December. Buildco were three months late delivering the
machinery. The signed contract contains a clause stating that Buildco will not be
liable for late delivery of the machinery.
Which one of the following is NOT correct?
Your answer (in bold):
A. Buildco has broken an express term of the contract. s.3 of the Unfair
Contract Terms Act 1977 will apply to the exemption clause if Paul is
dealing on Buildco's written standard terms of business.
B. If s.3 of the Unfair Contract Terms Act 1977 applies the
exemption clause will be void.
C. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption
clause will be valid if reasonable.
D. If s.3 of the Unfair Contract Terms Act 1977 does not apply, the
exemption clause will be valid.
Correct
B is the only statement that is not correct since s.3 of the Unfair Contract
Terms Act 1977 makes the clause subject to the requirement of
reasonableness.
4. In order to achieve a business plan, strategy and tactics must be considered.
Tactics is defined as...
Your answer (in bold):
A.
B.
C.
D.
the work undertaken by customer-facing staff
the human resources needed for the plan
the means by which the plan is implemented
the competitive advantages the company will aspire to in order to
achieve its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore
diagram under the 'Creating and capturing value' tutorial
5. For the purposes of the PCS, a senior actuary in a firm is a Fellow of the
Institute or Faculty who...
Your answer (in bold):
A. holds a practising certificate
B. has been registered with the FSA as responsible for professional actuarial
matters in the firm
C. has been nominated by a member's firm in respect of
professional actuarial matters
D. has worked for the firm for at least 10 years
Correct
The correct answer is C. An explanation can be found in the Definitions
section of the PCS
6. ABC Ltd were asked to provide a reference for their former employee, Jane,
by XYZ Ltd who had provisionally offered her a job. Unfortunately, when
preparing the reference Jane's record was confused with another employee's
record. The reference given was completely inaccurate, stating that Jane was a
bad time-keeper. Jane was not offered the job as a result of the information
contained in the reference.
Which one of the following statements correctly identifies Jane's position?
Your answer (in bold):
A. Jane cannot bring a claim against ABC Ltd as she did not ask for the
reference and therefore no duty is owed to her.
B. Jane has suffered no loss and cannot bring a claim.
C. Jane may bring a claim against XYZ Ltd for relying on an inaccurate
reference.
D. Jane may bring a claim against ABC Ltd as a former employer
does owe a duty to a former employee to prepare the reference
without negligence.
Correct
The correct answer is D. A former employer does owe a duty to a former
employee to prepare the reference without negligence. See the case of
Spring v Guardian Assurance [1994].
7. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A.
B.
C.
D.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and
tend to involve little structure or formality, high risk-taking, and the
decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of
approval, and in a matrix organisation (C) you would expect more people
to be involved in the process bringing their own views and expertise.
8. Many pension schemes are currently underfunded. Which of these are two of
the main reasons for this?
Your answer (in bold):
A.
B.
C.
D.
People are living longer.
Asset values have fallen.
Employers have taken long contribution holidays.
More people than expected have been retiring early.
Correct
Answers A and B are correct, and these reasons are often being stated
in the media. Contribution rates and therefore the scope for periods of
paying nil or low contributions have been determined on best estimates
of future experience and the significant falls in asset values since 2000,
in particular, could not have been foreseen. Therefore, in this context, it
cannot be claimed that a main reason is contribution holidays. Although
early retirements may have been running at a higher level than assumed,
and may have proved to be under funded, this is not a main reason given
for many schemes being under funded.
9. In carrying out a piece of work for your company, which of the following is
not a requirement in terms of the Professional Conduct Standards ('PCS')?
Your answer (in bold):
A. You must follow the judgement of your company's management.
B. You must disclose a conflict of interest.
C. Advice you give to a colleague should normally meet the same standards
as for external advice.
D. You must not give advice unless competent.
Correct
Answer A is correct because the PCS applies to individual members, not
their companies. Therefore, it is the individual judgement of members
upon which the good standing of the profession relies.
10. John, Andrew and Robert have been in partnership together for 3 years.
They have no partnership agreement. John has recently been declared
bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership without
John who will have to retire."
Your answer (in bold):
A. True
B. False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under
s33 Partnership Act 1890. In any event there is no right of retirement in
the Partnership Act 1890.
11. The value chain shows the activities required to deliver value to...
Your answer (in bold):
A. shareholders
B. customers
C. products
D. the economy
Incorrect
The answer is B in accordance with 'The business system' tutorial
12. If you were classifying a company in terms of how it made decisions when
responding to changing market conditions, which one of the following
descriptions would define a 'defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially
becoming complacent. Will raise quality and cut prices to
improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed
analyses to improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen
to wait around for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often
achieve strong returns and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies
with a strong position that needs defending from others seeking to steal
market share from them. They have resources they can use to attack
competitors. Sometimes their relative strength can make them over
confident. D - describes Fast Follower organisations who are less happy
with high risk than Innovators, but can often achieve greater returns and
visibility than Innovators gain. B - describes a combination of Defenders,
Innovators and Fast Followers. C - describes Innovators.
13. In the business game, The Way Forward, if a company sold a simple but
very effective product that was designed many years ago.
Which one of the following words would be the most appropriate to use in its
advertising?
Your answer (in bold):
A.
B.
C.
D.
Distinctive
Fashionable
Green
Reliable
Correct
The correct answer is D as ‘reliable' would suggest a non-complicated
product that has stood the test of time. ‘Distinctive' would suggest a more
modern product that has been specially designed to be different from
other available products. ‘Fashionable' would suggest a very recently
designed product. ‘Green' is a modern phenomenon and would not be a
product designed many years ago.
14. The Actuarial Profession has, in the past, regulated itself by setting ethical
standards, administering its education system and CPD, monitoring compliance
with professional standards, and administering disciplinary procedures.
Which one of the following will happen in the future?
Your answer (in bold):
A. The Profession will continue to self-regulate in this way.
B. The Professional Oversight Board will oversee The Actuarial
Profession's role in these matters.
C. The FSA will regulate for these matters.
D. The Morris Review team will spend more time considering these matters
and will make recommendations in due course.
Correct
Answer B is correct and you are recommended to read at least the
Forward and the Executive Summary of the Morris Review. You will find
the Review on the Profession's website.
15. Errors have been occurring quite often in the work of actuarial students in
your company.
Which of the following control processes has an apparent weakness, based on
the information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the work
can be followed by another person who has the appropriate level of
knowledge and skills.
B. Documentation is in place describing how the bases and assumptions
adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry
out their checks very quickly in order to avoid missing deadlines.
D. Checks are carried out on the computer systems that produce many of
the calculations
Correct
Answer C is correct. It is very important that control procedures include
audit trails. In turn, these should include documentation detailing how
bases and assumptions were adopted, and checks on computer systems
that produce calculations. The latter would only be a problem if these
checks had not been carried out rigorously. The weakness in the controls
described would be in the peer review process if the peer reviewer is not
given sufficient time to carry out the peer review in sufficient detail. The
peer reviewer is as responsible as the originator. If you sign, you are
responsible.
16. Which one of the following is NOT correct?
Your answer (in bold):
A. The remoteness rule in contract is that the loss must be within the
reasonable contemplation of the parties.
B. The remoteness rule in contract is that the loss must be
reasonably foreseeable.
C. The normal aim of the court when assessing damages in contract is to
put the innocent party in the position he would have been in if the
contract had been properly performed.
Correct
The only answer that is not correct is B as the statement refers to the
remoteness rule in tort, not contract.
17. The sustainability of a competitive advantage is driven in part by whether
the advantage is likely to last for a long time and is hard to substitute. You can
'test' if an advantage is likely to be sustainable by asking if it has certain
attributes. The following list describes the attributes of a sustainable advantage
- but one of them is not correct.
Which one does NOT represent an attribute of sustainable advantage?
Your answer (in bold):
A. A competitive advantage is likely to be sustainable if it is based
upon a scarce resource.
B. A competitive advantage is likely to be sustainable if it is difficult to
imitate.
C. A competitive advantage is likely to be sustainable if it is hard to
transfer.
D. A competitive advantage is likely to be sustainable if it is based on
technology.
E. A competitive advantage is likely to be sustainable if it hard to identify or
understand.
Incorrect
Answer D is correct. Unless the technology is proprietary, and therefore
hard to imitate, or otherwise hard to identify or understand, technology
often represents an advantage that is easily eroded by others attaining
the same, or similar, technology. All the other options are ways you can
'test' if an advantage is likely to be sustainable for a reasonable length of
time because if an advantage is hard to imitate, transfer or
identify/understand the implication is competitors won't have the
capability to replicate it.
18. Synthesis is the process of combining two or more facts to produce other
facts, hypotheses or questions. There are two kinds of synthesis.
Which one of the following are they?
Your answer (in bold):
A. Negative and deductive.
B. Creative and corrective.
C. Corrective and negative.
D. Deductive and creative.
Correct
The answer is D in accordance with the 'Synthesis' tutorial
19. Which one of these is not applicable?
A member providing reserved advice must ensure that the client is aware of...
Your answer (in bold):
A. the name and qualifications of the member providing the advice
B. the name of the member's firm
C. the name and qualifications of any non-members involved in the
assignment
D. the scope, purpose and terms of reference of the advice provided by the
member
Correct
The correct answer is C. The explanation can be found in Section 3 of
the PCS.
20. An actuary agrees to do work for a client, but does not expressly agree a
fee or hourly rate.
Which one of the following is correct?
Your answer (in bold):
A. The agreement is void for uncertainty
B. The agreement fails for lack of consideration
C. The law will imply a term that the fee or hourly rate charged is a
reasonable one
D. The agreement fails for lack of an express term as to charging
Correct
The correct answer is C. The Supply of Goods and Services Act 1982
implies such a term in the absence of express agreement. A, B and D
are incorrect because The Supply of Goods and Services Act 1982
implies a term that the fees charged will be reasonable.
21. One form of research used with consumers to explore their needs is called
Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct
statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value
of different attributes of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the
product or service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A Conjoint means 'CONsiderJOINTly and is devised to
help people explain what trade-offs they would make between attributes.
22. Your company is assessing whether to enter new markets and has asked
you to carry out a check on one of these to gain a clearer picture of its potential
profitability.
Which one of the following frameworks might you apply to structure your
thinking for this purpose?
Your answer (in bold):
A.
B.
C.
D.
A 'competitive forces' analysis.
A 'PEST' analysis.
An analysis of your company's business system.
A 'competitive advantage' analysis of your strategic assets, capabilities
and relationships.
Correct
Correct Answer: A. The purpose of analysing the strength of the
combined power of the competitive forces that bear on an industry or
market segment is to first, assess how much pressure they will exert and
hence squeeze profits on companies trying to operate in that industry or
market. Having assessed that, a company should next consider what it
could do to push back against these forces to see if the market is viable
for it. The other frameworks only provide you with elements of the
information you need.
23. An actuary is producing a report about an actuarial topic that has some
legal implications. The actuary has not come across these implications before.
Which of the following courses of action would probably be the most
appropriate?
Your answer (in bold):
A. To research the implications by reference to legal publications and make
a personal judgement based on the findings.
B. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not come
across these implications before.
C. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
D. To make a judgement based on personal intuition but to make the report
non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and
correct. An actuary should not hesitate to obtain advice from someone
outside the Actuarial Profession if that is the best way to produce the
correct advice. Therefore, C is the correct answer.
24. Yvonne rents a flat from Phil at a rent of £1,500 per month. Yvonne lost her
job and found it difficult to pay the full rent; she asked Phil if she could pay just
£1,000 per month for a while. Phil agreed.
Which one of the following is NOT correct?
Your answer (in bold):
A. Yvonne has not provided any consideration for Phil's agreement to
accept just £1,000 per month.
B. If Phil goes back on his promise and claims full rent for the
future and for the past three months Yvonne may be able to rely
on promissory estoppel as a defence.
C. For promissory estoppel to succeed it must be inequitable for Phil to go
back on his promise.
D. If promissory estoppel applies then Phil's right to full rent for both the
past and future is extinguished.
E. Promissory estoppel generally operates only to suspend rights.
Incorrect
The only incorrect statement is D. If promissory estoppel applies then
Phil's right to full rent for the future would only be extinguished if Yvonne
was unable to resume her original position and there is no indication of
this on the facts.
25. You are an industry analyst in a venture capital company, preparing a report
for potential investors on a restaurant chain, Fervour, which is looking to expand
abroad. Fervour specialises in converting churches into restaurants, capitalising
on the architecture to create atmospheric surroundings, supported by live jazz.
The menus - created by Michelin chef Jean-Pierre Noir - are highly acclaimed in
culinary circles for their imagination and flair. Fervour looks to cater for a wide
range of clientele, offering a dining experience 'for all the senses'. While it is still
relatively unknown, it has bought the majority of unused church buildings across
the country, ready for conversion.
In trying to make the investment proposition sound as attractive as possible, it
is important that you highlight where Fervour has advantages in the
marketplace.
Which one of the following statements do you feel represents a real and
sustainable competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the country.
C. Superior locations - church buildings stand out against ordinary
restaurants, and are located close to the desired audience.
D. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at
all its venues.
E. Relationships with its key suppliers - to ensure the freshest food and the
right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused
churches means that other competitors will be unable to replicate the
Fervour surroundings, making this a sustainable advantage. While the
menus are imaginative (A), they can also be copied, which means that
this advantage is difficult to sustain. The Fervour brand (B) is unknown
outside the country, so it cannot yet be exploited as an advantage. While
a website (D) is useful, it is likely that most other restaurants will also
have a website supporting their core offering, so this does not represent
an advantage. Relationships with suppliers to ensure fresh food (E) are a
necessity in this market, rather than an advantage.
26. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics
relating to your company would it normally be safe for you to talk about without
the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking
about B, C or D and you might be contravening your employment
contract by doing so. Therefore, A is the correct answer because there is
no reason why you should not talk about information that would be
available in the market place even if it could be quite hard for someone
else to find that information.
27. In the business game, The Way Forward, which one of the following mix of
strategies would you expect to be the most successful?
Your answer (in bold):
A.
B.
C.
D.
Modern, high quality product; medium price; conservative brand image
Traditional product; high price; modern brand image
Fashionable product; high price; prestigious image
Sturdy basic product, high price, traditional image
Correct
The correct answer is C. The three features of C, taken together, offer a
consistent strategy. In each of A, B and D the three features are not
consistent.
28. One source of competitive advantage is 'strategic relationships'. If you were
running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a
sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a
diverse range of industries.
C. The only parent company in the agency world whose policy is to
invest centrally in building capabilities it then shares across
business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful
business, it is option C that is said to be an exception, is harder to copy
than the other options.
29. In meeting customer or client needs which of the following would not
normally be true?
Your answer (in bold):
A. It is important for a company to know who its customers are and to be
clear about the needs it is meeting.
B. A company will not normally make assumptions about what its
customers want without asking them.
C. Customers' needs change over time.
D. Customers often find that a company will do things for them that they do
not care about.
Correct
The answer is B in accordance with the 'Are we meeting customer
needs?' tutorial.
30. The defendant is only liable for the extent of the injury which the reasonable
man would have suffered. If the claimant is particularly sensitive and this means
that he suffers greater loss, the defendant is not liable for this 'extra' loss even
though the type of injury was reasonably foreseeable.
Is the statement above true or false?
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A (false). Provided the type of loss is reasonably
foreseeable, the defendant is liable for the full extent of the loss even
though the precise extent was not foreseeable. This is known as the eggshell skull rule.
31. With regard to publicity, which one of the following statements is incorrect?
Your answer (in bold):
A. Members may publicise the professional services offered
B. Members must ensure their publicity is appropriate to the Actuarial
Profession
C. Members who have any doubts about material they wish to publicise
should seek advice from the Actuarial Profession
D. Members speaking in public must make it clear that their
presentation has the backing of the Actuarial Profession
Correct
The correct answer is D. An explanation can be found in Section 9 of the
PCS.
32. All except two of the following would be appropriate criteria to test whether
a potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. D - although it is vital to have channels of communication and
distribution they do not have to be exclusive. E - a long established
segment is likely to be served already and using this criterion would in
any case eliminate interesting emerging segments.
33. Which one of the following statements is correct?
Your answer (in bold):
A. The provisions of the Companies Act 2006 never apply to shadow
directors
B. The provisions of the Companies Act 2006 never apply to de facto
directors
C. If a director cannot attend a board meeting he might be able to appoint
a proxy to stand in his place
D. A de jure director is a properly appointed director
Correct
The correct answer is D. A is incorrect because many provisions of the
Act apply to shadow directors. B is incorrect because many provisions of
the Act apply to de facto directors. C is incorrect because proxies are
used by members. Directors use alternate directors to stand in their
place.
26
Quiz Feedback
27
You got 28 out of 32 answers correct (88%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9037111
(This question is not included in the score.)
2. The sustainability of a competitive advantage is driven in part by whether the
advantage is likely to last for a long time and is hard to substitute. You can 'test'
if an advantage is likely to be sustainable by asking if it has certain attributes.
The following list describes the attributes of a sustainable advantage - but one of
them is not correct.
Which one does NOT represent an attribute of sustainable advantage?
Your answer (in bold):
A. A competitive advantage is likely to be sustainable if it is based upon a
scarce resource.
B. A competitive advantage is likely to be sustainable if it is difficult to
imitate.
C. A competitive advantage is likely to be sustainable if it is hard to transfer.
D. A competitive advantage is likely to be sustainable if it is based on
technology.
E. A competitive advantage is likely to be sustainable if it hard to identify or
understand.
Correct
Answer D is correct. Unless the technology is proprietary, and therefore hard to imitate, or
otherwise hard to identify or understand, technology often represents an advantage that is
easily eroded by others attaining the same, or similar, technology. All the other options are
ways you can 'test' if an advantage is likely to be sustainable for a reasonable length of time
because if an advantage is hard to imitate, transfer or identify/understand the implication is
competitors won't have the capability to replicate it.
3. Which one of the following is NOT correct?
Your answer (in bold):
A. The remoteness rule in contract is that the loss must be within the
reasonable contemplation of the parties.
B. The remoteness rule in contract is that the loss must be reasonably
foreseeable.
C. The normal aim of the court when assessing damages in contract is to put
the innocent party in the position he would have been in if the contract
had been properly performed.
Incorrect
The only answer that is not correct is B as the statement refers to the remoteness rule in tort,
not contract.
4. The main purpose of a business strategy is...
Your answer (in bold):
A. to follow every opportunity available.
B. to determine how best to use management talent.
C. to decide on the best way to promote the business to customers.
D. to maximise the value of the company.
Correct
The answer is D in accordance with the 'Creating and capturing value' tutorial
5. An actuary is producing a report about an actuarial topic that has some legal
implications. The actuary has not come across these implications before.
Which of the following courses of action would probably be the most appropriate?
Your answer (in bold):
A. To research the implications by reference to legal publications and make a
personal judgement based on the findings.
B. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not come
across these implications before.
C. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
D. To make a judgement based on personal intuition but to make the report
non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and correct. An actuary
should not hesitate to obtain advice from someone outside the Actuarial Profession if that is
the best way to produce the correct advice. Therefore, C is the correct answer.
6. Which one of the following is correct?
Your answer (in bold):
A. If a condition is broken, the innocent party may be able to
terminate the contract as well as sue for damages.
B. If a warranty is broken, the innocent party may be able to terminate the
contract as well as sue for damages.
C. If a condition is broken and the innocent party terminates the contract, he
cannot also sue for damages
D. If an innominate term is broken, the innocent party can sue for damages
but cannot terminate the contract.
Correct
The correct answer is A. B is not correct because if a warranty is broken the innocent party
can sue for damages but cannot terminate the contract. C is not correct because a party
entitled to terminate a contract for breach of a condition is also entitled to claim damages for
any loss suffered. D is not correct because if an innominate term is broken the innocent party
can terminate the contract if the effects of the breach are major.
7. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have
looked for someone able to help you with this, but not found anyone with the
right qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A. A complex matrix organisation.
B. A hierarchical organisation.
C. A power-based organisation.
D. A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend to involve little
structure or formality, high risk-taking, and the decision-making power concentrated in a few
people. In a hierarchy (B) you would expect a big decision to go through a more formal
process of approval, and in a matrix organisation (C) you would expect more people to be
involved in the process bringing their own views and expertise.
8. There are certain roles for actuaries that are 'reserved' solely for them. These
are roles laid down by statute that only an actuary can carry out.
Which two of the following are not statutory roles reserved for actuaries only?
Your answer (in bold):
A. Scheme Actuary (pensions).
B. With Profits Actuary (life insurance).
C. Reserving actuary (general insurance).
D. Lloyd's Syndicate Actuary (Lloyd's of London market).
E. Appointed Actuary (life insurance).
Correct
Answers C and E are correct. Although the Morris Review has recommended that the FSA
should require a general insurer to take advice from an approved person regarding risk
assessment and the valuation of liabilities, this approved person would not have to be an
actuary (C). The Appointed Actuary role was a statutory one until 31 December 2004 when it
was replaced by an Actuarial Function Holder and a With Profits Actuary (E). A, B and D are
all statutory roles.
9. A member who has any doubt about the application of professional standards
in particular circumstances should normally seek advice in the first instance
from...
Your answer (in bold):
A. a senior actuary
B. an actuarial colleague in his/her own firm
C. an actuary external to his/her own firm
D. the Actuarial Profession
Correct
The correct answer is A. An explanation can be found in Section 1 of the PCS
10. Kerry offered to buy Rafiq's car for £5,000. She said that she would keep her
offer open until 1 June. On 14 May, Rafiq posted a letter accepting Kerry's offer.
This letter was lost in the post. In the meantime, on 13 May, Kerry posted a
letter revoking her offer which Rafiq received on 18 May.
Which two of the following are correct?
Your answer (in bold):
A. If the postal rule applies Rafiq's acceptance is valid on 14 May.
B. If the postal rule does not apply Rafiq's acceptance is invalid as it
has not been communicated.
C. The postal rule cannot apply here, as Rafiq's acceptance was lost in the
post.
D. Kerry cannot revoke her offer as she said she would keep it open until 1
June.
E. Kerry has validly revoked her offer on 13 May.
Correct
The correct answer is A and B. C is not correct because the postal rule can still apply even if
the acceptance is lost in the post - Household Fire Insurance v Grant (1879).D is not correct
as Kerry can still revoke even though she said she would leave the offer open - Routledge v
Grant (1828).E is not correct as a revocation is only effective when communicated, not when
it is posted - Byrne v Van Tienhoven (1880).
11. The value chain shows the activities required to deliver value to...
Your answer (in bold):
A. shareholders
B. customers
C. products
D. the economy
Correct
The answer is B in accordance with 'The business system' tutorial
12. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme
you run for customers.
B. Pledge to protect the environment by increasing new policies and
processes.
C. Leverage distribution network more effectively by establishing
shops on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the
financial objectives in D. A is tactical rather than strategic, and B is non-strategic and non
financial (although often it is difficult to draw a clear-cut line between profits and social
responsibility). D is financial - it is a specific goal with specific timeframe.
13. In the business game, The Way Forward, which one of the following mix of
strategies would you expect to be the most successful?
Your answer (in bold):
A. Modern, high quality product; medium price; conservative brand image
B. Traditional product; high price; modern brand image
C. Fashionable product; high price; prestigious image
D. Sturdy basic product, high price, traditional image
Correct
The correct answer is C. The three features of C, taken together, offer a consistent strategy.
In each of A, B and D the three features are not consistent.
14. Who carried out a review of The Actuarial Profession in 2004/05?
Your answer (in bold):
A. Lord Penrose.
B. Sir Derek Morris.
C. John Myners.
D. Gordon Brown.
Correct
Answer B is correct. Sir Derek Morris carried out the review at the request of Gordon Brown's
Treasury Department following the report by Lord Penrose about Equitable Life.
15. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics
relating to your company would it normally be safe for you to talk about without
the risk of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking about B, C or D and you
might be contravening your employment contract by doing so. Therefore, A is the correct
answer because there is no reason why you should not talk about information that would be
available in the market place even if it could be quite hard for someone else to find that
information.
16. A letter of engagement used by a firm of actuaries provides that employees
of the firm are to take the benefit of exclusions or limitations of liability contained
within the letter.
Which one of the following statements is correct?
Your answer (in bold):
A. Employees cannot take the benefit of the provision due to the principle of
privity of contract
B. Employees cannot take the benefit of the provision as they are not
specifically identified by name
C. The provision is irrelevant as employees would have no liability to a client
in any event
D. Employees can take the benefit of the provision under the
Contracts (Rights of Third Parties) Act 1999.
Correct
The correct answer is D. A is wrong because the old privity rule has been amended by the
Contracts (Rights of Third Parties) Act 1999. B is wrong because under the Contracts (Rights
of Third Parties) Act 1999 a party only need be identified as a member of a class to take the
benefit of such a provision. C is wrong because employees might owe clients a duty of care
in tort.
17. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A. A map of all the businesses operating in a strategic set i.e. targeting the
same market segment.
B. A system showing the industry competitors and all their suppliers.
C. A technological map used to capture all the technology links used within a
company.
D. A model of the primary and support functions of a business with
their key activities.
Correct
D is correct. It is often used to map functions and activities within a company to establish
which create value and which create costs; or to establish how activities are interlinked as a
means of improving processes and competence.
18. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A. Ask the right question, research the facts, decide what type of analysis is
needed.
B. Decide on the form of analysis, establish the right questions, discover the
facts.
C. Ask the right question, decide what analysis to undertake, collect
the relevant facts.
D. Discover a range of facts, identify what questions arise, conduct an
analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
19. With regard to publicity, which one of the following statements is incorrect?
Your answer (in bold):
A. Members may publicise the professional services offered
B. Members must ensure their publicity is appropriate to the Actuarial
Profession
C. Members who have any doubts about material they wish to
publicise should seek advice from the Actuarial Profession
D. Members speaking in public must make it clear that their presentation has
the backing of the Actuarial Profession
Incorrect
The correct answer is D. An explanation can be found in Section 9 of the PCS.
20. An actuary agrees to do work for a client, but does not expressly agree a fee
or hourly rate.
Which one of the following is correct?
Your answer (in bold):
A. The agreement is void for uncertainty
B. The agreement fails for lack of consideration
C. The law will imply a term that the fee or hourly rate charged is a
reasonable one
D. The agreement fails for lack of an express term as to charging
Incorrect
The correct answer is C. The Supply of Goods and Services Act 1982 implies such a term in
the absence of express agreement. A, B and D are incorrect because The Supply of Goods
and Services Act 1982 implies a term that the fees charged will be reasonable.
21. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A central power
source is usually associated with young companies, or those where the founder has not
wished to expand greatly. B - describes a characteristic of a hierarchical organisation. C - is a
characteristic of matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few individuals are compromising
their future stability if those decision makers cannot continue and no successors have been
identified.
22. Your company is assessing whether to enter new markets and has asked you
to carry out a check on one of these to gain a clearer picture of its potential
profitability.
Which one of the following frameworks might you apply to structure your
thinking for this purpose?
Your answer (in bold):
A. A 'competitive forces' analysis.
B. A 'PEST' analysis.
C. An analysis of your company's business system.
D. A 'competitive advantage' analysis of your strategic assets, capabilities
and relationships.
Correct
Correct Answer: A. The purpose of analysing the strength of the combined power of the
competitive forces that bear on an industry or market segment is to first, assess how much
pressure they will exert and hence squeeze profits on companies trying to operate in that
industry or market. Having assessed that, a company should next consider what it could do
to push back against these forces to see if the market is viable for it. The other frameworks
only provide you with elements of the information you need.
23. Which of the following contains a point that is not reflected by the
Professional Conduct Standards ('PCS') in the way stated?
Your answer (in bold):
A. You need to disclose a financial interest; you must have proper
regard for professional guidance; publicity that detracts from the
standing of the Profession is not allowed.
B. You must not give advice unless competent; you have an obligation to
serve the public interest; you must conform with the spirit and letter of
the PCS.
C. Your conscience must cause you to maintain the highest standards;
people must have absolute confidence in our Profession; if you breach the
PCS you may be disciplined.
D. The definition of misconduct is set out in the disciplinary scheme: you
must disclose a conflict of interest; the standing of the Profession relies
on the judgment of individual members.
Correct
Answer A is correct because the last point, 'publicity that detracts from the standing of the
Profession is not allowed' is not true. Such publicity would be acceptable, in terms of the
PCS, if it was in the public interest.
24. Which one of the following statements is correct?
Your answer (in bold):
A. A contract for the sale of land needs to be in writing
B. A contract for the sale of goods needs to be in writing
C. A contract for the provision of services needs to be in writing
D. A contract of employment needs to be in writing
Correct
The correct answer is A. B is wrong because no formalities are required for a sale of goods
contract. C is wrong because no formalities are required for a contract for the provision of
services. D is wrong because an employee is entitled to a written statement of terms if he or
she requests them. An employment contract does not need to be in writing.
25. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and telephone
system to enable smarter working on the move. However, the Mobilo is not
selling as well as expected into the company's core customer segments. Recent
research has revealed that the core segments are seeking mobile efficiency as
well as enhanced status for being 'early adopters' in this market.
Which of the company's advantages would you use as the core of a campaign to
increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which has
an unrivalled reputation for new ideas in mobile living/working.
B. The strong relationships the company has with its suppliers, who provide
highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the competition,
to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for awareness
three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency as well as their
need to be early adopters in the market. Customers will value the highly-reputed
technological components (B), but alone they do not meet customer needs for mobile
efficiency. Speed of delivery (C) will help in getting the products to customers early, to
support them being early adopters, but it does not match their need for innovation. There is
little benefit in purely having high awareness of the company brand (D), if this product
campaign is not communicating the benefits relevant to the target groups.
26. Errors have been occurring quite often in the work of actuarial students in
your company.
Which of the following control processes has an apparent weakness, based on the
information provided below?
Your answer (in bold):
A. There is an audit trail requirement, meaning that each step in the work
can be followed by another person who has the appropriate level of
knowledge and skills.
B. Documentation is in place describing how the bases and assumptions
adopted were determined.
C. All work is peer reviewed and the peer reviewers usually carry out
their checks very quickly in order to avoid missing deadlines.
D. Checks are carried out on the computer systems that produce many of
the calculations
Correct
Answer C is correct. It is very important that control procedures include audit trails. In turn,
these should include documentation detailing how bases and assumptions were adopted,
and checks on computer systems that produce calculations. The latter would only be a
problem if these checks had not been carried out rigorously. The weakness in the controls
described would be in the peer review process if the peer reviewer is not given sufficient time
to carry out the peer review in sufficient detail. The peer reviewer is as responsible as the
originator. If you sign, you are responsible.
27. In the business game, The Way Forward, which two of the following are true?
the amount charged for depreciation is shown on the balance sheet
2. creditors and debtors both count as assets on the balance sheet
3. the purpose of the balance sheet is to show what the company is worth
4. the value of currently held stock is shown as an asset on the balance
sheet
1.
Your answer (in bold):
A. 1 and 4
B. 2 and 4
C. 1 and 3
D. 2 and 3
Correct
The correct answer is A. Both depreciation and the current value of stock are shown on the
balance sheet. B is not correct as creditors are an asset, debtors are a liability. C is not
correct as a balance sheet does not reflect what a company is worth, only the value of its
assets and liabilities at a point in time.
28. You are the new Managing Director of Korsan, a city-based chain of mediumpriced hotels catering primarily for late-night business travellers. Trade is
reasonable, and you have a high level of repeat business (and thus good
projected future occupancy), but costs seem high and profits slim, particularly for
the hotel's restaurant. It serves few customers at night, although the chefs have
done innovative things to the menus to increase their appeal. A rival chain Luxuria - is also setting up its high-class hotels for discerning travellers in the
same cities, and your board is panicking that significant business will be lost.
They present some recent research showing that customers' core needs are a
good night's sleep and a convenient location. They also present a large dossier of
suggestions for maximising the value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience
(discerning travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of
potential customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of
Korsan to new customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship
with a city-based restaurant for your customers to have
discounted evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers (sleep and
location) Korsan can reduce unnecessary overheads and increase value captured. The deal
with a city restaurant will also be attractive to those customers wanting to eat in the evening.
Korsan's target audience is different to Luxuria, and there is no evidence to suggest that
Luxuria's target audience would be attracted, even with a refurbished hotel. A - could be a
costly error. B - would require investment by way of a marketing campaign to get it off the
ground, and there is no guarantee that non-hotel customers would be attracted. Korsan has
high repeat business and high projected future occupancy, so a campaign to attract new
customers (C) would be wasteful.
29. Moving from an existing strategy to a new one can be challenging with
complicated changes to implement. Trying to do everything at once can stretch
resources. It is usually best to progress in manageable steps with each step
representing a sustainable strategy in itself. Such steps are a strategic staircase.
In what order are the steps on Komatsu's strategic staircase, starting at the
bottom?
Your answer (in bold):
A. Cost; quality; diversification; differentiation.
B. Differentiation; quality; cost; diversification.
C. Quality; cost; differentiation; diversification.
D. Differentiation; diversification; quality; cost.
Correct
The answer is C in accordance with the 'Komatsu's strategic staircase'. Explore item in 'The
strategic staircase' tutorial.
30. Which one of the following always requires approval by shareholders to be
valid?
Your answer (in bold):
A. Sale of company assets to an unconnected third party
B. Sale of assets worth £10 to a director
C. Awarding a director a fixed term service contract over 6 years in
length
D. Registering a transfer of shares
Correct
The correct answer is C. A is wrong because unless there is provision in the articles to the
contrary this can be done by directors. B is wrong because sale of assets to directors over a
certain level requires approval of shareholders. However, small value sales do not require
approval. D is wrong because this is usually done by directors.
31. For the purposes of the PCS, a senior actuary in a firm is a Fellow of the
Institute or Faculty who...
Your answer (in bold):
A. holds a practising certificate
B. has been registered with the FSA as responsible for professional actuarial
matters in the firm
C. has been nominated by a member's firm in respect of professional
actuarial matters
D. has worked for the firm for at least 10 years
Correct
The correct answer is C. An explanation can be found in the Definitions section of the PCS
32. One source of competitive advantage is 'strategic relationships'. If you were
running a well-known Advertising Agency, select the one option in the list below
relating to the agency's relationships that you would consider as offering a
sustainable competitive advantage.
Your answer (in bold):
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a
diverse range of industries.
C. The only parent company in the agency world whose policy is to
invest centrally in building capabilities it then shares across
business units.
D. An award-winning creative team.
Correct
Correct Answer: C While all the options will contribute to a successful business, it is option C
that is said to be an exception, is harder to copy than the other options.
33. Which of the following cases decided that, if a particular type of loss is within
the parties' contemplation as a serious possibility, then all loss of that type is
recoverable even if more serious than could have been contemplated?
Your answer (in bold):
A. Hadley v Baxendale
B. Parsons v Uttley Ingham
C. Victoria Laundry v Newman Industries
D. The Heron II
Incorrect
The correct answer is B. In this case the court said it was within the contemplation of the
parties that the pigs might be ill if they ate the mouldy food. The fact that the illness was more
serious than could have been contemplated was not relevant. The case concerned physical
loss/damage and not just loss of profits.
28
Quiz Feedback
29
You got 29 out of 32 answers correct (91%)
View Instructions
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9037329
(This question is not included in the score.)
2. You run the office cleaning division at International GlobalCorp, and you are setting your group's objectives.
IGC's corporate goal is to grow market share in all its businesses.
Which of the following objectives for your area directly supports the corporate objective?
Your answer (in bold):
A.
B.
C.
D.
Increase the number of active customers by 15%
Reduce costs of purchased cleaning products by 10%
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute to the ability to grow market share,
answer A is the only one that directly results in increased share (assuming that the market as a whole grows
less than 15%!).
3. Which one of the following commercial scenarios is a trust not commonly used for?
Your answer (in bold):
A.
Pension funds
B.
C.
D.
Tax planning
To protect customers who have paid in advance when a company is close to insolvency
To hold investments in non-common law jurisdictions
Correct
The correct answer is D. Non – common law jurisdictions do not generally recognise trusts
4. Your company is assessing whether to enter new markets and has asked you to carry out a check on one of
these to gain a clearer picture of its potential profitability.
Which one of the following frameworks might you apply to structure your thinking for this purpose?
Your answer (in bold):
A.
B.
C.
D.
A 'competitive forces' analysis.
A 'PEST' analysis.
An analysis of your company's business system.
A 'competitive advantage' analysis of your strategic assets, capabilities and relationships.
Correct
Correct Answer: A. The purpose of analysing the strength of the combined power of the competitive forces that
bear on an industry or market segment is to first, assess how much pressure they will exert and hence
squeeze profits on companies trying to operate in that industry or market. Having assessed that, a company
should next consider what it could do to push back against these forces to see if the market is viable for it. The
other frameworks only provide you with elements of the information you need.
5. Which of the statements 1,2,3 and 4 below are correct?
1.
2.
3.
4.
The PCS are not exhaustive so considerable reliance is placed on the conscience of each individual
member to maintain the highest standards of conduct
The PCS are comprehensive and all members must comply with each section
Members must comply with the spirit and letter of the PCS
The PCS are not comprehensive and rely on the collective conscience of all members to maintain
the highest standards of conduct
Your answer (in bold):
A.
B.
C.
D.
1, 2 and 3
1, 3 and 4
2, 3 and 4
All of them
Correct
The correct answer is B. An explanation can be found in Section 1 of the PCS.
6. Which one of the following statements is correct?
Your answer (in bold):
A.
B.
C.
D.
A contract for the sale of land needs to be in writing
A contract for the sale of goods needs to be in writing
A contract for the provision of services needs to be in writing
A contract of employment needs to be in writing
Correct
The correct answer is A. B is wrong because no formalities are required for a sale of goods contract. C is
wrong because no formalities are required for a contract for the provision of services. D is wrong because an
employee is entitled to a written statement of terms if he or she requests them. An employment contract does
not need to be in writing.
7. One form of research used with consumers to explore their needs is called Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct statement.
Your answer (in bold):
A.
B.
C.
D.
To discover how they rate the importance and quantify the value of different attributes of a
product or service.
To find out which types of people would buy the product or service.
To see in what different types of circumstances people might use the product or service.
To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A Conjoint means 'CONsiderJOINTly and is devised to help people explain what trade-offs
they would make between attributes.
8. Which one of the following would not be a current issue for general insurance companies?
Your answer (in bold):
A.
B.
C.
D.
Capital adequacy.
Increasing longevity.
Treating customers fairly.
Claims compensation culture.
Correct
Answer B is correct because increasing longevity is a current issue for life insurance companies and pension
schemes, particularly when annual or monthly benefits are being paid out for the rest of a person's life.
However, this would not be an issue for a general insurance company that does not offer benefits related to a
person's lifetime. Answers A, C and D are all current issues for a general insurance company.
9. A member who has any doubt about the application of professional standards in particular circumstances
should normally seek advice in the first instance from...
Your answer (in bold):
A.
B.
C.
D.
a senior actuary
an actuarial colleague in his/her own firm
an actuary external to his/her own firm
the Actuarial Profession
Incorrect
The correct answer is A. An explanation can be found in Section 1 of the PCS
10. Which one of the following statements is incorrect?
Your answer (in bold):
A.
B.
C.
D.
Directors are generally prohibited from borrowing money from their own company.
Members' approval is required for all transactions whereby a director purchases an asset from his
own company.
Directors must declare any interest in any transaction/arrangement with the company to the
board.
A director is under a duty not to accept benefits from third parties.
Incorrect
The correct answer is B. Approval is required only for transactions of ‘requisite value'. A is incorrect because
Section 197 Companies Act 2006 generally prohibits borrowing. C is incorrect because Sections 177 and 183
Companies Act 2006 require the making of such a declaration. D is incorrect because Section 176 Companies
Act 2006 imposes such a duty.
11. Which is the correct order of activities to carry out problem solving?
Your answer (in bold):
A.
B.
C.
D.
Ask the right question, research the facts, decide what type of analysis is needed.
Decide on the form of analysis, establish the right questions, discover the facts.
Ask the right question, decide what analysis to undertake, collect the relevant facts.
Discover a range of facts, identify what questions arise, conduct an analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial.
12. You are considering opening a record store in a major shopping area. As there are other record stores
located nearby, you will have to find sources of competitive advantage.
Only one of the following would be a real source of competitive advantage - which is it?
Your answer (in bold):
A.
B.
C.
D.
An award-winning advertising campaign
Exclusive promotional relationship with a major record label.
An unusual store design and internal layout.
Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built on a strategic relationship that
cannot be copied or imitated. All of the other answers represent something that is easy to imitate, and are not
built upon superior assets, distinctive capabilities or strategic relationships.
13. In the business game, The Way Forward, how is gross margin defined?
Your answer (in bold):
A.
B.
C.
D.
The difference between turnover and cost of sales
The difference between the price a company sells at and the lowest price in the market
The difference between the Profit and Loss in the current time period and the Profit and Loss in the
previous period
The biggest difference between the price at which a team purchased an item and the price at which
it sold that item.
Correct
The correct answer is A. Gross margin is the difference between the sale price and the cost price of an item
that is sold. Turnover is the total sales price for all units that are sold. B is not correct as the lowest price in the
market is not relevant to a company's gross margin. C is not correct because many items make up the profit or
loss in a period, not just the gross margin on the sale of a product. D is not correct because it only relates to
the gross margin for one item.
14. As a result of the Morris Review, which body will oversee The Actuarial Profession in future?
Your answer (in bold):
A.
B.
C.
D.
The Financial Reporting Council.
The Financial Services Authority.
The Board for Actuarial Standards.
The Treasury
Correct
Answer A is correct and you are recommended to read at least the Forward and the Executive Summary of the
Morris Review. You will find the Review on the Profession's website.
15. A father of one of your friends feels he has lost out by his insurance company merging with another. Your
friend believes you know something about how insurance companies work and asks you to find out something
for her father. Which of the following actions would it be sensible for you to take?
Your answer (in bold):
A.
B.
C.
D.
Tell your friend everything you know about the merging of insurance companies.
Tell your friend that her father may have been disadvantaged because a main aim of any merger
would be to benefit the shareholders rather than the policyholders.
Tell your friend that you know one of the actuaries who worked on the merger and that you will ask
him to write to her father.
Tell your friend that she should ask her father to check that he has received from his
insurance company an outline of the reasons for the merger and that he should ask for a full
version of the available documents.
Correct
Answer D is correct. You would have to be very careful in this type of situation and remember that you are
never "off duty". There will always be a risk that what you say gets construed as expert actuarial opinion, and
may get quoted, or misquoted, by third parties. It would be potentially very dangerous to act per A or B and not
reasonable to act as C because the actuary you know should not be expected to write to individual
policyholders - in fact his company may not allow him to.
16. Peter owes Dent & Co £2,000. Peter asks Dent & Co if they will accept £1,500 in full settlement. Dent & Co
agree and Peter hands over the £1,500.
Is the following statement false or true? Dent & Co cannot sue Peter for the balance as promissory estoppel
can only be used as a defence.
Your answer (in bold):
A.
B.
False
True
Correct
The correct answer is A. Dent & Co. will not be relying on promissory estoppel. Dent & Co. can sue for the
balance relying on the contract and the rule in Foakes v Beer - it is Peter who may then try to rely on
promissory estoppel as a defence.
17. Which of the following statements describes the characteristics of power-based organizations in terms of
organizational decision-making?
Select the two relevant options.
Your answer (in bold):
A.
B.
C.
D.
E.
Decision-making may be based on instinct or swayed by key influencers more than key
data/research.
Logic, rules, procedures, activities and job roles are tightly specified. Easier to predict likely actions
as policies are set down.
Two or more functions are critical to the company's success.
Junior/specialist staff are exposed to more responsibility and issues beyond one function.
Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A central power source is usually
associated with young companies, or those where the founder has not wished to expand greatly. B - describes
a characteristic of a hierarchical organisation. C - is a characteristic of matrix organisations. D - is a
characteristic of matrix organisations. E- Organisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision makers cannot continue and no successors
have been identified.
18. You are considering investing in the car manufacturing industry, but you are concerned about competitive
forces changing the market. You've decided to organise an analysis on the five major competitive forces acting
on the industry.
Which of the following represents the five forces that you should investigate?
Your answer (in bold):
A.
B.
C.
D.
Product, price, people, placement, positioning. of substitute products,
Threat of substitute products, rivalry, supplier power, customer power, threat of new
entrants.
Missions, objectives, goals, strategies, objectives.
Access to capital, ease of integration, synergy with existing operations, distribution channels,
sustainable competitive advantages.
Correct
Answer B is correct. The other options do not represent the five competitive forces acting on an industry.
19. The PCS applies to all members where a member is...
Your answer (in bold):
A.
B.
C.
D.
a Fellow of the Institute or Faculty
a Fellow or an Associate of the Institute or Faculty
a Fellow, Associate or Student of the Institute, or a Fellow or Associate of the Faculty
a Fellow, Associate or Student of the Institute or Faculty
Correct
The correct answer is D. An explanation can be found in the Definitions of the PCS.
20. John, Andrew and Robert have been in partnership together for 3 years. They have no partnership
agreement. John has recently been declared bankrupt.
Indicate whether the following statement is true or false.
"Andrew and Robert can insist on continuing the business in partnership without John who will have to retire."
Your answer (in bold):
A.
B.
True
False
Correct
The answer is B (false). Bankruptcy causes automatic dissolution under s33 Partnership Act 1890. In any
event there is no right of retirement in the Partnership Act 1890.
21. You have been asked to define the competitive positioning for your business unit, a supplier of laser
printers.
Which one of the following statements would NOT represent a component of the business unit's competitive
position?
Your answer (in bold):
A.
B.
C.
D.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of either product/service, target
customers, or channels, all of which are competitive positioning decisions. Answer C is more concerned with
timing and resource decisions for building the company.
22. The value chain shows the activities required to deliver value to...
Your answer (in bold):
A.
B.
C.
D.
shareholders
customers
products
the economy
Correct
The answer is B in accordance with 'The business system' tutorial
23. If not possessing the requisite knowledge and personal competence, a member must only give advice if...
Your answer (in bold):
A.
B.
C.
D.
the fees are reduced significantly
protected by professional indemnity insurance
acting in cooperation with someone (member or not) who has the required competence
the member acts as an individual, making clear the advice is not associated with the
member's firm
Incorrect
The correct answer is C. An explanation can be found in Section 3 of the PCS.
24. Nina is the sole shareholder and director of Tarvin Limited. She owns 100,000 £1 shares, all of which are
fully paid. The company goes into liquidation. It has assets of £50,000 but owes creditors £250,000.
How much will Nina be required to contribute to the company's funds? Which one of the following is correct?
Your answer (in bold):
A.
B.
C.
D.
Nothing
£50,000
£100,000
£200,000
Correct
A is correct. A shareholder is protected by limited liability and will only be liable to pay for the amount they have
agreed to pay for their shares. Nina has fully paid up shares and cannot be asked to contribute further funds.
25. You have just joined a new company, and you have already been asked to make a recommendation on
what you think is a strategic, high-impact decision. Your recommendation will be made direct to the Chief
Executive. You have looked for someone able to help you with this, but not found anyone with the right
qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you there is not enough time to do
that, and suggested you should "Use your instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A.
B.
C.
D.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend to involve little structure or formality,
high risk-taking, and the decision-making power concentrated in a few people. In a hierarchy (B) you would
expect a big decision to go through a more formal process of approval, and in a matrix organisation (C) you
would expect more people to be involved in the process bringing their own views and expertise.
26. When you are discussing work with actuarial friends from another company you must be careful what you
talk about. There is a risk that you may be caught off guard, especially in a social environment. Which of the
following topics relating to your company would it normally be safe for you to talk about without the risk of
divulging anything confidential?
Your answer (in bold):
A.
B.
C.
D.
Commercial information that would be available in the market place.
Product development plans.
Results of recent internal mortality investigations.
Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking about B, C or D and you might be
contravening your employment contract by doing so. Therefore, A is the correct answer because there is no
reason why you should not talk about information that would be available in the market place even if it could be
quite hard for someone else to find that information.
27. In the business game, The Way Forward, if a company sold a simple but very effective product that was
designed many years ago.
Which one of the following words would be the most appropriate to use in its advertising?
Your answer (in bold):
A.
B.
C.
D.
Distinctive
Fashionable
Green
Reliable
Correct
The correct answer is D as ‘reliable' would suggest a non-complicated product that has stood the test of time.
‘Distinctive' would suggest a more modern product that has been specially designed to be different from other
available products. ‘Fashionable' would suggest a very recently designed product. ‘Green' is a modern
phenomenon and would not be a product designed many years ago.
28. As an executive in a major oil company, you work for the division where responsibilities cover its network of
petrol stations serving the public. You've received details from the directors of the strategic, financial, and
non-financial objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A.
B.
C.
D.
E.
Devise a new package of benefits for the 'motorist's club' loyalty scheme you run for customers.
Pledge to protect the environment by increasing new policies and processes.
Leverage distribution network more effectively by establishing shops on sites.
Increase return on investment by 5% over 2 years.
Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the financial objectives in D.
A is tactical rather than strategic, and B is non-strategic and non financial (although often it is difficult to draw a
clear-cut line between profits and social responsibility). D is financial - it is a specific goal with specific
timeframe.
29. The pressures that affect an industry's profitability are known as competitive forces, or Porter's 'Five
Forces'.
Which of the following is not one of the five forces?
Your answer (in bold):
A.
B.
C.
D.
Rivalry.
Economic change.
Threat of new entrants.
Supplier power.
Correct
The answer is B in accordance with the 'How strong are the competitive forces?' tutorial
30. You are preparing a report on a final salary pension scheme for A Ltd. You are aware B Ltd is in
negotiation to purchase the entire issued share capital of A Ltd. You are also aware that A Ltd has promised to
pass the report to B Ltd.
Which one of the following statements is most likely to be incorrect?
Your answer (in bold):
A.
B.
C.
D.
You owe a duty of care to A Ltd
You will never owe a duty of care to B Ltd
You might owe a duty of care to B Ltd
You are unlikely to owe a duty of care to other third parties who rely on the report
Correct
The correct answer is B. Given that you are aware of the purpose for which the report is to be used you might
owe B Ltd a duty of care. A is wrong as A Ltd is your client. You clearly owe your client a duty of care. C is
wrong because given you know the purpose for which the report is to be used you might owe B Ltd a duty of
care. D is wrong because as you are not aware of who else might rely on the report it is unlikely you will owe
them a duty of care.
31. An actuary is producing a report about an actuarial topic that has some legal implications. The actuary has
not come across these implications before.
Which of the following courses of action would probably be the most appropriate?
Your answer (in bold):
A.
B.
C.
D.
To research the implications by reference to legal publications and make a personal judgement
based on the findings.
To discuss the matter with another actuary who has wide actuarial experience of the topic being
reported on but who also has not come across these implications before.
To seek external advice from a legally qualified person who has appropriate experience of the
implications.
To make a judgement based on personal intuition but to make the report non-committal in respect of
the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and correct. An actuary should not hesitate
to obtain advice from someone outside the Actuarial Profession if that is the best way to produce the correct
advice. Therefore, C is the correct answer.
32. What do we mean by the term a 'business system'?
Select the correct answer:
Your answer (in bold):
A.
B.
C.
D.
A map of all the businesses operating in a strategic set i.e. targeting the same market segment.
A system showing the industry competitors and all their suppliers.
A technological map used to capture all the technology links used within a company.
A model of the primary and support functions of a business with their key activities.
Correct
D is correct. It is often used to map functions and activities within a company to establish which create value
and which create costs; or to establish how activities are interlinked as a means of improving processes and
competence.
33. Kerry offered to buy Rafiq's car for £5,000. She said that she would keep her offer open until 1 June. On 14
May, Rafiq posted a letter accepting Kerry's offer. This letter was lost in the post. In the meantime, on 13 May,
Kerry posted a letter revoking her offer which Rafiq received on 18 May.
Which two of the following are correct?
Your answer (in bold):
A.
B.
If the postal rule applies Rafiq's acceptance is valid on 14 May.
If the postal rule does not apply Rafiq's acceptance is invalid as it has not been
C.
D.
E.
communicated.
The postal rule cannot apply here, as Rafiq's acceptance was lost in the post.
Kerry cannot revoke her offer as she said she would keep it open until 1 June.
Kerry has validly revoked her offer on 13 May.
Correct
The correct answer is A and B. C is not correct because the postal rule can still apply even if the acceptance is
lost in the post - Household Fire Insurance v Grant (1879).D is not correct as Kerry can still revoke even
though she said she would leave the offer open - Routledge v Grant (1828).E is not correct as a revocation is
only effective when communicated, not when it is posted - Byrne v Van Tienhoven (1880).
30 Quiz Feedback
30.1
View Instructions
You got 30 out of 32 answers correct (94%)
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9040812
(This question is not included in the score.)
2. You are an industry analyst in a venture capital company, preparing a report for
potential investors on a restaurant chain, Fervour, which is looking to expand
abroad. Fervour specialises in converting churches into restaurants, capitalising on
the architecture to create atmospheric surroundings, supported by live jazz. The
menus - created by Michelin chef Jean-Pierre Noir - are highly acclaimed in culinary
circles for their imagination and flair. Fervour looks to cater for a wide range of
clientele, offering a dining experience 'for all the senses'. While it is still relatively
unknown, it has bought the majority of unused church buildings across the country,
ready for conversion.
In trying to make the investment proposition sound as attractive as possible, it is
important that you highlight where Fervour has advantages in the marketplace.
Which one of the following statements do you feel represents a real and sustainable
competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the country.
C. Superior locations - church buildings stand out against ordinary
restaurants, and are located close to the desired audience.
D. Marketing capability - Fervour has recently introduced its own website to
extend the diner's experience, detailing the menus and music planned at all
its venues.
E. Relationships with its key suppliers - to ensure the freshest food and the
right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused
churches means that other competitors will be unable to replicate the
Fervour surroundings, making this a sustainable advantage. While the
menus are imaginative (A), they can also be copied, which means that this
advantage is difficult to sustain. The Fervour brand (B) is unknown outside
the country, so it cannot yet be exploited as an advantage. While a website
(D) is useful, it is likely that most other restaurants will also have a website
supporting their core offering, so this does not represent an advantage.
Relationships with suppliers to ensure fresh food (E) are a necessity in this
market, rather than an advantage.
3. Which one of the following statements is correct?
Your answer (in bold):
A. The provisions of the Companies Act 2006 never apply to shadow directors
B. The provisions of the Companies Act 2006 never apply to de facto directors
C. If a director cannot attend a board meeting he might be able to appoint a
proxy to stand in his place
D. A de jure director is a properly appointed director
Correct
The correct answer is D. A is incorrect because many provisions of the Act
apply to shadow directors. B is incorrect because many provisions of the Act
apply to de facto directors. C is incorrect because proxies are used by
members. Directors use alternate directors to stand in their place.
4. In maximising the value of a company, which of the following is the best measure
of value to use?
Your answer (in bold):
A.
B.
C.
D.
Annual profit.
Annual return on assets.
Net present value of future profits.
There is no one perfect measure.
Correct
The answer is D as there is no single measure of value in accordance with
the 'Financial objectives' tutorial, it is best to consider that specific measures
are providing information on specific aspects of the business.
5. Members will take reasonable steps to ensure that they are aware of:
Your answer (in bold):
A.
B.
C.
D.
any relevant interest, including income, of their firm
any previous disciplinary findings against members in their firm
the salaries and other earnings of senior members within their firms
circumstances which might delay the completion of the appointment
or instruction
Incorrect
Answer A is correct. In the pursuit of independence and impartiality,
members must undertake investigation of possible conflicts of interest,
personal or corporate, which would prevent them undertaking the work.
6. An actuary agrees to do work for a client, but does not expressly agree a fee or
hourly rate.
Which one of the following is correct?
Your answer (in bold):
A. The agreement is void for uncertainty
B. The agreement fails for lack of consideration
C. The law will imply a term that the fee or hourly rate charged is a
reasonable one
D. The agreement fails for lack of an express term as to charging
Correct
The correct answer is C. The Supply of Goods and Services Act 1982
implies such a term in the absence of express agreement. A, B and D are
incorrect because The Supply of Goods and Services Act 1982 implies a
term that the fees charged will be reasonable.
7. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme you
run for customers.
B. Pledge to protect the environment by increasing new policies and processes.
C. Leverage distribution network more effectively by establishing shops
on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic, and B
is non-strategic and non financial (although often it is difficult to draw a clearcut line between profits and social responsibility). D is financial - it is a
specific goal with specific timeframe.
8. Many pension schemes are currently underfunded. Which of these are two of the
main reasons for this?
Your answer (in bold):
A.
B.
C.
D.
People are living longer.
Asset values have fallen.
Employers have taken long contribution holidays.
More people than expected have been retiring early.
Correct
Answers A and B are correct, and these reasons are often being stated in
the media. Contribution rates and therefore the scope for periods of paying
nil or low contributions have been determined on best estimates of future
experience and the significant falls in asset values since 2000, in particular,
could not have been foreseen. Therefore, in this context, it cannot be
claimed that a main reason is contribution holidays. Although early
retirements may have been running at a higher level than assumed, and
may have proved to be under funded, this is not a main reason given for
many schemes being under funded.
9. What should members do if they believe that a course of action is unlawful,
unethical and improper?
Your answer (in bold):
A.
B.
C.
D.
speak up to their clients or to their employers or both
resign from the project
contact an appropriate Committee
put the matter in the hands of a lawyer
Incorrect
Answer A is correct. It is important that members appreciate the need to
"speak up" (whistle-blow), when believing that a course of action pursued is
wrong. Other actions (resignation, going to the Profession or seeking legal
advice) are ancillary to this core requirement.
10. Which of the following statements is incorrect?
Your answer (in bold):
A.
B.
C.
D.
Consideration must take a money form
Provision of services can be consideration
Releasing a party from obligations under a contract can be consideration
Parties do not have to provide each other with equal consideration
Correct
The correct answer is A. Consideration can take the form of any benefit or
detriment, however small.
11. Select the one statement below that correctly defines the difference between
deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while in
creative synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from an
hypothesis, while in creative synthesis facts are created by some additional
insight.
C. In deductive synthesis facts are found by reducing the data down to
the fact, while in creative synthesis facts are created by some
additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the outcome,
while in creative synthesis facts are not relevant to the outcome.
12. You run the office cleaning division at International GlobalCorp, and you are
setting your group's objectives. IGC's corporate goal is to grow market share in all
its businesses.
Which of the following objectives for your area directly supports the corporate
objective?
Your answer (in bold):
A.
B.
C.
D.
Increase the number of active customers by 15%
Reduce costs of purchased cleaning products by 10%
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute to
the ability to grow market share, answer A is the only one that directly results
in increased share (assuming that the market as a whole grows less than
15%!).
13. In the business game, The Way Forward, which one of the following defines the
‘cost of sales' in the Profit and Loss Account?
Your answer (in bold):
A.
B.
C.
D.
The purchase cost of all the items purchased by a team in the time period
The purchase cost of all the items sold by a team in the time period
The cost of all the items currently held in stock by a team
The total costs incurred in marketing, selling and distribution of the items
sold in the period.
Correct
The correct answer is B. The cost of sales was defined as the amount a
team had to pay for all the items that it sold during the period.
14. The Actuarial Profession has, in the past, regulated itself by setting ethical
standards, administering its education system and CPD, monitoring compliance with
professional standards, and administering disciplinary procedures.
Which one of the following will happen in the future?
Your answer (in bold):
A. The Profession will continue to self-regulate in this way.
B. The Professional Oversight Board will oversee The Actuarial
Profession's role in these matters.
C. The FSA will regulate for these matters.
D. The Morris Review team will spend more time considering these matters and
will make recommendations in due course.
Correct
Answer B is correct and you are recommended to read at least the Forward
and the Executive Summary of the Morris Review. You will find the Review
on the Profession's website.
15. A father of one of your friends feels he has lost out by his insurance company
merging with another. Your friend believes you know something about how
insurance companies work and asks you to find out something for her father. Which
of the following actions would it be sensible for you to take?
Your answer (in bold):
A. Tell your friend everything you know about the merging of insurance
companies.
B. Tell your friend that her father may have been disadvantaged because a
main aim of any merger would be to benefit the shareholders rather than the
policyholders.
C. Tell your friend that you know one of the actuaries who worked on the
merger and that you will ask him to write to her father.
D. Tell your friend that she should ask her father to check that he has
received from his insurance company an outline of the reasons for
the merger and that he should ask for a full version of the available
documents.
Correct
Answer D is correct. You would have to be very careful in this type of
situation and remember that you are never "off duty". There will always be a
risk that what you say gets construed as expert actuarial opinion, and may
get quoted, or misquoted, by third parties. It would be potentially very
dangerous to act per A or B and not reasonable to act as C because the
actuary you know should not be expected to write to individual policyholders
- in fact his company may not allow him to.
16. A company holds advance payments made by customers on trust for those
customers.
Which of the following statements is incorrect?
Your answer (in bold):
A. All the customers must be able to be identified in order for the trust to be
effective
B. If the company goes into liquidation , the trust monies can be used
to pay the creditors of the company
C. If the company goes into liquidation, the trust monies are ringfenced for
customers
D. The directors of the company cannot use the trust monies to pay suppliers of
the company
Correct
The correct answer is B. The trust monies belong to customers until the
customers receive their goods
17. You are the new Managing Director of Korsan, a city-based chain of mediumpriced hotels catering primarily for late-night business travellers. Trade is
reasonable, and you have a high level of repeat business (and thus good projected
future occupancy), but costs seem high and profits slim, particularly for the hotel's
restaurant. It serves few customers at night, although the chefs have done
innovative things to the menus to increase their appeal. A rival chain - Luxuria - is
also setting up its high-class hotels for discerning travellers in the same cities, and
your board is panicking that significant business will be lost. They present some
recent research showing that customers' core needs are a good night's sleep and a
convenient location. They also present a large dossier of suggestions for maximising
the value of the business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning
travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential
customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of
Korsan to new customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship
with a city-based restaurant for your customers to have discounted
evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers
(sleep and location) Korsan can reduce unnecessary overheads and
increase value captured. The deal with a city restaurant will also be
attractive to those customers wanting to eat in the evening. Korsan's target
audience is different to Luxuria, and there is no evidence to suggest that
Luxuria's target audience would be attracted, even with a refurbished hotel.
A - could be a costly error. B - would require investment by way of a
marketing campaign to get it off the ground, and there is no guarantee that
non-hotel customers would be attracted. Korsan has high repeat business
and high projected future occupancy, so a campaign to attract new
customers (C) would be wasteful.
18. Synthesis is the process of combining two or more facts to produce other facts,
hypotheses or questions. There are two kinds of synthesis.
Which one of the following are they?
Your answer (in bold):
A.
B.
C.
D.
Negative and deductive.
Creative and corrective.
Corrective and negative.
Deductive and creative.
Correct
The answer is D in accordance with the 'Synthesis' tutorial
19. An actuary is producing a report about an actuarial topic that has some legal
implications. The actuary has not come across these implications before.
Which of the following courses of action would probably be the most appropriate?
Your answer (in bold):
A. To research the implications by reference to legal publications and make a
personal judgement based on the findings.
B. To discuss the matter with another actuary who has wide actuarial
experience of the topic being reported on but who also has not come across
these implications before.
C. To seek external advice from a legally qualified person who has
appropriate experience of the implications.
D. To make a judgement based on personal intuition but to make the report
non-committal in respect of the implications.
Correct
It will be of the utmost importance to ensure that the report is clear and
correct. An actuary should not hesitate to obtain advice from someone
outside the Actuarial Profession if that is the best way to produce the correct
advice. Therefore, C is the correct answer.
20. Which one of the following commercial scenarios is a trust not commonly used
for?
Your answer (in bold):
A. Pension funds
B. Tax planning
C. To protect customers who have paid in advance when a company is close to
insolvency
D. To hold investments in non-common law jurisdictions
Correct
The correct answer is D. Non – common law jurisdictions do not generally
recognise trusts
21. As part of a 'PEST' analysis of external factors that might affect your industry,
which of the following areas might you investigate?
Your answer (in bold):
A.
B.
C.
D.
Political changes.
Environmental factors - how climate changes will affect your operation.
Strategic choices being made by your main competitor.
Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are
part of the PEST framework that is used to scan for external influences
impacting an industry.
22. The main purpose of a business strategy is...
Your answer (in bold):
A.
B.
C.
D.
to follow every opportunity available.
to determine how best to use management talent.
to decide on the best way to promote the business to customers.
to maximise the value of the company.
Correct
The answer is D in accordance with the 'Creating and capturing value'
tutorial
23.
Members will not allow X to override their professional judgement.
Which three matters might replace X?
1.
2.
3.
4.
5.
6.
7.
8.
bias
dominance risk
fatigue
religious fervour
conflict of interest
undue influence of others
the opinions of student colleagues
media speculation
Your answer (in bold):
A.
B.
C.
D.
Correct
1, 5 and 6
2,3 and 8
1, 4 and 7
4,6 and 8
Answer A is correct. Members must ensure that their professional judgement
is not impaired by bias (1), conflict of interest (5) or undue influence of others
(6)
24. Paul ordered new machinery from Buildco Ltd for use in his business and to be
delivered on 14 December. Buildco were three months late delivering the machinery.
The signed contract contains a clause stating that Buildco will not be liable for late
delivery of the machinery.
Which one of the following is NOT correct?
Your answer (in bold):
A. Buildco has broken an express term of the contract. s.3 of the Unfair
Contract Terms Act 1977 will apply to the exemption clause if Paul is dealing
on Buildco's written standard terms of business.
B. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption
clause will be void.
C. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption clause
will be valid if reasonable.
D. If s.3 of the Unfair Contract Terms Act 1977 does not apply, the exemption
clause will be valid.
Correct
B is the only statement that is not correct since s.3 of the Unfair Contract
Terms Act 1977 makes the clause subject to the requirement of
reasonableness.
25. You are the marketing director for Svenson, a technology manufacturer. You
have just introduced a new 'mobile entertainment' device, which will offer users the
opportunity to play videos, take digital photographs, send emails and text
messages, play music and communicate via telephone. It has state-of-the-art
features, allowing compatibility with all the top service providers. The Svenson
brand is relatively new, yet it already has a reputation for being innovative, cool and
funky. The Svenson 'mini entertainer' is priced at $600. You now have information
from your Customer Management team showing the profiles of your key customer
segments.
Which segment is most attractive and achievable for Svenson?
Your answer (in bold):
A. Gadgets Galore - 27% of your base and rising slowly. Good
disposable income, increasingly mobile for work and leisure, take
huge interest in gadget advertising, and love the funky status they
acquire with Svenson products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable disposable
income, buy on functionality, willing to pay for whichever technology
combines all the functions they need and fits their mobile lifestyle
C. Family First - the largest segment (33% of your base), although it has
shrunk over the last year. Mobility based around supporting the family. High
income restricted by outlays on children and aged parents. Willing to
purchase any technology proven to make their lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable
segment. Segment size is reasonable, and it is growing, disposable income
is high (for what is quite a reasonably expensive, one-off purchase) and
there is strong desire for the product. It is an ideal fit with Svenson's
advantages in innovation, plus its brand reputation - gadget lovers matched
with funky gadget provider. Youth of Today (B) is a reasonable-sized,
growing segment. Svenson's advantages match their needs, but the
segment is more attracted by generic functionality than the Svenson brand,
making it less attractive to the company. Family First (C) is less attractive.
Although this segment is large, the profile suggests people in this segment
are more likely to pay for features that provide convenience rather than pure
entertainment. Although they have high income, their profile suggests they
are likely to have priorities for spending rather than a high-priced
entertainment item.
26. When you are discussing work with actuarial friends from another company you
must be careful what you talk about. There is a risk that you may be caught off
guard, especially in a social environment. Which of the following topics relating to
your company would it normally be safe for you to talk about without the risk of
divulging anything confidential?
Your answer (in bold):
A.
B.
C.
D.
Commercial information that would be available in the market place.
Product development plans.
Results of recent internal mortality investigations.
Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking about B,
C or D and you might be contravening your employment contract by doing
so. Therefore, A is the correct answer because there is no reason why you
should not talk about information that would be available in the market place
even if it could be quite hard for someone else to find that information.
27. In the business game, the Way Forward, what was the method for calculating
the overhead per unit sold?
Your answer (in bold):
A.
B.
C.
D.
Purchase cost/ Total units sold
(Administration and energy costs)/ Total units sold
(Administration, energy and depreciation costs)/ Total units sold
Profit before tax/ Total units sold
Correct
The correct answer is C. The calculation must take account of all overheads
shown below Gross profit. Within the business simulation the outputs from
calculations A, B and D do not provide critical information.
28. Strategic decisions work at different levels of a company. If you were
developing a 'business unit' strategy.
Which one of the following questions would you be concerned with?
Your answer (in bold):
A. What functional capabilities should we build and leverage to meet the
company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its
competitive positioning and the advantages it will use. A relates to functional
strategy and C relates to corporate strategy.
29. The pressures that affect an industry's profitability are known as competitive
forces, or Porter's 'Five Forces'.
Which of the following is not one of the five forces?
Your answer (in bold):
A.
B.
C.
D.
Rivalry.
Economic change.
Threat of new entrants.
Supplier power.
Correct
The answer is B in accordance with the 'How strong are the competitive
forces?' tutorial
30. The defendant is only liable for the extent of the injury which the reasonable
man would have suffered. If the claimant is particularly sensitive and this means
that he suffers greater loss, the defendant is not liable for this 'extra' loss even
though the type of injury was reasonably foreseeable.
Is the statement above true or false?
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A (false). Provided the type of loss is reasonably
foreseeable, the defendant is liable for the full extent of the loss even though
the precise extent was not foreseeable. This is known as the egg-shell skull
rule.
31. If, as a result of a Disciplinary Scheme Tribunal, an actuary is fined, what is the
maximum amount he or she can be fined?
Your answer (in bold):
A.
B.
C.
D.
£5,000
£20,000
£50,000
there is no limit.
Correct
Answer D is correct because in theory there is no limit as to how much a
guilty actuary could be fined though in practice the amount must be in
proportion to the misdemeanor. This will be based on the panel's judgement
and at its discretion.
32. You have just joined a new company, and you have already been asked to make
a recommendation on what you think is a strategic, high-impact decision. Your
recommendation will be made direct to the Chief Executive. You have looked for
someone able to help you with this, but not found anyone with the right
qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you there
is not enough time to do that, and suggested you should "Use your instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A.
B.
C.
D.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend to
involve little structure or formality, high risk-taking, and the decision-making
power concentrated in a few people. In a hierarchy (B) you would expect a
big decision to go through a more formal process of approval, and in a
matrix organisation (C) you would expect more people to be involved in the
process bringing their own views and expertise.
33. Charles is the purchasing director of Westron Limited. He recently purchased
some chemicals from Joe Sullivan, a sales manager for Chems Limited. The
chemicals that have been delivered are the wrong concentration and unusable by
Westron Limited. Chems Limited is refusing to replace them. If proceedings are
commenced, who would be the parties to the action?
Choose the two correct parties.
Your answer (in bold):
A. Charles
B. Joe Sullivan
C. Westron Limited
D. Chems Limited
Correct
Answers C and D are correct. The contract is made by Charles and Joe as
agents for, and signing on behalf of, the two companies. Therefore, the
companies would be the parties to any legal action.
31 Quiz Feedback
31.1
View
Instructions
You got 29 out of 32 answers correct (91%)
Congratulations! You have passed the Business Awareness Module test.
1. Please enter your student ARN.
Your response:
9040983
(This question is not included in the score.)
2. You are the lead agency working for a motor manufacturer, whose new
'technology-enhanced' car - the Mobilo - has an inbuilt computer and telephone
system to enable smarter working on the move. However, the Mobilo is not
selling as well as expected into the company's core customer segments. Recent
research has revealed that the core segments are seeking mobile efficiency as
well as enhanced status for being 'early adopters' in this market.
Which of the company's advantages would you use as the core of a campaign to
increase uptake?
Your answer (in bold):
A. The quality of its research and development function, which has an
unrivalled reputation for new ideas in mobile living/working.
B. The strong relationships the company has with its suppliers, who provide
highly-reputed technological components.
C. The speed of delivery, fulfilling orders faster than any of the competition,
to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for awareness
three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency
as well as their need to be early adopters in the market. Customers will
value the highly-reputed technological components (B), but alone they do
not meet customer needs for mobile efficiency. Speed of delivery (C) will
help in getting the products to customers early, to support them being
early adopters, but it does not match their need for innovation. There is
little benefit in purely having high awareness of the company brand (D), if
this product campaign is not communicating the benefits relevant to the
target groups.
3. Kerry offered to buy Rafiq's car for £5,000. She said that she would keep her
offer open until 1 June. On 14 May, Rafiq posted a letter accepting Kerry's offer.
This letter was lost in the post. In the meantime, on 13 May, Kerry posted a letter
revoking her offer which Rafiq received on 18 May.
Which two of the following are correct?
Your answer (in bold):
A. If the postal rule applies Rafiq's acceptance is valid on 14 May.
B. If the postal rule does not apply Rafiq's acceptance is invalid as it
has not been communicated.
C. The postal rule cannot apply here, as Rafiq's acceptance was lost in the
post.
D. Kerry cannot revoke her offer as she said she would keep it open until 1
June.
E. Kerry has validly revoked her offer on 13 May.
Correct
The correct answer is A and B. C is not correct because the postal rule
can still apply even if the acceptance is lost in the post - Household Fire
Insurance v Grant (1879).D is not correct as Kerry can still revoke even
though she said she would leave the offer open - Routledge v Grant
(1828).E is not correct as a revocation is only effective when
communicated, not when it is posted - Byrne v Van Tienhoven (1880).
4. The pressures that affect an industry's profitability are known as competitive
forces, or Porter's 'Five Forces'.
Which of the following is not one of the five forces?
Your answer (in bold):
A.
B.
C.
D.
Rivalry.
Economic change.
Threat of new entrants.
Supplier power.
Correct
The answer is B in accordance with the 'How strong are the competitive
forces?' tutorial
5. What should members do if they believe that a course of action is unlawful,
unethical and improper?
Your answer (in bold):
A.
B.
C.
D.
speak up to their clients or to their employers or both
resign from the project
contact an appropriate Committee
put the matter in the hands of a lawyer
Incorrect
Answer A is correct. It is important that members appreciate the need to
"speak up" (whistle-blow), when believing that a course of action pursued
is wrong. Other actions (resignation, going to the Profession or seeking
legal advice) are ancillary to this core requirement.
6. Which one of the following statements is incorrect?
Your answer (in bold):
A. Damages for fraudulent or negligent misrepresentation are assessed on a
tort basis
B. Damages in tort aim to put the innocent party in the position he or she
would have been in had the tort not occurred
C. Damages in contract aim to compensate the innocent party for loss of
bargain
D. A claimant can never have concurrent claims in contract and tort
Correct
The correct answer is D. Other a claimant will have a claim for breach of
contract and in the tort of negligence on the same facts. A claimant is free
to choose which claim he or she wishes to pursue.
7. One form of research used with consumers to explore their needs is called
Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct
statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value
of different attributes of a product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the
product or service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A Conjoint means 'CONsiderJOINTly and is devised to
help people explain what trade-offs they would make between attributes.
8. Which of the following is least likely to be a current issue for general insurance
companies?
Your answer (in bold):
A.
B.
C.
D.
Capital adequacy.
Increasing longevity.
Treating customers fairly.
Claims compensation culture.
Correct
Answer B is correct because increasing longevity is a current issue for life
insurance companies and pension schemes, particularly when annual or
monthly benefits are being paid out for the rest of a person's life. However,
this would not be an issue for a general insurance company that does not
offer benefits related to a person's lifetime. Answers A, C and D are all
current issues for a general insurance company.
9. You are the marketing actuary for insurance company XYZ You have just been
informed by the Board, on a confidential basis, that XYZ has joined a cartel of
insurance companies that is in the process of agreeing major changes to the
terms of core insurance products. The new terms will have the appearance of
being better value to customers but in fact the vast majority will be worse
off. This change would dominate the market and would result in higher overall
profits, but you feel that it is unethical.
Which of the following best describes how you should proceed?
Your answer (in bold):
A. Your primary responsibility is to your employer and the shareholders of
company XYZ, so you should implement the proposal irrespective of your
own ethical views.
B. The information is confidential and you should therefore not discuss it with
anyone outside the Board of XYZ.
C. Although the information is confidential, you should consider
disclosing it (if legal) because it would be in the public interest to
do so.
D. As marketing actuary, it is your responsibility to differentiate yourself from
competitors and for that reason you should recommend not joining the
cartel.
Correct
Answer C is correct. Members will respect confidentiality unless disclosure
is permitted by law and justified in the public interest.
10. Which one of the following statements is correct?
Your answer (in bold):
A. An actuary can never limit his or her liability to a client
B. An attempt by an actuary to limit liability to a client will be subject
to a reasonableness test
C. Any attempt by an actuary to exclude liability for his or her negligence is
void
D. If there is any ambiguity in a limitation clause used by an actuary, it will
be construed in favour of the actuary
Correct
The correct answer is B because the Unfair Contract Terms Act 1977
imposes such a test. C is wrong because an actuary can exclude liability
for loss other than death or personal injury arising from negligence as long
as the exclusion satisfies the reasonableness test. D is wrong because it
will be construed against the actuary!
11. Synthesis is the process of combining two or more facts to produce other
facts, hypotheses or questions. There are two kinds of synthesis.
Which one of the following are they?
Your answer (in bold):
A.
B.
C.
D.
Negative and deductive.
Creative and corrective.
Corrective and negative.
Deductive and creative.
Correct
The answer is D in accordance with the 'Synthesis' tutorial
12. As an executive in a major oil company, you work for the division where
responsibilities cover its network of petrol stations serving the public. You've
received details from the directors of the strategic, financial, and non-financial
objectives going forward.
Identify the two strategic objectives.
Your answer (in bold):
A. Devise a new package of benefits for the 'motorist's club' loyalty scheme
you run for customers.
B. Pledge to protect the environment by increasing new policies and
processes.
C. Leverage distribution network more effectively by establishing
shops on sites.
D. Increase return on investment by 5% over 2 years.
E. Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to
achieve the financial objectives in D. A is tactical rather than strategic, and
B is non-strategic and non financial (although often it is difficult to draw a
clear-cut line between profits and social responsibility). D is financial - it is
a specific goal with specific timeframe.
13. In the business game, The Way Forward, which two of the following are true?
1.
2.
3.
4.
depreciation is accounted for on the balance sheet
creditors and debtors both count as assets on the balance sheet
the purpose of the balance sheet is to show what the company is worth
the value of currently held stock is shown as an asset on the balance
sheet
Your answer (in bold):
A.
B.
C.
D.
1 and 4
2 and 4
1 and 3
2 and 3
Correct
The correct answer is A. Depreciation and the current value of stock are
accounted for on the balance sheet. B is not correct as creditors are an
asset, debtors are a liability. C is not correct as a balance sheet does not
reflect what a company is worth, only the value of its assets and liabilities
at a point in time.
14. Who carried out a review of The Actuarial Profession in 2004/05?
Your answer (in bold):
A.
B.
C.
D.
Lord Penrose.
Sir Derek Morris.
John Myners.
Gordon Brown.
Correct
Answer B is correct. Sir Derek Morris carried out the review at the request
of Gordon Brown's Treasury Department following the report by Lord
Penrose about Equitable Life.
15. You may be offered a gift by a company with whom you, or your company,
has a business / professional relationship. In deciding whether to accept the gift,
which of the following would not be true?
Your answer (in bold):
A. You must consider carefully whether acceptance of a gift could in any way
influence your judgement.
B. You must find out what your company's policy is on gifts.
C. A series of gifts is likely to be viewed as acceptable business
practice compared with the offer of a one-off gift for a particular
piece of work.
D. The relative financial status of a donor and donee is relevant.
Correct
Answer C is correct because a single gift, especially if it occurs at the
termination of a particular task of some importance, is less likely to be
objectionable than a series of gifts implying the possibility of undue
influence. The other alternatives, A, B and D, are all true. An example
under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some
standing.
16. A firm of actuaries issues a brochure advertising its services.
Which one of the following statements is most likely to be incorrect?
Your answer (in bold):
A. The brochure is likely to be classed as an invitation to treat
B. Statements made in the brochure are capable of being misrepresentations
C. The brochure is likely to form a binding contract between the firm
and the client
D. The brochure is likely to form a collateral contract with the client
Correct
The correct answer is C. A is wrong because it is unlikely the firm will be
expressing a willingness to be bound by the terms of the brochure. B is
wrong because if a statement in the brochure is untrue and induces entry
into a contract it is capable of being a misrepresentation. D is wrong
because collateral contracts are rare. The brochure is unlikely to form a
collateral contract.
17. You have just joined a new company, and you have already been asked to
make a recommendation on what you think is a strategic, high-impact decision.
Your recommendation will be made direct to the Chief Executive. You have looked
for someone able to help you with this, but not found anyone with the right
qualifications or experience.
You had intended to do a detailed analysis, but a colleague has informed you
there is not enough time to do that, and suggested you should "Use your
instinct."
What type of organizational structure do you think you are now working in?
Your answer (in bold):
A.
B.
C.
D.
A complex matrix organisation.
A hierarchical organisation.
A power-based organisation.
A freeform organisation.
Correct
Answer C Newly-formed companies are frequently power-based and tend
to involve little structure or formality, high risk-taking, and the decisionmaking power concentrated in a few people. In a hierarchy (B) you would
expect a big decision to go through a more formal process of approval,
and in a matrix organisation (C) you would expect more people to be
involved in the process bringing their own views and expertise.
18. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget
B. Object A has a button
C. Object A is a green striped widget with a button
D. Object A has a button and green stripes
Correct
The answer is D as all you know for sure is that Object A has a button and
green stripes. This is in accordance with the deductive synthesis exercise
under the 'Synthesis' tutorial
19.
Which two of the following are key requirements for our Open Communication
principle:
1. Members will meet all applicable reporting standards.
2. Members will communicate effectively.
3. Members should take legal advice before using actuarial designations in
any formal communication.
4. Members should seek the advice of the Profession before using actuarial
designations in any formal communication.
Your answer (in bold):
A.
B.
C.
D.
1 and 4
2 and 3
2 and 4
1 and 2
Correct
Answer D is correct. Members will communicate effectively and meet all
applicable reporting standards.
20. Which ONE of the following statements about directors' duties is incorrect?
Your answer (in bold):
A. A director owes a duty to employees of a company
B. Directors' duties are codified in the Companies Act 2006
C. A director is expected to exercise reasonable care and skill when
performing his functions
D. A director must exercise independent judgment
Correct
The correct answer is A because that is the untrue statement - a director
should consider the interests of employees, but owes no direct duty to
employees. B is true - Directors' duties are codified in sections 170 – 177
Companies Act 2006. C is true - this duty is set out in section 174
Companies Act 2006. D is true -this duty is set out in section 173
Companies Act 2006.
21. You run the office cleaning division at International GlobalCorp, and you are
setting your group's objectives. IGC's corporate goal is to grow market share in
all its businesses.
Which of the following objectives for your area directly supports the corporate
objective?
Your answer (in bold):
A.
B.
C.
D.
Increase the number of active customers by 15%
Reduce costs of purchased cleaning products by 10%
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards
Correct
Answer A is correct. While the other objectives might indirectly contribute
to the ability to grow market share, answer A is the only one that directly
results in increased share (assuming that the market as a whole grows
less than 15%!).
22. In order to achieve a business plan, strategy and tactics must be considered.
Tactics is defined as...
Your answer (in bold):
A.
B.
C.
D.
the work undertaken by customer-facing staff
the human resources needed for the plan
the means by which the plan is implemented
the competitive advantages the company will aspire to in order to achieve
its strategy
Correct
The answer is C in accordance with the strategy vs tactics Explore
diagram under the 'Creating and capturing value' tutorial
23.
Which of the following is/are principles of the Actuaries’ Code?
1. Application
2. Business
3. Compliance
Your answer (in bold):
A.
B.
C.
D.
2 and 1 only
2 and 3 only
1 only
3 only
Correct
The correct answer is D. Compliance is the only principle listed here.
24. Charles is the purchasing director of Westron Limited. He recently purchased
some chemicals from Joe Sullivan, a sales manager for Chems Limited. The
chemicals that have been delivered are the wrong concentration and unusable by
Westron Limited. Chems Limited is refusing to replace them. If proceedings are
commenced, who would be the parties to the action?
Choose the two correct parties.
Your answer (in bold):
A.
B.
C.
D.
Charles
Joe Sullivan
Westron Limited
Chems Limited
Correct
Answers C and D are correct. The contract is made by Charles and Joe
as agents for, and signing on behalf of, the two companies. Therefore, the
companies would be the parties to any legal action.
25. Which of the following statements describes the characteristics of powerbased organizations in terms of organizational decision-making?
Select the two relevant options.
Your answer (in bold):
A. Decision-making may be based on instinct or swayed by key
influencers more than key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified.
Easier to predict likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues
beyond one function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organisations. A - A
central power source is usually associated with young companies, or
those where the founder has not wished to expand greatly. B - describes a
characteristic of a hierarchical organisation. C - is a characteristic of
matrix organisations. D - is a characteristic of matrix organisations. EOrganisations where power is highly concentrated in one or few
individuals are compromising their future stability if those decision makers
cannot continue and no successors have been identified.
26. When you are discussing work with actuarial friends from another company
you must be careful what you talk about. There is a risk that you may be caught
off guard, especially in a social environment. Which of the following topics relating
to your company would it normally be safe for you to talk about without the risk
of divulging anything confidential?
Your answer (in bold):
A. Commercial information that would be available in the market
place.
B. Product development plans.
C. Results of recent internal mortality investigations.
D. Specific salary levels of actuaries in your company.
Correct
It is likely that your company would not like to think you were talking about
B, C or D and you might be contravening your employment contract by
doing so. Therefore, A is the correct answer because there is no reason
why you should not talk about information that would be available in the
market place even if it could be quite hard for someone else to find that
information.
27. In the business game, The Way Forward, which one of the following mix of
strategies would you expect to be the most successful?
Your answer (in bold):
A.
B.
C.
D.
Modern, high quality product; medium price; conservative brand image
Traditional product; high price; modern brand image
Fashionable product; high price; prestigious image
Sturdy basic product, high price, traditional image
Correct
The correct answer is C. The three features of C, taken together, offer a
consistent strategy. In each of A, B and D the three features are not
consistent.
28. The company you work for, TransGlobal Multinational Limited, is considering
entering a new market. The decision-making process has involved reviewing other
similar organisations' attempted entries, identifying successes and failures,
suggesting improvements that TransGlobal could make over competitors' offers,
and an analysis of the market and the customers' needs.
Based on this decision-making behaviour, which one of the organisational cultural
types listed do you think TransGlobal fits within?
Your answer (in bold):
A.
B.
C.
D.
Defenders.
Innovators.
Fast followers.
Slow reactors.
Correct
Answer C is correct. This behaviour illustrates an organisation not willing
to take the risk of moving first, but opportunistic enough to enter where an
opportunity has appeared, and then attempt to improve upon the market
entry, process, or product introduced by the innovator.
29. Select the one statement below that correctly defines the difference between
deductive synthesis and creative synthesis?
Your answer (in bold):
A. In deductive synthesis the new fact is implicit in the old ones, while in
creative synthesis the new fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from an
hypothesis, while in creative synthesis facts are created by some
additional insight.
C. In deductive synthesis facts are found by reducing the data down
to the fact, while in creative synthesis facts are created by some
additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in
creative synthesis removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the
outcome, while in creative synthesis facts are not relevant to the outcome.
30. In which of the following situations does a duty of care not generally arise?
Your answer (in bold):
A.
B.
C.
D.
Motorist to other road users
Auditor to third parties who rely on accounts filed at Companies House
Actuary to client
Doctor to patient
Incorrect
The correct answer is B. An auditor does not generally owe a duty of care
to a third party unless there has been a voluntary assumption of
responsibility.
31. Which of the following is NOT deemed to give rise to a conflict of interest?
The member's duty to act in the best interest of any client compromises ……………
Your answer (in bold):
A.
B.
C.
D.
….. the member's own interests
….. the member's ability to report truly and fairly to the regulator
….. the interest of the member's firm
….. the interest of other clients
Incorrect
Answer B is correct. The member's ability to report to the regulator
represents a definite professional impediment but not a true conflict. The
others are all valid conflicts of interest
32. All except two of the following would be appropriate criteria to test whether a
potential segment should be a viable target. Select the two which are NOT real
tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require
some adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to
include the target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or
distribution exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a
long time, ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true
segment. D - although it is vital to have channels of communication and
distribution they do not have to be exclusive. E - a long established
segment is likely to be served already and using this criterion would in any
case eliminate interesting emerging segments.
33. The defendant is only liable for the extent of the injury which the reasonable
man would have suffered. If the claimant is particularly sensitive and this means
that he suffers greater loss, the defendant is not liable for this 'extra' loss even
though the type of injury was reasonably foreseeable.
Is the statement above true or false?
Your answer (in bold):
A. False
B. True
Correct
The correct answer is A (false). Provided the type of loss is reasonably
foreseeable, the defendant is liable for the full extent of the loss even
though the precise extent was not foreseeable. This is known as the eggshell skull rule.
2. If you were classifying a company in terms of how it made decisions when responding to
changing market conditions, which one of the following descriptions would define a 'Defender'?
Your answer (in bold):
A. Historically successful, but conservative, and potentially becoming complacent.
Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to
improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait around for
detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong returns
and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs defending from others
seeking to steal market share from them. They have resources they can use to attack competitors. Sometimes their relative
strength can make them over confident. D - describes Fast Follower organisations who are less happy with high risk than
Innovators, but can often achieve greater returns and visibility than Innovators gain. B - describes a combination of Defenders,
Innovators and Fast Followers. C - describes Innovators.
3. Which one of the following always requires approval by shareholders to be valid?
Your answer (in bold):
A. Sale of company assets to an unconnected third party
B. Sale of assets worth £10 to a director
C. Awarding a director a fixed term service contract over 6 years in length
D. Registering a transfer of shares
Correct
The correct answer is C. A is wrong because unless there is provision in the articles to the contrary this can be done by
directors. B is wrong because sale of assets to directors over a certain level requires approval of shareholders. However,
small value sales do not require approval. D is wrong because this is usually done by directors.
4. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesises the facts?
Your answer (in bold):
A. Object A is a widget
B. Object A has a button
C. Object A is a green striped widget with a button
D. Object A has a button and green stripes
Correct
The answer is D as all you know for sure is that Object A has a button and green stripes. This is in accordance with the
deductive synthesis exercise under the 'Synthesis' tutorial.
5. Members will take reasonable steps to ensure that they are aware of:
Your answer (in bold):
A. any relevant interest, including income, of their firm
B. any previous disciplinary findings against members in their firm
C. the salaries and other earnings of senior members within their firms
D. circumstances which might delay the completion of the appointment or instruction
Correct
Answer A is correct. In the pursuit of independence and impartiality, members must undertake investigation of possible
conflicts of interest, personal or corporate, which would prevent them undertaking the work.
6. Kamla sends a fax to Tony asking if he wants to buy her computer for £500. Tony sends a
fax back asking if Kamla will accept £450. Later that day, not having received a reply from
Kamla, Tony sends her a fax saying "I'll buy the computer for £500. Can you deliver it to me
or should I collect?" Kamla no longer wants to sell the computer.
Which one of the following is correct?
Your answer (in bold):
A. Tony has a contract with Kamla to buy the computer for £450
B. Tony has a contract with Kamla to buy the computer for £500
C. There is no contract between Tony and Kamla
D. There is a contract with Kamla to buy the computer but the court will fix a reasonable
price
Correct
The correct answer is C. Tony's first fax is a counter offer. This has the effect of destroying Kamla's offer which can no
longer be accepted. The authority for this is the case of Hyde v Wrench (1840).
7. You are the new Managing Director of Korsan, a city-based chain of medium-priced hotels
catering primarily for late-night business travellers. Trade is reasonable, and you have a high
level of repeat business (and thus good projected future occupancy), but costs seem high and
profits slim, particularly for the hotel's restaurant. It serves few customers at night, although
the chefs have done innovative things to the menus to increase their appeal. A rival chain Luxuria - is also setting up its high-class hotels for discerning travellers in the same cities, and
your board is panicking that significant business will be lost. They present some recent
research showing that customers' core needs are a good night's sleep and a convenient
location. They also present a large dossier of suggestions for maximising the value of the
business.
Which one would you implement?
Your answer (in bold):
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning
travellers) to Korsan
B. Open your restaurant to non-hotel guests, to increase the level of potential customers
for Korsan
C. Invest in a major marketing campaign to promote the location benefits of Korsan to
new customers
D. Reduce the restaurant to breakfast-only, setting up a relationship with a
city-based restaurant for your customers to have discounted evening meals
Correct
Answer D is correct. By only serving the needs most desired by customers (sleep and location) Korsan can reduce
unnecessary overheads and increase value captured. The deal with a city restaurant will also be attractive to those
customers wanting to eat in the evening. Korsan's target audience is different to Luxuria, and there is no evidence to
suggest that Luxuria's target audience would be attracted, even with a refurbished hotel. A - could be a costly error. B would require investment by way of a marketing campaign to get it off the ground, and there is no guarantee that nonhotel customers would be attracted. Korsan has high repeat business and high projected future occupancy, so a
campaign to attract new customers (C) would be wasteful.
8. As a result of the Morris Review, which body will oversee The Actuarial Profession in future?
Your answer (in bold):
A. The Financial Reporting Council
B. The Financial Services Authority
C. The Board for Actuarial Standards
D. The Treasury
Incorrect
Answer A is correct and you are recommended to read at least the Forward and the Executive Summary of the Morris
Review. You will find the Review on the Profession's website.
9.
Members will not allow X to override their professional judgement.
Which three matters might replace X?
1.
2.
3.
4.
5.
6.
7.
8.
bias
dominance risk
fatigue
religious fervour
conflict of interest
undue influence of others
the opinions of student colleagues
media speculation
Your answer (in bold):
A. 1, 5 and 6
B. 2, 3 and 8
C.
D.
1, 4 and 7
4, 6 and 8
Correct
Answer A is correct. Members must ensure that their professional judgement is not impaired by bias (1), conflict of
interest (5) or undue influence of others (6).
10. ABC Ltd were asked to provide a reference for their former employee, Jane, by XYZ Ltd
who had provisionally offered her a job. Unfortunately, when preparing the reference Jane's
record was confused with another employee's record. The reference given was completely
inaccurate, stating that Jane was a bad time-keeper. Jane was not offered the job as a result
of the information contained in the reference.
Which one of the following statements correctly identifies Jane's position?
Your answer (in bold):
A. Jane cannot bring a claim against ABC Ltd as she did not ask for the reference and
therefore no duty is owed to her
B. Jane has suffered no loss and cannot bring a claim
C. Jane may bring a claim against XYZ Ltd for relying on an inaccurate reference
D. Jane may bring a claim against ABC Ltd as a former employer does owe a
duty to a former employee to prepare the reference without negligence
Correct
The correct answer is D. A former employer does owe a duty to a former employee to prepare the reference without
negligence. See the case of Spring v Guardian Assurance [1994].
11. In order to achieve a business plan, strategy and tactics must be considered.
Tactics is defined as:
Your answer (in bold):
A. The work undertaken by customer-facing staff
B. The human resources needed for the plan
C. The means by which the plan is implemented
D. The competitive advantages the company will aspire to in order to achieve its strategy
Correct
The answer is C in accordance with the strategy vs. tactics explore diagram under the 'Creating and capturing value'
tutorial.
12. The sustainability of a competitive advantage is driven in part by whether the advantage is
likely to last for a long time and is hard to substitute. You can 'test' if an advantage is likely to
be sustainable by asking if it has certain attributes. The following list describes the attributes
of a sustainable advantage - but one of them is not correct.
Which one does NOT represent an attribute of sustainable advantage?
Your answer (in bold):
A. A competitive advantage is likely to be sustainable if it is based upon a scarce
resource
B. A competitive advantage is likely to be sustainable if it is difficult to imitate
C. A competitive advantage is likely to be sustainable if it is hard to transfer
D. A competitive advantage is likely to be sustainable if it is based on
technology
E. A competitive advantage is likely to be sustainable if it hard to identify or understand
Correct
Answer D is correct. Unless the technology is proprietary, and therefore hard to imitate, or otherwise hard to identify or
understand, technology often represents an advantage that is easily eroded by others attaining the same, or similar,
technology. All the other options are ways you can 'test' if an advantage is likely to be sustainable for a reasonable
length of time because if an advantage is hard to imitate, transfer or identify/understand the implication is competitors
won't have the capability to replicate it.
13. In the business game, The Way Forward, which one of the following mix of strategies
would you expect to be the most successful?
Your answer (in bold):
A. Modern, high quality product; medium price; conservative brand image
B.
C.
D.
Traditional product; high price; modern brand image
Fashionable product; high price; prestigious image
Sturdy basic product, high price, traditional image
Correct
The correct answer is C. The three features of C, taken together, offer a consistent strategy. In each of A, B and D the
three features are not consistent.
14. There are certain roles for actuaries that are 'reserved' solely for them. These are roles
laid down by statute that only an actuary can carry out.
Which two of the following are not statutory roles reserved for actuaries only?
Your answer (in bold):
A. Scheme Actuary (pensions)
B. With Profits Actuary (life insurance)
C. Reserving Actuary (general insurance)
D. Lloyd's Syndicate Actuary (Lloyd's of London market)
E. Appointed Actuary (life insurance)
Correct
Answers C and E are correct. Although the Morris Review has recommended that the FSA should require a general
insurer to take advice from an approved person regarding risk assessment and the valuation of liabilities, this approved
person would not have to be an actuary (C). The Appointed Actuary role was a statutory one until 31 December 2004
when it was replaced by an Actuarial Function Holder and a With Profits Actuary (E). A, B and D are all statutory
roles.
15. You may be offered a gift by a company with whom you, or your company, has a business
/ professional relationship.
In deciding whether to accept the gift, which of the following would not be true?
Your answer (in bold):
A. You must consider carefully whether acceptance of a gift could in any way influence
your judgement
B. You must find out what your company's policy is on gifts
C. A series of gifts is likely to be viewed as acceptable business practice
compared with the offer of a one-off gift for a particular piece of work
D. The relative financial status of a donor and donee is relevant
Correct
Answer C is correct because a single gift, especially if it occurs at the termination of a particular task of some
importance, is less likely to be objectionable than a series of gifts implying the possibility of undue influence. The other
alternatives, A, B and D, are all true. An example under D is that a substantial gift to a newly-qualified actuary might be
more suspect than the same gift to an established actuary of some standing.
16. A company holds advance payments made by customers on trust for those customers.
Which of the following statements is incorrect?
Your answer (in bold):
A. All the customers must be able to be identified in order for the trust to be effective
B. If the company goes into liquidation , the trust monies can be used to pay
the creditors of the company
C. If the company goes into liquidation, the trust monies are ringfenced for customers
D. The directors of the company cannot use the trust monies to pay suppliers of the
company
Correct
The correct answer is B. The trust monies belong to customers until the customers receive their goods.
17. You have been asked to define the competitive positioning for your business unit, a
supplier of laser printers.
Which one of the following statements would NOT represent a component of the business
unit's competitive position?
Your answer (in bold):
A. Supply affordable laser printers and related supplies
B.
C.
D.
Target Home Office computer users
Taking a phased approach to expanding the distribution network
Sell through both retail stores and online
Correct
Answer C is correct. All of the other responses represent a definition of either product/service, target customers, or
channels, all of which are competitive positioning decisions. Answer C is more concerned with timing and resource
decisions for building the company.
18. What is the underlying principle on which a 'Strategic Staircase' should be devised?
Select the correct answer:
Your answer (in bold):
A. It should be a robust plan allowing for multiple parallel activities to be completed
simultaneously and in a short timeframe
B. It should be drawn up in detail by the most senior executives in the company, so it
takes into account the company's past plans and successes
C. It should be a sequence of steps that are strategic plans in their own right,
so long term, major change can be managed in stages
D. A Strategic Staircase should be developed for any activity within a company which
involves an activity not undertaken previously
Correct
C is the correct answer as a Strategic Staircase is needed when a significant and major change could result in high risk if
there was an attempt to implement it too quickly (so D is incorrect and A is incorrect). It is inherently about the future,
so only taking into account the past would not be sufficient, and for major change programmes, wide inputs from the
organisation should be taken into account (so B is incorrect).
19. If, as a result of a Disciplinary Scheme Tribunal, an actuary is fined, what is the maximum
amount he or she can be fined?
Your answer (in bold):
A. £5,000
B. £20,000
C. £50,000
D. There is no limit
Correct
Answer D is correct because in theory there is no limit as to how much a guilty actuary could be fined though in
practice the amount must be in proportion to the misdemeanor. This will be based on the panel's judgement and at its
discretion.
20. Which one of the following statements is correct?
Your answer (in bold):
A. An actuary can never limit his or her liability to a client
B. An attempt by an actuary to limit liability to a client will be subject to a
reasonableness test
C. Any attempt by an actuary to exclude liability for his or her negligence is void
D. If there is any ambiguity in a limitation clause used by an actuary, it will be construed
in favour of the actuary
Correct
The correct answer is B because the Unfair Contract Terms Act 1977 imposes such a test. C is wrong because an
actuary can exclude liability for loss other than death or personal injury arising from negligence as long as the exclusion
satisfies the reasonableness test. D is wrong because it will be construed against the actuary.
21. You are an industry analyst in a venture capital company, preparing a report for potential
investors on a restaurant chain, Fervour, which is looking to expand abroad. Fervour
specialises in converting churches into restaurants, capitalising on the architecture to create
atmospheric surroundings, supported by live jazz. The menus - created by Michelin chef JeanPierre Noir - are highly acclaimed in culinary circles for their imagination and flair. Fervour
looks to cater for a wide range of clientele, offering a dining experience 'for all the senses'.
While it is still relatively unknown, it has bought the majority of unused church buildings
across the country, ready for conversion.
In trying to make the investment proposition sound as attractive as possible, it is important
that you highlight where Fervour has advantages in the marketplace.
Which one of the following statements do you feel represents a real and sustainable
competitive advantage?
Your answer (in bold):
A. Scarce assets - not many other restaurants offer such a varied menu
B. The Fervour brand, which could be capitalised upon outside the country
C. Superior locations - church buildings stand out against ordinary restaurants,
and are located close to the desired audience
D. Marketing capability - Fervour has recently introduced its own website to extend the
diner's experience, detailing the menus and music planned at all its venues
E. Relationships with its key suppliers - to ensure the freshest food and the right
musicians
Correct
Answer C is correct. The fact that Fervour has bought up most unused churches means that other competitors will be
unable to replicate the Fervour surroundings, making this a sustainable advantage. While the menus are imaginative
(A), they can also be copied, which means that this advantage is difficult to sustain. The Fervour brand (B) is unknown
outside the country, so it cannot yet be exploited as an advantage. While a website (D) is useful, it is likely that most
other restaurants will also have a website supporting their core offering, so this does not represent an advantage.
Relationships with suppliers to ensure fresh food (E) are a necessity in this market, rather than an advantage.
22. You are considering investing in the car manufacturing industry, but you are concerned
about competitive forces changing the market. You've decided to organise an analysis on the
five major competitive forces acting on the industry.
Which of the following represents the Five Forces that you should investigate?
Your answer (in bold):
A. Product, price, people, placement, positioning of substitute products
B. Threat of substitute products, rivalry, supplier power, customer power,
threat of new entrants
C. Missions, objectives, goals, strategies, objectives
D. Access to capital, ease of integration, synergy with existing operations, distribution
channels, sustainable competitive advantages
Correct
Answer B is correct. The other options do not represent the Five Competitive Forces acting on an industry.
23.
Which two of the following are key requirements for our Open Communication principle:
1.
2.
3.
4.
Members will meet all applicable reporting standards.
Members will communicate effectively.
Members should take legal advice before using actuarial designations in any formal
communication.
Members should seek the advice of the Profession before using actuarial designations
in any formal communication.
Your answer (in bold):
A. 1 and 4
B. 2 and 3
C. 2 and 4
D. 1 and 2
Correct
Answer D is correct. Members will communicate effectively and meet all applicable reporting standards.
24. Which of the following cases decided that, if a particular type of loss is within the parties'
contemplation as a serious possibility, then all loss of that type is recoverable even if more
serious than could have been contemplated?
Your answer (in bold):
A. Hadley v Baxendale
B. Parsons v Uttley Ingham
C. Victoria Laundry v Newman Industries
D. The Heron II
Correct
The correct answer is B. In this case the court said it was within the contemplation of the parties that the pigs might be
ill if they ate the mouldy food. The fact that the illness was more serious than could have been contemplated was not
relevant. The case concerned physical loss/damage and not just loss of profits.
25. All except two of the following would be appropriate criteria to test whether a potential
segment should be a viable target.
Select the two which are NOT real tests of segment viability.
Your answer (in bold):
A. Distinctiveness - are the customer needs sufficiently different to require some
adaptation to product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to include the
target customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or distribution
exclusively devoted to reaching these targets?
E. Stability - has the segment been recognised and established for a long time,
ensuring it will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although it is vital to have channels
of communication and distribution they do not have to be exclusive. E - a long established segment is likely to be
served already and using this criterion would in any case eliminate interesting emerging segments.
26. A father of one of your friends feels he has lost out by his insurance company merging
with another. Your friend believes you know something about how insurance companies work
and asks you to find out something for her father. Which of the following actions would it be
sensible for you to take?
Your answer (in bold):
A. Tell your friend everything you know about the merging of insurance companies
B. Tell your friend that her father may have been disadvantaged because a main aim of
any merger would be to benefit the shareholders rather than the policyholders
C. Tell your friend that you know one of the actuaries who worked on the merger and
that you will ask him to write to her father
D. Tell your friend that she should ask her father to check that he has received
from his insurance company an outline of the reasons for the merger and
that he should ask for a full version of the available documents
Correct
Answer D is correct. You would have to be very careful in this type of situation and remember that you are never "off
duty". There will always be a risk that what you say gets construed as expert actuarial opinion, and may get quoted, or
misquoted, by third parties. It would be potentially very dangerous to act per A or B and not reasonable to act as C
because the actuary you know should not be expected to write to individual policyholders - in fact his company may not
allow him to.
27. In the business game, the Way Forward, which of the following effects would be most
likely if supplier relations was chosen as a management priority?
Your answer (in bold):
A. Increased staff morale
B. Higher sales prices
C. Increased product differentiation
D. Improved stock control
Correct
The correct answer is D. If the highest management priority was supplier relations this would be most likely to result in
speedier and more accurate stock deliveries and overall stock control. Increased staff morale might result in improved
stock control but it would be an indirect result. Neither higher sales prices or product differentiation would be a prime
outcome from attention to supplier relations.
28. The company you work for, TransGlobal Multinational Limited, is considering entering a
new market. The decision-making process has involved reviewing other similar organisations'
attempted entries, identifying successes and failures, suggesting improvements that
TransGlobal could make over competitors' offers, and an analysis of the market and the
customers' needs.
Based on this decision-making behaviour, which one of the organisational cultural types listed
do you think TransGlobal fits within?
Your answer (in bold):
A. Defenders
B. Innovators
C. Fast followers
D. Slow reactors
Correct
Answer C is correct. This behaviour illustrates an organisation not willing to take the risk of moving first, but
opportunistic enough to enter where an opportunity has appeared, and then attempt to improve upon the market entry,
process, or product introduced by the innovator.
29. Moving from an existing strategy to a new one can be challenging with complicated
changes to implement. Trying to do everything at once can stretch resources. It is usually best
to progress in manageable steps with each step representing a sustainable strategy in itself.
Such steps are a Strategic Staircase.
In what order are the steps on Komatsu's Strategic Staircase, starting at the bottom?
Your answer (in bold):
A. Cost; quality; diversification; differentiation
B. Differentiation; quality; cost; diversification
C. Quality; cost; differentiation; diversification
D. Differentiation; diversification; quality; cost
Correct
The answer is C in accordance with the 'Komatsu's Strategic Staircase'. Explore item in 'The Strategic Staircase' tutorial.
30. Paul ordered new machinery from Buildco Ltd for use in his business and to be delivered
on 14 December. Buildco were three months late delivering the machinery. The signed
contract contains a clause stating that Buildco will not be liable for late delivery of the
machinery.
Which one of the following is NOT correct?
Your answer (in bold):
A. Buildco has broken an express term of the contract, s.3 of the Unfair Contract Terms
Act 1977 will apply to the exemption clause if Paul is dealing on Buildco's written
standard terms of business
B. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption clause
will be void
C. If s.3 of the Unfair Contract Terms Act 1977 applies the exemption clause will be valid
if reasonable
D. If s.3 of the Unfair Contract Terms Act 1977 does not apply, the exemption clause will
be valid
Correct
B is the only statement that is not correct since s.3 of the Unfair Contract Terms Act 1977 makes the clause subject to
the requirement of reasonableness.
31. What should members do if they believe that a course of action is unlawful, unethical and
improper?
Your answer (in bold):
A. Speak up to their clients or to their employers or both
B. Resign from the project
C. Contact an appropriate Committee
D.
Put the matter in the hands of a lawyer
Correct
Answer A is correct. It is important that members appreciate the need to "speak up" (whistle-blow), when believing that
a course of action pursued is wrong. Other actions (resignation, going to the Profession or seeking legal advice) are
ancillary to this core requirement.
32. One form of research used with consumers to explore their needs is called Conjoint
Analysis.
For what precise purpose would you use this research? Choose the correct statement.
Your answer (in bold):
A. To discover how they rate the importance and quantify the value of different
attributes of a product or service
B. To find out which types of people would buy the product or service
C. To see in what different types of circumstances people might use the product or
service
D. To find out what attributes of the product they are most familiar with
Correct
Correct Answer: A Conjoint means 'CONsiderJOINTly and is devised to help people explain what trade-offs they
would make between attributes.
33. Which one of the following statements is correct?
Your answer (in bold):
A. The provisions of the Companies Act 2006 never apply to shadow directors
B. The provisions of the Companies Act 2006 never apply to de facto directors
C. If a director cannot attend a board meeting he might be able to appoint a proxy
to stand in his place
D. A de jure director is a properly appointed director
Correct
The correct answer is D. A is incorrect because many provisions of the Act apply to shadow directors. B is
incorrect because many provisions of the Act apply to de facto directors. C is incorrect because proxies are used
by members. Directors use alternate directors to stand in their place.
Final Assignment
1. Strategic decisions work at different levels of a company.
If you were developing a 'business unit' strategy, which one of the following questions would you be
concerned with?
A. What functional capabilities should we build and leverage to meet the company's needs?
B. How should the business compete?
C. Which business/es should we be in?
Correct
B is correct. The business unit is concerned with how to compete, i.e. its competitive positioning and the
advantages it will use. A relates to functional strategy and C relates to corporate strategy.
2. Assume that in The Institute and Faculty of Actuaries there are two respected bodies of opinion as to
how to tackle a particular task (methods 1 and 2). You choose method 1. In the event it turns out that
using method 2 would have been more beneficial to the client.
Which one of the following statements is correct?
A.
B.
C.
D.
You are in breach of duty.
You are not in breach of duty.
You are in breach of duty, but damages will be reduced as you acted reasonably.
You are in breach of duty, but the client’s damages will be reduced as the client was guilty of
contributory negligence by allowing you to choose method 1.
Correct
The correct answer is B. A is wrong because if there are two respected bodies of opinion you are not in
breach of duty by choosing one of them. C is wrong because you are not in breach of duty if you follow a
recognized body of opinion and there is no basis for claiming a reduction of damages. D is wrong
because you are not in breach of duty by choosing a recognized body of opinion and there is no basis for
holding the client negligent.
3. If you have a major surprise to impart to your colleagues concerning the business, the way NOT to
communicate this would be...
A.
B.
C.
D.
at the next team meeting with your colleagues.
by talking to key influencers well before the meeting.
by checking your ideas with selected colleagues at least a week before the meeting.
by pre-selling your ideas to individual colleagues in the run-up to the meeting.
Correct
The answer is A in accordance with the 'no surprises' tutorial.
4. Which one is the powerful tool of memory?
A.
B.
C.
D.
Textbooks
Audio
Video
Visual
Correct
Correct Answer: D
5. Lara buys a computer from Leon. The purchase price is paid and the computer is delivered to Lara.
Three months later, John claims the computer from Lara. John says that the computer belonged to him,
but was stolen by a thief, who in turn sold the computer to Leon. Leon was not aware that the computer
was stolen.
Which statement is most accurate?
A. Lara must cancel the contract, return the computer to John, and claim the return of the purchase
price as well as damages from Leon if she can prove that John had been the owner and that the
computer was stolen from him.
B. The contract between Lara and Leon is void because it is against public policy to sell a stolen
item. Because Leon did not know that the computer was stolen he can keep the money Lara paid
him, but Lara would have to return the computer to John.
C. The contract between Lara and Leon is void, because Leon was never the owner and
therefore he could not validly sell the computer to Lara. The computer must be returned to
John and Leon would have to repay Lara the money she paid him.
D. Even if John can prove that he was the owner, Lara can keep the computer as Leon was not
aware that the computer had been stolen.
Correct
Answer C is correct. To validly transfer ownership of property, the transferor must be the owner of the
property at the time that he seeks to effect transfer of ownership. In this case Leon thought that he was
the owner of the computer. However, it turns out that a thief sold him the computer. The consequence of
this is that even though Leon might have paid fair value for the computer he never became the owner, as
the thief did not have ownership rights which were capable of being passed. This in turn means that
Lara’s title to the computer is also defective. The result is that the true owner, John, can recover his
computer from whoever has possession of the computer. Lara would have to return the computer to John
and would have to sue Leon for the return of the money that she paid him. Leon would have to sue the
thief for the money that he (Leon) paid the thief. It will be for John to prove that he was the owner of the
computer and that it was stolen from him.
6. One form of research used with consumers to explore their needs is called Conjoint Analysis.
For what precise purpose would you use this research? Choose the correct statement.
A. To discover how they rate the importance and quantify the value of different attributes of a
product or service.
B. To find out which types of people would buy the product or service.
C. To see in what different types of circumstances people might use the product or service.
D. To find out what attributes of the product they are most familiar with.
Correct
Correct Answer: A. Conjoint means 'CONsiderJOINTly and is devised to help people explain what tradeoffs they would make between attributes.
7. Which of the following are the aspects about your employing company that you should understand?
A. What is the market in which the company operates?
B. What are the product / service it offers?
C. Ultimate corporate objectives – its mission, vision, values and strategy?
D. All of above
Correct
Correct Answer: D
8. Which of the following circumstances may warrant an actuary to disclose their client’s confidential
information?
I.
II.
III.
A.
B.
C.
D.
By virtue of statutory or other judicial authority
Disclosure of confidential information is in the public interest
Client did not get the actuary to sign a non disclosure agreement
I and III
I and II
II and III
All of above
Correct
Correct Answer: B
9. Forest Consultants is an actuarial firm. The firm is informed by an insurance company, Scrooge
Insurance Ltd, that it is in the process of setting up a new investment portfolio, and that if everything turns
out well, Forest will be appointed to render certain services. Forest realizes that it does not have the
human resources capacity to do all the work required. Forest, therefore, approaches a fellow actuarial
firm, Shadows, and the two firms start discussing the possibility of a collaborative joint venture. In terms of
the joint venture agreement, Forest and Shadows agree to collaborate in the event that Forest is awarded
a contract with Scrooge Insurance Ltd.
This clause is a...
A.
B.
C.
D.
time term.
warranty.
resolutive condition.
suspensive condition.
Correct
Answer D is correct. A time clause suspends the fulfillment of a contract until a certain date arrives. A
warranty is a pre-contractual statement as regards the existence of a fact. A resolutive condition does not
suspend the existence of a contract. However, with a resolutive condition, the contract falls away the
moment an agreed future event occurs . A suspensive condition, on the other hand, suspends the
existence of a contract until a condition precedent has been met. In the case above, the joint venture
agreement is dependent on Forest being awarded a contract by Scrooge. This is a suspensive condition.
If Forest is not awarded the contract by Scrooge, the joint venture will not come into operation. But, if
Forest is awarded the contract, the joint venture would automatically come into operation between Forest
and Shadows.
10. The Value Chain shows the activities required to deliver value to...
A.
B.
C.
D.
shareholders
customers
products
the economy
Correct
The answer is B in accordance with 'the business system' tutorial
11. The sustainability of a competitive advantage is driven in part by whether the advantage is likely to
last for a long time and is hard to substitute. You can 'test' if an advantage is likely to be sustainable by
asking if it has certain attributes.
The following list describes the attributes of a sustainable advantage - but one of them is not correct.
Which one does NOT represent an attribute of sustainable advantage?
A.
B.
C.
D.
E.
A competitive advantage is likely to be sustainable if it is based upon a scarce resource.
A competitive advantage is likely to be sustainable if it is difficult to imitate.
A competitive advantage is likely to be sustainable if it is hard to transfer.
A competitive advantage is likely to be sustainable if it is based on technology.
A competitive advantage is likely to be sustainable if it hard to identify or understand.
Correct
Answer D is correct. Unless the technology is proprietary, and therefore hard to imitate, or otherwise
hard to identify or understand, technology often represents an advantage that is easily eroded by others
attaining the same, or similar, technology. All the other options are ways you can 'test' if an advantage is
likely to be sustainable for a reasonable length of time because if an advantage is hard to imitate, transfer
or identify/understand the implication is competitors won't have the capability to replicate it.
12. In the business game, The Way Forward, which one of the following is the primary purpose of the
Profit and Loss Account?
A.
B.
C.
D.
So that a team knows how much money it has got.
So that a team knows whether it traded profitably or not in the period concerned.
So that a team knows its overhead costs in relation to its turnover.
So that a team knows how much money to set aside for Corporation Tax.
Correct
The correct answer is B. The prime purpose of a Profit and Loss Account is to show the trading profit or
loss for the period of the accounts.
13. Which one of the following authorities is responsible for setting the ethical standards that member of
the Institute of Actuaries in the India should comply with?
A.
B.
C.
D.
Insurance Regulatory and Development Authority
The Institute of Actuaries of India
Reserve Bank of India
Securities and Exchange Board of India
Correct
Correct Answer: B
14. Which of the following are allowed to practice as actuaries under the actuaries act, 2006?
I. Partnership firms
II. Companies incorporated in India
III. Companies incorporated outside India
A.
B.
C.
D.
I only
II only
III only
II or III
Correct
Correct Answer: A
15. Read the following facts and then pick out the incorrect statement:
Joe and Smith are the sole shareholders and also the only directors of XCo (Pty) Ltd. They purchase
immovable property on behalf of the company. Later, they sell and transfer the property to Sam, first
cousin of both directors. The director-shareholders declare a dividend and each director receives 50% of
the proceeds of the sale without satisfying the debts owed by the company to its creditors. It now turns
out that the company is insolvent. The creditors can
A. bring an action against the directors in terms of section 77(2) of the Companies Act 71 of 2008 to
hold the directors liable for fraud.
B. bring an action in which they ask the court to pierce the corporate veil of the company to
hold the directors and Sam jointly and severally liable.
C. bring an action against the directors for a breach of their fiduciary duties.
D. bring an action against the directors in the law of delict for failing to exercise care and skill.
Correct
The correct answer is B. Sam cannot be held liable unless he participated in the fraud. There is nothing
to suggest that he was a party to the fraud even though he was a family member. The fact that the
directors acted fraudulently does not affect the transfer of ownership to Sam as Indian law subscribes to
the abstract system of transfer of ownership and not the causal system.
16. You are the new Managing Director of Korsan, a city-based chain of medium-priced hotels catering
primarily for late-night business travelers. Trade is reasonable, and you have a high level of repeat
business (and thus good projected future occupancy), but costs seem high and profits slim, particularly
for the hotel's restaurant. It serves few customers at night, although the chefs have done innovative things
to the menus to increase their appeal. A rival chain - Luxuria - is also setting up its high-class hotels for
discerning travelers in the same cities, and your board is panicking that significant business will be lost.
They present some recent research showing that customers' core needs are a good night's sleep and a
convenient location. They also present a large dossier of suggestions for maximizing the value of the
business.
Which one would you implement?
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning travelers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of Korsan to new
customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a city-based
restaurant for your customers to have discounted evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers (sleep and location) Korsan
can reduce unnecessary overheads and increase value captured. The deal with a city restaurant will also
be attractive to those customers wanting to eat in the evening. Korsan's target audience is different to
Luxuria, and there is no evidence to suggest that Luxuria's target audience would be attracted, even with
a refurbished hotel. A - could be a costly error. B - would require investment by way of a marketing
campaign to get it off the ground, and there is no guarantee that non-hotel customers would be attracted.
Korsan has high repeat business and high projected future occupancy, so a campaign to attract new
customers (C) would be wasteful.
17. Which is the correct order of activities to carry out problem solving?
A.
B.
C.
D.
Ask the right question, research the facts, decide what type of analysis is needed.
Decide on the form of analysis, establish the right questions, discover the facts.
Ask the right question, decide what analysis to undertake, collect the relevant facts.
Discover a range of facts, identify what questions arise, conduct an analysis.
Correct
The answer is C in accordance with the 'problem-solving' tutorial
18. When invited to give actuarial advice to a client an actuary must consider whether there are any
professional reasons not to accept the appointment by exercising which of the following options?
A.
B.
C.
D.
Contacting the client’s Board or Trustees
Contacting the previous actuary when this is known
Contacting the client’s CEO
None of the above
Correct
Correct Answer: B
19. In a contract of sale, Basil thought he was buying a computer from Agatha and Agatha thought that
she was selling a computer. However, the box in fact contained a television and was clearly labeled
‘television.’
Which of the following statements is correct?
A.
B.
C.
D.
The contract would be void due to common mistake as the error is material.
The contract would be void due to mutual mistake as the error is material.
The contract would not be void due to common mistake as the error is not reasonable.
The contract would be voidable due to mutual mistake as the error is reasonable.
Correct
Answer A is correct. If both parties are mistaken about the same thing, this would be a common
mistake. If both parties are mistaken about different aspects of a contract, this would be mutual mistake.
In the above case, both parties labored under a common mistake as regards the contents of the box.
Both thought that the box contained a computer, when in fact it contained a television. The result of this
common mistake is that the contract of sale is void. For common mistake there is no requirement for the
mistake to be reasonable in order for the contract to be rendered void. Therefore, the fact that the box
was clearly labeled is neither here nor there when it comes to determining whether the contract is void
20. One source of competitive advantage is 'strategic relationships'.
If you were running a well-known Advertising Agency, select the one option in the list below relating to the
agency's relationships that you would consider as offering a sustainable competitive advantage.
A. Client business is built into fixed term contracts of one or two years.
B. Extensive selection of testimonials from satisfied customers from a diverse range of industries.
C. The only parent company in the agency world whose policy is to invest centrally in
building capabilities it then shares across business units.
D. An award-winning creative team.
Correct
Correct Answer is C While all the options will contribute to a successful business, it is option C that is
said to be an exception, as it's harder to copy than the other options
21. In order to achieve a business plan, strategy and tactics must be considered. Tactics is defined as...
A.
B.
C.
D.
the work undertaken by customer-facing staff.
the human resources needed for the plan.
the means by which the plan is implemented.
the competitive advantages the company will aspire to in order to achieve its strategy.
Correct
The answer is C in accordance with the strategy vs. tactics explore diagram under the 'creating and
capturing value' tutorial.
22. Self regulation is a right for the actuarial profession
A. True
B. False
Correct
Correct Answer: B
23. Brian wants to have the outside of his house painted and telephones Lalla’s Painters for a quote. On
8 April, Penelope, the owner of Lalla’s Painters, has a look at Brian’s house and gives a quote of
R20,000. Later that day (8 April), Penelope faxes the quotation document to Brian and one of the
sentences reads as follows:
“Quotation of R20,000 is valid until 13 May” and the quote furthermore states that acceptance of the
quote must be done in writing and can either be faxed or posted to Lalla’s Painters. On 10 May, Brian
posts a letter of acceptance to Lalla’s Painters. The letter of acceptance reached Lalla’s Painters on 15
May. As a result of this, Lalla’s Painters argue that the acceptance was out of time and no contract has
come into existence between the parties.
Your advice to Brian is that:
A. There is no contract, as the acceptance was not received by 13 May and the so-called
‘information’ theory applies on this set of facts.
B. There is no contract, as the acceptance was not received by 13 May and the so-called
‘expedition’ theory applies on this set of facts.
C. There is a valid and binding contract, as it is irrelevant that the acceptance was not received by
13 May, for the so-called ‘information’ theory applies on this set of facts.
D. There is a valid and binding contract, as it is irrelevant that the acceptance was not
received by 13 May, for the so-called ‘expedition’ theory applies on this set of facts.
Correct
Answer D is correct. With postal contracts, the expedition theory of contract formation applies.
According to this theory, a contract comes into existence the moment the offeree posts his acceptance to
the offeror. As long as the offeree can prove that he posted the acceptance before 13 May, a valid
contract will come into being.
24. If you were classifying a company in terms of how it made decisions when responding to changing
market conditions, which one of the following descriptions would define a 'defender'?
A. Historically successful, but conservative, and potentially becoming complacent. Will raise
quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to improve
ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait around for
detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong returns and
visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that
needs defending from others seeking to steal market share from them. They have resources they can use
to attack competitors. Sometimes their relative strength can make them over confident. D - describes Fast
Follower organizations who are less happy with high risk than Innovators, but can often achieve greater
returns and visibility than Innovators gain. B - Describes a combination of Defenders, Innovators and Fast
Followers. C - Describes Innovators.
25. Which of the following Committee/Committees is/are mandated by the Actuaries Act 2006
I.
II.
III.
IV.
A.
B.
C.
D.
Finance and Strategic Affairs Committee
External Affairs Committee
Professional Affairs Committee
Disciplinary Committee
I only
I, III and IV
IV only
III and IV
Correct
Correct Answer: C
26. In the business game, The Way Forward, if a company sold a simple but very effective product that
was designed many years ago, which one of the following words would be the most appropriate to use in
its advertising?
A.
B.
C.
D.
Distinctive.
Fashionable.
Green.
Reliable.
Correct
The correct answer is D as ‘reliable' would suggest a non-complicated product that has stood the test
of time. ‘Distinctive' would suggest a more modern product that has been specially designed to be
different from other available products. ‘Fashionable' would suggest a very recently designed product.
‘Green' is a modern phenomenon and would not be a product designed many years ago
25. You are an industry analyst in a venture capital company, preparing a report for potential investors on
a restaurant chain, Fervour, which is looking to expand abroad. Fervour specialises in converting
churches into restaurants, capitalising on the architecture to create atmospheric surroundings, supported
by live jazz. The menus - created by Michelin Chef Jean-Pierre Noir - are highly acclaimed in culinary
circles for their imagination and flair. Fervour looks to cater for a wide range of clientele, offering a dining
experience 'for all the senses'. While it is still relatively unknown, it has bought the majority of unused
church buildings across the country, ready for conversion. In trying to make the investment proposition
sound as attractive as possible, it is important that you highlight where Fervour has advantages in the
marketplace.
Which one of the following statements do you feel represents a real and sustainable competitive
advantage?
A. Scarce assets - not many other restaurants offer such a varied menu.
B. The Fervour brand, which could be capitalised upon outside the country.
C. Superior locations - church buildings stand out against ordinary restaurants, and are
located close to the desired audience.
D. Marketing capability - Fervour has recently introduced its own website to extend the diner's
experience, detailing the menus and music planned at all its venues.
E. Relationships with its key suppliers - to ensure the freshest food and the right musicians.
Correct
Answer C is correct. The fact that Fervour has bought up most unused churches means that other
competitors will be unable to replicate the Fervour surroundings, making this a sustainable advantage.
While the menus are imaginative (A), they can also be copied, which means that this advantage is difficult
to sustain. The Fervour brand (B) is unknown outside the country, so it cannot yet be exploited as an
advantage. While a website (D) is useful, it is likely that most other restaurants will also have a website
supporting their core offering, so this does not represent an advantage. Relationships with suppliers to
ensure fresh food (E) are a necessity in this market, rather than an advantage.
26. There are four main types of external shock that are relevant to an organization's strategy. A PEST
analysis can help think through what these potential shocks might be, where PEST stands for...
A.
B.
C.
D.
Physical; Economic; Structural; Timing.
Political; External; Staffing; Technological.
Physical; External; Social; Timing.
Political; Economic; Social; Technological.
Correct
The answer is D in accordance with the 'PEST analysis' tutorial
27. Which one of the following statements is incorrect?
A. Damages for breach of contract cannot be claimed if losses are so remote so as to not have been
within the contemplation of the parties.
B. A party suing for breach of contract should take reasonable steps to mitigate his or her loss.
C. Damages for distress, inconvenience and anxiety arising from breach of contract can be
claimed by commercial parties.
D. The Apportionment of Damages Act 34 of 1956 permits a court to apportion damages between
parties in a delictual claim by taking into account the extent to which each party was at fault.
Correct
The correct answer is C because according to the common law one cannot claim damages for
sentimental loss or inconvenience in the law of contract.
28. Which of the following described in options A, B, C or D is not in itself criteria used for the issuance of
an Actuarial Practice Standard or a Guidance Note?
I.
II.
III.
A.
B.
C.
D.
Consistent with public interest
Consistent with Professional Conduct Standards
Unambiguous
I only
II only
III only
None of them
Correct
Correct Answer: C
29. You run the office cleaning division at International Global Corp, and you are setting your group's
objectives. IGC's corporate goal is to grow market share in all its businesses.
Which of the following objectives for your area directly supports the corporate objective?
A.
B.
C.
D.
Increase the number of active customers by 15%.
Reduce costs of purchased cleaning products by 10%.
Buy four new mobile cleaning vans.
Achieve Silver status in the Association of Cleaners awards.
Correct
Answer A is correct. While the other objectives might indirectly contribute to the ability to grow market
share, answer A is the only one that directly results in increased share (assuming that the market as a
whole grows less than 15%).
30. Mia is 18 years old. She wants to invest in shares on the securities exchange. She has not spoken to
her parents about the purchase. She goes to a stockbroker and signs the necessary purchase of shares
agreement. She invests R20,000, which she made delivering pizzas and which she was saving for
University tuition. A week after purchasing the shares the stock market takes a tumble and the shares are
rendered worthless.
Which of the statements is correct?
A. Mia can repudiate the contract on the grounds that she was a minor at the time of entering into it
and hence, entered into an unassisted contract. She could therefore claim her money back, and
she would incur no liability at all.
B. Tough luck. Mia is bound to the contract.
C. Mia can repudiate the contract on the grounds that she was an unassisted minor and can
therefore claim her money back, but she may be liable to the stock broker for administration
expenses as these were his necessary expenses.
D. Mia will not be able to ask for her money back as she is liable under the law of delict for not telling
the stock broker her age and/or failing to inform him that she had not consulted her parents when
entering into the contract.
Correct
Answer B is correct. When a minor enters into a contract, the contract is regarded as a ‘limping
contract’. The contract may be set aside by either the minor’s guardian or the minor on attaining the age
of majority. In the past majority commenced at age 21, but in terms of the Children’s Act 38 of 2005,
which came into operation on 1 July 2007, majority now commences at age 18. Since Mia was a major
when she entered into the contract, she is bound to the terms of the contract.
31. A construction contract contains the following clause: ‘It is specifically recorded that the project must
be completed by 31 January 2011. For every day that the project remains incomplete after the
aforementioned date, the construction company will be liable to the developer for the sum of R15,000 per
day.’ Which of the following statements is correct?
A. The aforementioned clause is called a penalty clause and is permitted in terms of the
Conventional Penalties Act of 1962.
B. The aforementioned clause is called a penalty clause. Penalty clauses in contracts are not
permitted in terms of the Conventional Penalties Act of 1962.
C. The aforementioned clause is called a penalty clause and is considered illegal as it is said to be
unconscionable in terms of the common law.
D. The aforementioned clause is called a penalty clause and is considered void in the present case
because the penalty is in excess of the recognized amount for penalties stipulated by the Minister
of Justice and Constitutional Development in the Government Gazette. The amount is currently
set at R10,000
Correct
Answer A is correct. The Conventional Penalties Act recognizes and endorses penalty clauses inserted
into contracts. A penalty clause usually entrenches a pre-estimate of damages in the event that a contract
is breached. If the penalty is unduly harsh, the party affected by the clause can apply to court to reduce
the penalty. However, until the party applies to court for a reduction of the penalty, the penalty stands.
There is no limitation as regards what a penalty could be. Depending on the circumstances of a case and
the nature of the contract, the penalty could be a few hundred, thousands, or evens millions of rands. In
the above case, the penalty clause stands
32. Mr A.N. Actuary, a Member of the profession works for ABC Consulting and is negotiating a contract
with a client, XYZ. ABC Consulting is being appointed by XYZ to advise on a number of actuarial matters.
The Finance Director of XYZ insists on a contingent fees basisin the contract stating that this is how XYZ
operates with all their other advisers.
What action would be the most appropriate?
A. Ensure that ABC Consulting and A.N. Actuary have sufficient Professional Indemnity
cover
B. Accept the appointment provided A.N Actuary can satisfy himself that his
objectivity would not be compromised by the conditions of the contract
C. Decline the appointment – contingent fees should not be accepted under any
circumstances
D. Accept the appointment only if the fee income from XYZ represents a significant
proportion of ABC’s revenue
Correct
Answer B is correct. Members will ensure that their ability to provide objective advice to their clients is
not, and cannot reasonably be seen to be, compromised
l
33. Which of the following options describes a function outside the purview of the Quality Review
Board?
A.
B.
C.
D.
Fix standards for the services provided by the members of the Institute
Review the quality of services provided by the members including actuarial audit services
Promote the status of the Actuarial profession
Guide members of the Institute to improve the quality of services and adherence to the various
statutory and other regulatory requirements
Correct
Correct Answer: C
34. An agreement between David and Cathy stipulates that David will purchase an apartment from Cathy.
However, the agreement is subject to David securing a loan from a bank to finance the purchase. The
term regarding the loan is best described as a...
A.
B.
C.
D.
resolutive time clause.
suspensive time clause.
resolutive condition.
suspensive condition.
Correct
Answer D is correct. A resolutive time clause requires an act not be performed on a date which is
certain to arrive. Until the act is performed the contract remains in existence. If the act occurs by the date
mentioned, the contract falls away. A suspensive time clause requires an act to be performed on a date
which is certain to arrive. Unless the act is performed by the stipulated date, no contract comes into
existence. A resolutive condition requires an act not be performed in the future (no particular date stated).
If the act is performed at any time, the contract falls away. A suspensive condition requires a specific act
to be performed on a date which is uncertain to arrive. Unless the act is performed, no contact comes into
existence. In the case above, the operation of the contract is dependent on the purchaser securing a
loan. There is no date stated by when the loan must be secured and it is not certain that the loan will ever
be granted. We are thus dealing with a suspensive condition
35. Which of the following is NOT a part of financial services industry?
A.
B.
C.
D.
E.
Insurance companies.
Merchant Bankers.
Mutual Funds.
Hedge Funds.
None of above.
Correct
Correct answer: E
36. Ferdie sold a house to Ernest without disclosing the existence of a gravesite located close to one of
the bedrooms. Prior to the sale, Ferdie ploughed over the gravesite and obliterated all visible traces of it
in order to make the house more attractive to potential buyers. Ernest discovered the existence of the
gravesite after he had already moved in.
Which of the following statements is correct?
A. Ernest will be able to set the contract aside as there was a mutual mistake.
B. Ernest will not be able to set the contract aside as the misrepresentation was not material.
C. Ernest will be able to set the contract aside on the basis of misrepresentation as Ferdie
had a duty to disclose the gravesite.
D. None of the above.
Correct
Answer C is correct. A misrepresentation by silence occurs when the seller fails to disclose information
which he should have. Put another way, one can say that a misrepresentation by silence occurs when the
seller fails to disclose material information. Information would be material if a reasonable person would
not have entered into the contract if they knew the undisclosed information. In this case the existence of a
gravesite would be material information. Making matters worse, it is quite clear that the seller fraudulently
concealed the material information. There wasn't a mutual mistake in this case, because it cannot be said
that both parties were mistaken about different aspects of the contract
37. Which one of the following lists contains items that are all included in Maslow's hierarchy of needs?
A.
B.
C.
D.
Self-actualisation; financial; social.
Safety; psychological; esteem.
Working; physiological; financial.
Social; safety; esteem.
Correct
The answer is D in accordance with the 'Maslow's hierarchy of needs'. Explore item under the 'identifying
consumer needs' tutorial
38. You have just joined a new company, and you have already been asked to make a recommendation
on what you think is a strategic, high-impact decision. Your recommendation will be made direct to the
Chief Executive. You have looked for someone able to help you with this, but not found anyone with the
right qualifications or experience. You had intended to do a detailed analysis, but a colleague has
informed you there is not enough time to do that, and suggested you should "use your instinct."
What type of organizational structure do you think you are now working in?
A.
B.
C.
D.
A complex matrix organization.
A hierarchical organization.
A power-based organization.
A freeform organization.
Correct
Answer C. Newly-formed companies are frequently power-based and tend to involve little structure or
formality, high risk-taking, and the decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of approval, and in a matrix
organization (C) you would expect more people to be involved in the process bringing their own views
and expertise
39. In the business game, The Way Forward, which two of the following are true?
1.
2.
3.
4.
The amount charged for depreciation is shown on the balance sheet.
Creditors and debtors both count as assets on the balance sheet.
The purpose of the balance sheet is to show what the company is worth.
The value of currently held stock is shown as an asset on the balance sheet.
A.
B.
C.
D.
1 and 4
2 and 4
1 and 3
2 and 3
Correct
The correct answer is A. Both depreciation and the current value of stock are shown on the
balance sheet. B is not correct as creditors are an asset, debtors are a liability. C is not correct as a
balance sheet does not reflect what a company is worth, only the value of its assets and liabilities at a
point in time
40. Which one of the following would NOT be a current issue for Finance & Investment companies in
India?
A.
B.
C.
D.
To be known as credible player in financial and investment sector – business challenge
Understand & apply asset liability techniques for pension sector
Move towards market consistent asset valuations for insurance sector
None of the above
Correct
Correct answer: D
41. Which of the following options A, B, C or D is correct?
I. The actuarial profession does not have an obligation to serve the public interest
II. Advice given to an actuarial colleague does not have to meet the same standards as external advice
III. A member has a duty to the profession and must not act in a manner that denigrates its reputation
A.
B.
C.
D.
I and III
II and III
II only
III only
Correct
Correct Answer: D
42. Your 'street-style' youth-orientated fashion-house needs extra suppliers to allow you to get a constant
flow of your new designs quickly to young customers. Based on the strengths and weaknesses of
potential overseas manufacturers listed below.
Which one would help you fulfill your strategy?
A. This company handles high volumes (they've supplied identical Government uniforms for years).
It has many machinists, but is not highly automated. It can deliver on schedule if given long lead
times. Low wages guarantee low cost per unit.
B. This small factory will take instructions electronically and transfer data to computerized
cutting machines. It can produce items quickly, though usually in smaller batches than
manufacturer A. It produces its own designs for local markets. It has fewer, higher paid
staff than manufacturer A.
C. Company C can - and will - copy anything - they don't need many written instructions. They make
near-identical copies of design from international fashion shows within a week, usually without the
designer's permission. They emphasis speed over quality.
Correct
Correct Answer: B. Manufacturer B would be best as it seems responsive and flexible and could offer
volume by delivering smaller batches across staggered dates, allowing orders to be adapted according to
market uptake. Staff has better conditions and their skills for original design may be an asset. Company
A's strengths appear to be in large scale, repetitive orders. Indications are that their systems and staff
may not be geared to fast turnaround on changing requirements. Company C may present some risks.
They provide speed, but if their success is built on 'stealing' designs, your own reputation may suffer by
using them - or your own designs could be stolen too.
43. Which of the following described in options A, B, C or D is used to self-regulate the actuarial
profession?
I.
II.
III.
A.
B.
C.
D.
Promoting good practice
Preventing poor rules and regulations
Intervention when necessary
I and III
II and II
II and III
All of them
Correct
Correct Answer: A
44. Hannah, on selling a puppy to Irene, told Irene that the puppy was a Thoroughbred Staffordshire Bull
Terrier. On taking the puppy to the Staffordshire Bull Terrier Society for registration, Irene was told that
the puppy was not a Thoroughbred. As she had paid R2,000 for the puppy, Irene wants to return the
puppy to Hannah and wants her money back.
Which of the following answers is correct?
A. If the statement by Hannah is a warranty, Irene can bring an action for breach of contract
against Hannah.
B. If the statement by Hannah is a misrepresentation, Irene can bring an action for breach of
contract against Hannah.
C. If the statement by Hannah is a warranty, Irene will be placed in the position as if the contract had
not occurred and she will therefore get her money back.
D. If the statement by Hannah is a misrepresentation, Irene will be placed in the same economic
position as if the contract had taken place.
Correct
Answer A is correct. Hannah’s statement constitutes a warranty as regards the qualities of the subject
matter of the contract (the dog). Since the statement is incorrect, the contract will be considered to have
been breached. This will entitle the innocent party (Irene) to sue for contractual damages. As such, the
innocent party will be placed in the same position she would have been had the contractual statement
been true. If the statement above is a misrepresentation, the contract would be voidable. This will give
rise to a claim for restitution in integrum and a delictual claim for damages. As such, Irene’s damages
claim would place her in the position she would have been had the misrepresentation not occurred
because the claim would effectively be in the law of delict
45. You are considering opening a record store in a major shopping area. As there are other record
stores located nearby, you will have to find sources of competitive advantage.
Only one of the following would be a real source of competitive advantage - which is it?
A.
B.
C.
D.
An award-winning advertising campaign.
Exclusive promotional relationship with a major record label.
An unusual store design and internal layout.
Higher ratio of staff per customer than the industry norm.
Correct
Answer B is correct. This answer represents a sustainable advantage, built on a strategic relationship
that cannot be copied or imitated. All of the other answers represent something that is easy to imitate,
and are not built upon superior assets, distinctive capabilities or strategic relationships
46. In maximizing the value of a company, which of the following is the best measure of value to use?
A.
B.
C.
D.
Annual profit.
Annual return on assets.
Net present value of future profits.
There is no one perfect measure.
Correct
The answer is D as there is no single measure of value in accordance with the 'financial objectives'
tutorial, it is best to consider that specific measures are providing information on specific aspects of the
business
47. Which of the following constitutes professional guidance by the Institute of Actuaries of India?
A. Professional guidance consists of the Professional Conduct Standards only
B. Professional guidance consists of the Professional Conduct Standards and Actuarial Practice
Standards
C. Professional guidance consists of all Guidance Notes and Standards of Practice issued by the
International Actuarial Association
D. Professional guidance consists of the Professional Conduct Standards, all Actuarial
Practice Standards and all Guidance Notes
Correct
Correct Answer: D
48. You are an actuary who has been engaged to provide professional services to a client. No letter of
engagement/mandate has been issued.
Which one of the following statements is incorrect?
A. You can contractually bind yourself to a client without a written contract.
B. The law will imply a term into the contract to the effect that you will carry out the service with
reasonable care and skill.
C. The only obligation you owe your client is a duty of care in delict.
D. There can be a contract without any express terms.
Correct
The correct answer is C. You have an oral contract with your client, so you would owe contractual
duties. A is wrong because you can bind yourself to a contract orally. B is wrong because the common
law implies such a term. D is wrong because there can be oral express terms
49. If you were classifying a company in terms of how it made decisions when responding to changing
market conditions, which one of the following descriptions would define a 'defender'?
A. Historically successful, but conservative, and potentially becoming complacent. Will raise
quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to improve
ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait around for
detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong returns and
visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs
defending from others seeking to steal market share from them. They have resources they can use to
attack competitors. Sometimes their relative strength can make them over confident. D - describes Fast
Follower organizations who are less happy with high risk than Innovators, but can often achieve greater
returns and visibility than Innovators gain. B - describes a combination of Defenders, Innovators and Fast
Followers. C - describes Innovators
50. In the business game, The Way Forward, how is gross margin defined?
A. The difference between turnover and cost of sales.
B. The difference between the price a company sells at and the lowest price in the market.
C. The difference between the Profit and Loss in the current time period and the Profit and Loss in
the previous period.
D. The biggest difference between the price at which a team purchased an item and the price at
which it sold that item.
Correct
The correct answer is A. Gross margin is the difference between the sale price and the cost price
of an item that is sold. Turnover is the total sales price for all units that are sold. B is not correct as
the lowest price in the market is not relevant to a company's gross margin. C is not correct because many
items make up the profit or loss in a period, not just the gross margin on the sale of a product. D is not
correct because it only relates to the gross margin for one item
51. You are the lead agency working for a motor manufacturer, whose new 'technology-enhanced' car the Mobilo - has an inbuilt computer and telephone system to enable smarter working on the move.
However, the Mobilo is not selling as well as expected into the company's core customer segments.
Recent research has revealed that the core segments are seeking mobile efficiency as well as enhanced
status for being 'early adopters' in this market.
Which of the company's advantages would you use as the core of a campaign to increase uptake?
A. The quality of its research and development function, which has an unrivalled reputation
for new ideas in mobile living/working.
B. The strong relationships the company has with its suppliers, who provide highly-reputed
technological components.
C. The speed of delivery, fulfilling orders faster than any of the competition, to supply early adopters.
D. The Mobilo brand name, which has topped industry polls for awareness three years running.
Correct
Answer A is correct. This matches customers' desire for mobile efficiency as well as their need to be
early adopters in the market. Customers will value the highly-reputed technological components (B), but
alone they do not meet customer needs for mobile efficiency. Speed of delivery (C) will help in getting the
products to customers early, to support them being early adopters, but it does not match their need for
innovation. There is little benefit in purely having high awareness of the company brand (D), if this product
campaign is not communicating the benefits relevant to the target groups
52. You are given the following facts:



All widgets have green stripes
All things with green stripes also have a button
Object A has green stripes
Which of the following statements best synthesizes the facts?
A.
B.
C.
D.
Object A is a widget.
Object A has a button.
Object A is a green striped widget with a button.
Object A has a button and green stripes.
Correct
The answer is D as all you know for sure is that Object A has a button and green stripes. This is in
accordance with the deductive synthesis exercise under the 'synthesis' tutorial
53. The Actuarial Society of India was established in?
A. 1945
B. 1944
C. 1947
D. 1946
Correct
Correct Answer: B
54. Which one of the following always requires approval by shareholders to be valid?
A. Sale of company assets to an unconnected third party
B. Sale of assets worth £10 to a director
C. Awarding a director a fixed term service contract over 6 years in length
D. Registering a transfer of shares
Correct
The correct answer is C. A is wrong because unless there is provision in the articles to the contrary
this can be done by directors. B is wrong because sale of assets to directors over a certain level
requires approval of shareholders. However, small value sales do not require approval. D is wrong
because this is usually done by directors
55. Choose the statement that most correctly reflects the law.
A mistake renders a contract...
A.
B.
C.
D.
void or voidable.
void.
voidable.
None of the above.
Correct
The answer is B. Mistake renders a contract void
56. If you were classifying a company in terms of how it made decisions when responding to changing
market conditions, which one of the following descriptions would define a 'defender'?
A. Historically successful, but conservative, and potentially becoming complacent. Will raise
quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to improve
ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait around for
detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong returns and
visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs
defending from others seeking to steal market share from them. They have resources they can use to
attack competitors. Sometimes their relative strength can make them over confident. D - describes Fast
Follower organizations who are less happy with high risk than Innovators, but can often achieve greater
returns and visibility than Innovators gain. B - describes a combination of Defenders, Innovators and Fast
Followers. C - describes Innovators
57. You are considering investing in the car manufacturing industry, but you are concerned about
competitive forces changing the market. You've decided to organise an analysis on the five major
competitive forces acting on the industry.
Which of the following represents the five forces that you should investigate?
A. Product, price, people, placement, positioning of substitute products.
B. Threat of substitute products, rivalry, supplier power, customer power, threat of new
entrants.
C. Missions, objectives, goals, strategies, people.
D. Access to capital, ease of integration, synergy with existing operations, distribution channels,
sustainable competitive advantages.
Correct
Answer B is correct. The other options do not represent the five competitive forces acting on an industry
58. Which of the following forms of publicity is prohibited?
A. A member authorized by the Institute of Actuaries of India to represent the profession speaking
as its representative
B. Appropriate publicity of the profession objectively substantiated
C. Description of the professional services offered including basis for charging
D. Description of the work done on behalf of the profession for gains by the actuary’s firm
Correct
Correct Answer: D
59. A company owns a plot of land. The company decides to sell the land and advertises for offers from
the general public. Offers come in. One of the company’s directors has a friend. He informs his friend of
what offers have come in. Relying on this information, the friend places an offer which marginally outbids
all the other offerors. The land is eventually sold to the director’s friend. One of the unsuccessful bidders,
Rupert, hears about the director’s indiscretion and wants to take action. Rupert feels that if the friend had
not placed an offer, his (Rupert’s) offer would have been accepted, and he would have been able to
develop a residential complex on the land, bringing him a large profit.
One of the following statements is correct. Please select which one.
A. Rupert can sue the director for breaching his fiduciary duties and claim for loss of profits.
B. Rupert can sue the company for loss of profits in the law of delict as the director was acting within
the course and scope of his employment when he divulged insider information.
C. Rupert can sue the director’s friend in delict for loss of profits on the basis that he acquired
information in an underhanded manner to give him a competitive edge.
D. A and C above.
E. A, B and C above.
Correct
Answer E is correct. When a director of a company commits a delict, he can be sued personally, or the
company can be held liable for the delicts of the director on the basis of vicarious liability. The director
can be held personally liable for breaching his fiduciary duties. The fiduciary duties of a director require a
director to transact the business of the company in good faith. In this case, the director has clearly acted
contrary to the principle of good faith for divulging insider information to a friend to the detriment of
Rupert. Rupert may thus sue the director or the company. It may make more sense to sue the company
because the company has more resources to pay Rupert’s damages claim. The fact that the company
may also have been harmed by the director’s actions is irrelevant from the point of view of Rupert’s
delictual action against the company. As an alternative, Rupert could also sue the director’s friend as the
friend committed a delict when he fraudulently conspired with the director. Fraud is a wrongful act in the
law of delict.
60. Which one of the following statements is false?
A. Life insurance market in India was tariffed until very recently, which limited the role that actuaries
can play in product pricing and development.
B. IRDA has recently issued product related regulations, resulting is majority of life insurance
products offered by life insurers to be re-developed and re-priced.
C. Solvency II has been mandated by IRDA for life insurance companies, but not general
insurance companies in India.
D. None of the above.
Correct
Correct Answer: C
61 Which one of the following statements is correct?
A. The standard of care expected of an actuary is assessed by reference to the reasonable
person
B. The standard of care expected of an actuary is judged subjectively
C. Following the statements set by a professional body automatically means an actuary will not
be in breach of duty
D. The standard of care is judged by reference to a reasonably competent actuary
Correct
The correct answer is D. B is wrong as the standard is judged objectively. C is wrong because following
standards set by a professional body will usually mean that a professional has taken appropriate care.
However, it does not automatically mean a professional will have reached the required level of skill.
62. You are the new Managing Director of Korsan, a city-based chain of medium-priced hotels catering
primarily for late-night business travellers. Trade is reasonable, and you have a high level of repeat
business (and thus good projected future occupancy), but costs seem high and profits slim, particularly
for the hotel's restaurant. It serves few customers at night, although the chefs have done innovative things
to the menus to increase their appeal. A rival chain - Luxuria - is also setting up its high-class hotels for
discerning travellers in the same cities, and your board is panicking that significant business will be lost.
They present some recent research showing that customers' core needs are a good night's sleep and a
convenient location. They also present a large dossier of suggestions for maximizing the value of the
business.
Which one would you implement?
A. Refurbish the hotel, to attract some of Luxuria's target audience (discerning travellers) to Korsan.
B. Open your restaurant to non-hotel guests, to increase the level of potential customers for Korsan.
C. Invest in a major marketing campaign to promote the location benefits of Korsan to new
customers.
D. Reduce the restaurant to breakfast-only, setting up a relationship with a city-based
restaurant for your customers to have discounted evening meals.
Correct
Answer D is correct. By only serving the needs most desired by customers (sleep and location) Korsan
can reduce unnecessary overheads and increase value captured. The deal with a city restaurant will also
be attractive to those customers wanting to eat in the evening. Korsan's target audience is different to
Luxuria, and there is no evidence to suggest that Luxuria's target audience would be attracted, even with
a refurbished hotel. A - could be a costly error. B - would require investment by way of a marketing
campaign to get it off the ground, and there is no guarantee that non-hotel customers would be attracted.
Korsan has high repeat business and high projected future occupancy, so a campaign to attract new
customers (C) would be wasteful
63. In the business game, The Way Forward, which one of the following mix of strategies would you
expect to be the most successful?
A.
B.
C.
D.
Modern; high quality product; medium price; conservative brand image
Traditional product; high price; modern brand image
Fashionable product; high price; prestigious image
Sturdy basic product, high price, traditional image
Correct
The correct answer is C. The three features of C, taken together, offer a consistent strategy. In each of
A, B and D the three features are not consistent
64. Which one of the following would not be a current issue for Health insurance companies in India?
A.
B.
C.
D.
Fast changing regulations resulting in business challenges
Move towards market consistent and risk based reporting techniques
High claim ratio in group health insurance segment
Increase in loss ratio with maturing policies in retail segment
Correct
Correct Answer: B
65. You have been asked to define the competitive positioning for your business unit, a supplier of laser
printers. Which one of the following statements would NOT represent a component of the business
unit's competitive position?
A.
B.
C.
D.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of either product/service, target
customers, or channels, all of which are competitive positioning decisions. Answer C is more concerned
with timing and resource decisions for building the company
66. Which of the following shows the three main headings in 'the change readiness matrix'?
A. Management willingness to change; key stakeholders courage to change; individual staff
members motivation to change.
B. Key stakeholders; willingness to change; ability to change.
C. Individual ability to change; organizational ability to change; management courage to change.
D. Shareholders; motivation to change; organization willingness to change.
Correct
The answer is B as shown in 'the change matrix'. Explore item under the 'predicting reactions' tutorial
67. Which of the following options describes a function outside the purview of the Quality Review Board?
A.
B.
C.
D.
Fix standards for the services provided by the members of the Institute
Review the quality of services provided by the members including actuarial audit services
Promote the status of the Actuarial profession
Guide members of the Institute to improve the quality of services and adherence to the various
statutory and other regulatory requirements
Correct
Correct Answer: C
68. Roger offers blue chip shares for sale to Penelope for R500, 000 and stipulates that R100, 000 should
be paid as a down payment the moment the share certificates are transferred to her. Penelope agrees to
buy the shares for R500, 000, but fixes a different date for the down payment.
Which of the following statements is correct?
A. Penelope has validly accepted Roger’s offer because she has accepted all the material terms.
B. Penelope’s acceptance of the offer amounts to a rejection of Roger’s original offer coupled
with a counter-offer.
C. Penelope’s acceptance of the offer is valid because she has defined all the terms on which
agreement is sought.
D. Penelope has rejected Roger’s offer outright.
Correct
Answer B is correct. For a valid contract to come into existence, the offeree has to accept an offer on
the same terms as that addressed to him/her by the offeror. If the offeree accepts some terms but
rejects other terms, no contract comes into existence. The acceptance of some terms and the
rejection of other terms constitute a rejection of the original offer with a concomitant counter-offer
addressed by the offeree to the offeror. If the latter accepts the counter-offer, then a valid contract comes
into existence
69. As part of a 'PEST' analysis of external factors that might affect your industry, which of the following
areas might you investigate?
A.
B.
C.
D.
Political changes.
Environmental factors - how climate changes will affect your operation.
Strategic choices being made by your main competitor.
Temporary advantages with product design.
Correct
Answer A is correct. The other responses do not represent factors that are part of the PEST framework
that is used to scan for external influences impacting an industry
70. Which of the following described in options A, B, C or D is not in itself criteria used for the issuance of
an Actuarial Practice Standard or a Guidance Note?
I.
II.
III.
A.
B.
C.
D.
Consistent with public interest
Consistent with Professional Conduct Standards
Unambiguous
I only
II only
III only
None of them
Correct
Correct Answer: C
71. One source of competitive advantage is 'strategic relationships'.
If you were running a well-known Advertising Agency, select the one option in the list below relating to the
agency's relationships that you would consider as offering a sustainable competitive advantage.
A. Client business is built into fixed term contracts of one or two years
B. Extensive selection of testimonials from satisfied customers from a diverse range of industries.
C. The only parent company in the agency world whose policy is to invest centrally in
building capabilities it then shares across business units
D. An award-winning creative team
Correct
Correct Answer: C While all the options will contribute to a successful business, it is option C that is said
to be an exception, as it's harder to copy than the other options
72. In the business game, The Way Forward, which one of the following effects would be most likely if
public relations was chosen as the first management priority in all areas?
A.
B.
C.
D.
Increased sales.
Decreased sales price.
Decreased debtors.
Higher profit.
Correct
The correct answer is A. If the highest management priority was public relations this is most likely to
cause the public to buy more of the company's products. Public relations would not in itself decrease the
sales price, reduce the debtors, or necessarily result in higher profit, so B, C and D are not correct in the
context of the question asked
73. You are the lead agency working for a motor manufacturer, whose new 'technology-enhanced' car the Mobilo - has an inbuilt computer and telephone system to enable smarter working on the move.
However, the Mobilo is not selling as well as expected into the company's core customer segments.
Recent research has revealed that the core segments are seeking mobile efficiency as well as enhanced
status for being 'early adopters' in this market.
Which of the company's advantages would you use as the core of a campaign to increase uptake?
A. The quality of its research and development function, which has an unrivalled reputation
for new ideas in mobile living/working
B. The strong relationships the company has with its suppliers, who provide highly-reputed
technological components
C. The speed of delivery, fulfilling orders faster than any of the competition, to supply early adopters
D. The Mobilo brand name, which has topped industry polls for awareness three years running
Correct
Answer A is correct. This matches customers' desire for mobile efficiency as well as their need to be
early adopters in the market. Customers will value the highly-reputed technological components (B), but
alone they do not meet customer needs for mobile efficiency. Speed of delivery (C) will help in getting the
products to customers early, to support them being early adopters, but it does not match their need for
innovation. There is little benefit in purely having high awareness of the company brand (D), if this product
campaign is not communicating the benefits relevant to the target groups
74. The main purpose of a business strategy is...
A.
B.
C.
D.
to follow every opportunity available.
to determine how best to use management talent.
to decide on the best way to promote the business to customers.
to maximise the value of the company.
Correct
The answer is D in accordance with the 'creating and capturing value' tutorial
75. William buys a house from Sue-Ellen. Ownership passes when...
A.
B.
C.
D.
William and Sue-Ellen sign the deed of sale.
Sue-Ellen hands over the keys of the house to William.
the house is registered in William’s name in the deeds registries.
William’s bank approves the bond and pays the purchase price into Sue-Ellen’s bank account.
Correct
Answer C is correct because ownership of immovable property passes when registration of transfer
takes place in the deeds registries. The conclusion of the contract, payment of the purchase price etc.
only create a personal right to receive transfer of the property, but not real right of ownership
76. Choose the correct statement.
When litigating, a company’s
A. directors and shareholders must always be cited as nominal parties to the litigation.
B. directors and shareholders will be liable for the costs of unsuccessful litigation in so far as the
company has insufficient assets to pay for a costs order.
C. directors and all shareholders may not breach their fiduciary duties.
D. None of the above.
Correct
Statement D is correct because a company has separate juristic personality, the directors and
shareholders are never party to proceedings, are not liable for any costs orders made against the
company, and shareholders owe no fiduciary duties
77. As an executive in a major oil company, you work for the division where responsibilities cover its
network of petrol stations serving the public. You've received details from the directors of the strategic,
financial, and non-financial objectives going forward.
Identify the two strategic objectives
A.
B.
C.
D.
E.
Devise a new package of benefits for the 'motorist's club' loyalty scheme you run for customers.
Pledge to protect the environment by increasing new policies and processes.
Leverage distribution network more effectively by establishing shops on sites.
Increase return on investment by 5% over 2 years.
Increase share of national market by investing to update facilities.
Correct
Answers C and E are high level, strategic objectives which should help to achieve the financial
objectives in D. A is tactical rather than strategic, and B is non-strategic and non-financial (although often
it is difficult to draw a clear-cut line between profits and social responsibility). D is financial - it is a specific
goal with specific timeframe
78. In the business game, The Way Forward, if your company made a new issue of 1,000,000 shares and
the issue price was £3.25, how much money would your company receive?
A.
B.
C.
D.
£32,500,000
£750,000
£325,000
£3,250,000
Correct
The correct answer is D, £3.25 times 1,000,000 shares which equals £3,250,000
79. A construction contract contains the following clause: It is specifically recorded that the project must
be completed by 31 January 2011. For every day that the project remains incomplete after the
aforementioned date, the construction company will be liable to the developer for the sum of R15,000 per
day.
Which of the following statements is correct?
A. The aforementioned clause is called a penalty clause and is permitted in terms of the
Conventional Penalties Act of 1962.
B. The aforementioned clause is called a penalty clause. Penalty clauses in contracts are not
permitted in terms of the Conventional Penalties Act of 1962.
C. The aforementioned clause is called a penalty clause and is considered illegal as it is said to be
unconscionable in terms of the common law.
D. The aforementioned clause is called a penalty clause and is considered void in the present case
because the penalty is in excess of the recognized amount for penalties stipulated by the Minister
of Justice and Constitutional Development in the Government Gazette. The amount is currently
set at R10,000.
Correct
Answer A is correct. The Conventional Penalties Act recognizes and endorses penalty clauses inserted
into contracts. A penalty clause usually entrenches a pre-estimate of damages in the event that a contract
is breached. If the penalty is unduly harsh, the party affected by the clause can apply to court to reduce
the penalty. However, until the party applies to court for a reduction of the penalty, the penalty stands.
There is no limitation as regards what a penalty could be. Depending on the circumstances of a case and
the nature of the contract, the penalty could be a few hundred, thousands, or evens millions of rands. In
the above case, the penalty clause stands
80. In case of a conflict of interest arising between two or more clients of an actuary’s firm which of the
following options should an actuary exercise?
A. The actuary must withdraw from providing advice to both/all clients thereby avoiding the conflict
of interest
B. The actuary must consider only the nature of the conflict and whether it makes it improper for the
actuary to provide advice to one or both the clients involved in the conflict
C. The actuary must consider the nature and extent of the conflict and whether it makes it
improper for the actuary to provide advice to one or both the clients involved in the
conflict
D. None of them
Correct
Correct Answer: C
81. Natalie, a successful training consultant, negotiated conference facilities at the Nelson Hotel in
Caledon where she was to conduct a two day seminar for local businesses. All the arrangements were
confirmed by the hotel and all the delegates were accordingly informed of the venue, dates and times. On
the morning of the conference, Natalie discovered, much to her dismay, that the hotel had double booked
its conference facilities and that she could not run her seminar there. She quickly contacted the only other
hotel in the area, the Overberg Luxury Spa Resort, which was able to accommodate her seminar for the
two days but at double the rate the Nelson Hotel was going to charge her. The delegates were redirected
to this hotel. In her rush to the new destination, Natalie had a minor accident in which her car's bumper
was damaged.
The Nelson Hotel admits that they were in breach but allege that Natalie has not suffered any damages
because the Overberg Luxury Spa Hotel is rated 5 star whereas the Nelson is only rated 4 star and the
conference facilities at the Overberg are much better than at the Nelson. Natalie wants to claim the
additional expenses she has incurred. She also wants compensation for loss of profit, cost of repairs of
the bumper, inconvenience, humiliation and loss of prestige caused by the breach.
In terms of the law of contract, which of the following statements is correct?
A. Natalie cannot claim any damages.
B. Natalie can claim the additional expenses and any associated loss of profits.
C. Natalie can claim the additional expenses, and damages for the loss of profit, cost of repairs of
the bumper, inconvenience, humiliation and loss of prestige.
D. Natalie cannot cancel the contract as the breach was not serious.
Correct
Answer B is correct. The breach in this case was material, entitling Natalie to claim damages for breach
of contract. She would be able to claim damages to put her in the position she would have been had the
contract not been breached. If the contract had not been breached, she would not have incurred the
additional expenses associated with having to move the conference to a more expensive venue and the
possible loss of profits associated with this. She may thus bring a claim for the additional expenses and
the loss of profits. However, she would not be able to claim for the damages to her car from the Nelson
Hotel, as these damages are not a direct and foreseeable consequence of the Nelson’s breach. It would,
therefore, be more appropriate for her to sue the driver of the other vehicle in the law of delict for the
damages to her car. Inconvenience, humiliation and loss of prestige are non-patrimonial losses. In the law
of contract, one cannot claim damages for non-patrimonial loss. If she wishes to pursue her claims for
these damages, she would have to bring a claim in the law of delict, provided, of course, that she can
satisfy all the requirements of delict
82. Moving from an existing strategy to a new one can be challenging with complicated changes to
implement. Trying to do everything at once can stretch resources. It is usually best to progress in
manageable steps with each step representing a sustainable strategy in itself. Such steps are a strategic
staircase.
In what order are the steps on Komatsu's strategic staircase, starting at the bottom?
A.
B.
C.
D.
Cost; quality; diversification; differentiation.
Differentiation; quality; cost; diversification.
Quality; cost; differentiation; diversification.
Differentiation; diversification; quality; cost.
Correct
The answer is C in accordance with the 'Komatsu's strategic staircase'. Explore item in 'the strategic
staircase' tutorial
83. You are the Marketing Director for Svenson, a technology manufacturer. You have just introduced a
new 'mobile entertainment' device, which will offer users the opportunity to play videos, take digital
photographs, send emails and text messages, play music and communicate via telephone. It has state-ofthe-art features, allowing compatibility with all the top service providers. The Svenson brand is relatively
new, yet it already has a reputation for being innovative, cool and funky. The Svenson 'mini entertainer' is
priced at $600. You now have information from your Customer Management team showing the profiles of
your key customer segments.
Which segment is most attractive and achievable for Svenson?
A. Gadgets Galore - 27% of your base and rising slowly. Good disposable income,
increasingly mobile for work and leisure, take huge interest in gadget advertising, and love
the funky status they acquire with Svenson products.
B. Youth of Today - 30% of your base, and rising fast. Reasonable disposable income, buy on
functionality, willing to pay for whichever technology combines all the functions they need and fits
their mobile lifestyle.
C. Family First - the largest segment (33% of your base), although it has shrunk over the last year.
Mobility based around supporting the family. High income restricted by outlays on children and
aged parents. Willing to purchase any technology proven to make their lives easier.
Correct
Answer A is correct. Gadgets Galore is the most attractive/achievable segment. Segment size is
reasonable, and it is growing, disposable income is high (for what is quite a reasonably expensive, oneoff purchase) and there is strong desire for the product. It is an ideal fit with Svenson's advantages in
innovation, plus its brand reputation - gadget lovers matched with funky gadget provider. Youth of Today
(B) is a reasonable-sized, growing segment. Svenson's advantages match their needs, but the segment is
more attracted by generic functionality than the Svenson brand, making it less attractive to the company.
Family First (C) is less attractive. Although this segment is large, the profile suggests people in this
segment are more likely to pay for features that provide convenience rather than pure entertainment.
Although they have high income, their profile suggests they are likely to have priorities for spending rather
than a high-priced entertainment item
84. An insurance company employs Edward, an actuary. Whilst acting within the course and scope of his
employment, he negligently misstates information to a client. By relying on this information the client
suffers loss.
Which of the following statements is correct?
A. The client can sue the insurance company in the law of delict for the loss that it (the client)
suffered.
B. The client can hold the insurance company liable on the basis of the principle of vicarious liability.
C. The insurance company is not liable; only the actuary is, as the company was not at fault.
D. A and B above.
Correct
Answer D is correct. According to the principle of vicarious liability an employer can be held liable for the
delicts of its employee provided that the employee was acting within the course and scope of his
employment
85. Select the one statement below that correctly defines the difference between deductive synthesis and
creative synthesis?
A. In deductive synthesis the new fact is implicit in the old ones, while in creative synthesis the new
fact is explicit in the old ones.
B. In deductive synthesis facts are found by building the data up from a hypothesis, while in creative
synthesis facts are created by some additional insight.
C. In deductive synthesis facts are found by reducing the data down to the fact, while in
creative synthesis facts are created by some additional insight.
D. In deductive synthesis the outcome is created by adding insight, while in creative synthesis
removing details creates the outcome.
Correct
Answer C is correct. In deductive synthesis facts are critical to the outcome, while in creative synthesis
facts are not relevant to the outcome
86. The company you work for, TransGlobal Multinational Limited, is considering entering a new market.
The decision-making process has involved reviewing other similar organizations' attempted entries,
identifying successes and failures, suggesting improvements that TransGlobal could make over
competitors' offers, and an analysis of the market and the customers' needs.
Based on this decision-making behaviour, which one of the organizational cultural types listed do you
think TransGlobal fits within?
A.
B.
C.
D.
Defenders.
Innovators.
Fast followers.
Slow reactors.
Correct
Answer C is correct. This behaviour illustrates an organization not willing to take the risk of moving first,
but opportunistic enough to enter where an opportunity has appeared, and then attempt to improve upon
the market entry, process, or product introduced by the innovator
87. Which of the following statements is correct?
A. The court will apply the curious bystander test when deciding if a term is an imposed term.
B. When applying the parol evidence rule, the court will take into account not only the written
contract itself, but also all the surrounding circumstances to ascertain what the true terms of the
contract are.
C. The courts may order rectification of a written contract if, at the time of verbal
negotiations, the parties were both of the same mind, but the written contract contains an
error and does not conform to the parties’ true intentions.
D. All contracts must be in writing to be valid.
Correct
Answer C is correct. According to the common law, a contract need not be in writing. The only time a
contact needs to be in writing is when a statute requires the contract to be written. The curious bystander
test is used to imply a term into a contract. According to the common law, the parol evidence rule
prevents parties from relying on extrinsic evidence to construe the terms of an agreement that is reduced
to writing
88. When considering financial and non-financial objectives, which of the following would be true?
A. Non-financial objectives are often just as important as financial ones, and they can be a lot
less obvious.
B. Financial objectives will always be more important than non-financial ones, and are usually more
obvious.
C. Non-financial objectives will usually be more obvious than financial ones and will be better
understood by the staff.
D. Financial objectives are key to the success of a company so non-financial ones are not usually
relevant.
Correct
The answer is A in accordance with the 'non-financial objectives' tutorial
89. Which of the following options A, B, C or D best describes the action in relation to other members?
I.
II.
III.
A.
B.
C.
D.
Criticism of another member’s work is prohibited
Criticism of another member’s work is acceptable
Criticism of another member’s work is properly reasoned and believed to be justified
I only
II and III
II only
II or III
Correct
Correct Answer: B
90. On 15 January Richard entered into a written contract of agency with Diana in terms of which Richard
authorized his professional assistant Diana to purchase a vacant plot of land from Golf Mead (Pty) Ltd, a
private golf estate development company. Richard instructed Diana that she must not pay more than R3
million for a vacant plot. Diana, on behalf of Richard, entered into a written contract with Golf Mead (Pty)
Ltd for the purchase of a vacant plot on a golf estate. In terms of the contract of sale the purchase price
for the vacant plot was R2.5 million. In addition, Diana, professing to act on Richard’s behalf, bought a
golf cart at the price of R150,000 from Golf Mead (Pty) Ltd. Although Richard at no stage provided Diana
with either express or implied authority to purchase the golf cart, Diana fraudulently represented that she
had authority to purchase the golf cart on Richard’s behalf. Furthermore, Richard did not impliedly or
expressly ratify Diana’s purchase of the golf cart (in fact he has never even seen it), nor did he, at any
time, give the impression that Diana was authorized to purchase the golf cart.
Which of the statements is correct?
A. Richard is bound to Golf Mead under the law of contract of sale for the purchase of the vacant
plot, and will be liable under the implied warranty of authority for the golf cart.
B. Richard is not bound under the law of contract of sale for the purchase of the vacant plot as
Diana exceeded her authority in respect of the purchase of the golf cart. Diana may, however, be
liable to Golf Mead for contractual damages arising from the sale of the plot and the golf cart
because she exceeded her authority in this regard.
C. Richard is liable to Golf Mead in terms of the law of contract of sale for the purchase of the
vacant plot, and Diana will be liable to Golf Mead for the golf cart in terms of the implied
warranty of authority.
D. Richard is bound to Golf Mead for the sale of the vacant piece of land and the golf cart, as the
cumulative value of the purchases did not exceed R3 million.
Correct
Answer C is correct. An agent must act in terms of the mandate given by the principal. If the agent
exceeds her mandate, the principal is still bound to fulfill those transactions that were undertaken in terms
of the mandate, but may refuse to fulfill those transactions that were undertaken in excess of the given
mandate. As regards those transactions which were undertaken by the agent in excess of the mandate,
the agent will be liable. There are times, however, when the principal will be liable even for those
transactions exceeding the express mandate. This will occur where the principal has acted in a way so as
to give the other party a reasonable impression that the agent was authorized to enter into those
transactions which were not covered by the mandate. In the case above, the agent acted in terms of the
mandate for the procurement of the property, but exceeded her authority as regards the purchase of the
golf cart. Accordingly, the principal, Richard, will be liable to perform in terms of the sale agreement for
the vacant plot of land. However, Diana will be liable for the purchase price of the golf cart as she
exceeded her authority and Richard did nothing to create an impression in the mind of the seller that he
had authorized this transaction
91. When can a firm practice as Actuaries?
A.
B.
C.
D.
All the partners are Fellow of Institute of Actuaries of India (FIAI)
Some of the partners are FIAI while some can be members of other professional bodies
Some of the partners are FIAI while some can be Associates of Institute of Actuaries of India
Professional qualification of partners doesn’t matter
Correct
Correct Answer: A
92. Parliament recently passed the National Credit Act of 2005. The Act specifically provides that it does
not apply to a credit agreement in terms of which the consumer is a juristic person with an asset value
or annual turnover exceeding R1 million.
The Act provides that this amount may be amended by the Minister of Finance from time to time by
notice Regulation in the Government Gazette.
At the end of 2007, the Minister, through his government department, passes a Regulation to increase
the amount from R1 million to R1.2 million.
Which of the following statements is correct?
A. The National Credit Act is an example of original legislation and the Regulation is an example of
delegated legislation.
B. Both the National Credit Act and the Regulation are examples of original legislation.
C. Both the National Credit Act and the Regulation are examples of delegated legislation as
the only original piece of legislation in India is the Constitution.
D. The National Credit Act is an example of original legislation and the Regulation is an example of a
by-law.
Correct
The correct answer is A. Acts passed by Parliament are original legislation because they represent the
will of the legislature. However, an Act sometimes empowers a functionary to pass Regulations in terms
of the Act. Regulations are delegated legislation because they represent the delegated will of Parliament
93. A construction contract contains the following clause: “ It is specifically recorded that the project must
be completed by 31 January 2011. For every day that the project remains incomplete after the
aforementioned date, the construction company will be liable to the developer for the sum of R15 000 per
day.”
Which of the following statements is correct?
A. The aforementioned clause is called a penalty clause and is permitted in terms of the
Conventional Penalties Act of 1962.
B. The aforementioned clause is called a penalty clause. Penalty clauses in contracts are not
permitted in terms of the Conventional Penalties Act of 1962.
C. The aforementioned clause is called a penalty clause and is considered illegal as it is said to be
unconscionable in terms of the common law.
D. The aforementioned clause is called a penalty clause and is considered void in the present case
because the penalty is in excess of the recognised amount for penalties stipulated by the Minister
of Justice and Constitutional Development in the Government Gazette. The amount is currently
set at R10 000.
Correct
Answer A is correct. The Conventional Penalties Act recognises and endorses penalty clauses inserted
into contracts. A penalty clause usually entrenches a pre-estimate of damages in the event that a contract
is breached. If the penalty is unduly harsh, the party affected by the clause can apply to court to reduce
the penalty. However, until the party applies to court for a reduction of the penalty, the penalty stands.
There is no limitation as regards what a penalty could be. Depending on the circumstances of a case and
the nature of the contract, the penalty could be a few hundred, thousands, or evens millions of rands. In
the above case, the penalty clause stands
94. In the business game, The Way Forward, how is gross margin defined?
A. The difference between turnover and cost of sales.
B. The difference between the price a company sells at and the lowest price in the market.
C. The difference between the Profit and Loss in the current time period and the Profit and Loss in
the previous period.
D. The biggest difference between the price at which a team purchased an item and the price at
which it sold that item.
Correct
The correct answer is A. Gross margin is the difference between the sale price and the cost price of an
item that is sold. Turnover is the total sales price for all units that are sold. B is not correct as the lowest
price in the market is not relevant to a company's gross margin. C is not correct because many items
make up the profit or loss in a period, not just the gross margin on the sale of a product. D is not correct
because it only relates to the gross margin for one item
95. You have just joined a new company, and you have already been asked to make a recommendation
on what you think is a strategic, high-impact decision. Your recommendation will be made direct to the
Chief Executive. You have looked for someone able to help you with this, but not found anyone with the
right qualifications or experience. You had intended to do a detailed analysis, but a colleague has
informed you there is not enough time to do that, and suggested you should "use your instinct."
What type of organizational structure do you think you are now working in?
A.
B.
C.
D.
A complex matrix organization.
A hierarchical organization.
A power-based organization.
A freeform organization.
Correct
Answer C. Newly-formed companies are frequently power-based and tend to involve little structure or
formality, high risk-taking, and the decision-making power concentrated in a few people. In a hierarchy (B)
you would expect a big decision to go through a more formal process of approval, and in a matrix
organization (C) you would expect more people to be involved in the process bringing their own views
and expertise
96. An actuary agrees to do work for a client, but does not expressly agree a fee or hourly rate.
Which one of the following is correct?
A.
B.
C.
D.
The agreement is void for mistake.
The agreement fails for lack of consideration.
The law will imply a term to the effect that a reasonable fee or charge will be charged.
The agreement fails for lack of an express term as to charging.
Correct
The correct answer is C. According to the common law, where a professional agrees to perform work
the law implies a term that the fees charged will be reasonable, unless the parties expressly agree on an
amount. The doctrine of consideration does not form part of our law, and in this scenario, there is no
mistake.
97. You are preparing a report on a final salary pension scheme for A Ltd. You are aware B Ltd is in
negotiations to purchase the entire issued share capital of A Ltd. You are also aware that A Ltd has
promised to pass the report to B Ltd.
Which one of the following statements is most likely to be incorrect?
A.
B.
C.
D.
You owe a duty of care to A Ltd.
You will never owe a duty of care to B Ltd.
You might owe a duty of care to B Ltd.
You are unlikely to owe a duty of care to other third parties who rely on the report.
Correct
The correct answer is B. Given that you are aware of the purpose for which the report is to be used you
might owe B Ltd a duty of care. A is wrong as A Ltd is your client. You clearly owe your client a duty of
care. C is wrong because given you know the purpose for which the report is to be used you might owe B
Ltd a duty of care. D is wrong because as you are not aware of who else might rely on the report it is
unlikely you will owe them a duty of care
98. A firm of actuaries issues a brochure advertising its services.
Which one of the following statements is most likely to be incorrect?
A.
B.
C.
D.
The brochure is likely to be classed as an invitation to treat.
Statements made in the brochure are capable of being misrepresentations.
The brochure is likely to form a binding contract between the firm and the client.
The brochure is likely to give rise to warranties.
Correct
The correct answer is C. A is wrong because it is unlikely the firm will be expressing a willingness to be
bound by the terms of the brochure. B is wrong because if a statement in the brochure is untrue and
induces entry into a contract it is capable of being a misrepresentation. D is wrong because a warranty is
an express term of a contract where one of the parties makes a pre-contractual representation
99. The key issues that an actuary will encounter in any business area in which he/she is working are:
A.
B.
C.
D.
Balancing the interests of all stakeholders
Treating customers fairly
Statutory & regulatory compliances
All of above
Correct
Correct Answer: D
100. Thandi lives in Cape Town. She is offered employment by a firm of actuaries in Sandton, Gauteng.
She receives the offer of employment by email. A week later she emails the Sandton firm and informs
them that she has decided to accept their offer. The email is successfully sent. A few hours after sending
the acceptance email, she has a change of heart and decides to email the Sandton firm to withdraw her
acceptance.
In terms of the Electronic Communications and Transactions Act of 2002, which of the following
statements is correct?
A. The moment Thandi sends the acceptance email Thandi is deemed to have accepted the
employment offer and a valid contract comes into being.
B. If Thandi can prove that the recipient of the email had not read the acceptance email before she
sent the withdrawal email, no contract comes into being.
C. Acceptance of the offer of employment would be deemed to have occurred when Thandi’s
acceptance email successfully reaches the email inbox of the recipient (offeror) and is
capable of being retrieved, even though the recipient has not had a chance to read it.
However, if the recipient reads the withdrawal email before reading the acceptance email,
the withdrawal email will automatically cancel the acceptance email and accordingly, no
contract comes into existence.
D. None of the above.
Correct
Answer D is correct. In terms of the Electronic Communications and Transactions Act of 2002,
acceptance of an email contract occurs when the offeree’s acceptance reaches the email inbox of the
offeror. The offeror need not have read the email for the contract to come into existence. One cannot
withdraw an acceptance after the acceptance has reached the offeror’s inbox, because a valid contract
has already come into existence. Withdrawal of the acceptance would be tantamount to repudiation of the
contract, which would entitle the offeror to sue the offeree for breach of contract
101. What is the maximum number of working offices an actuarial firm with two partners can have?
A.
B.
C.
D.
One
Four
Two
Six
Correct
Correct Answer: C
102. The sale of a collection of guns is illegal if a permit has not been granted allowing such a sale. Bob
and Sam enter into an agreement for the purchase and sale of a collection of guns, without the required
permit. Bob, the seller, knows that a permit is required whereas Sam, the purchaser, does not. Sam pays
the purchase price, but Bob refuses to deliver the guns to Sam.
Which of the following statements is correct?
A. Because Sam was unaware of the requirement of a permit, he may legally compel Bob to deliver
the guns.
B. Sam may not legally compel Bob to deliver the guns, because all performance is halted in
an illegal contract.
C. Sam may not recover the purchase price, because of the rule that 'the position of the possessor
is the stronger'.
D. Sam may not recover the purchase price, because of the rule that 'ignorance of the law is no
excuse'.
Correct
Answer B is correct. An illegal contract is void. Once the illegality becomes known, all outstanding
performance may be halted. Where performance has already been made, the general rule is that the
possessor of the performance is not required to return the performance made. However, the general rule
can be overridden if it can be shown that the party who is out of pocket was innocent of the illegality. Bob
is thus not obliged to deliver the guns. The principle ‘the position of the possessor is stronger’ will not
apply in this case because Sam was innocent of the illegality.
103. All except two of the following would be appropriate criteria to test whether a potential segment
should be a viable target. Select the two which are NOT real tests of segment viability.
A. Distinctiveness - are the customer needs sufficiently different to require some adaptation to
product, service or communications?
B. Significance - is the segment large enough to create volume sales, or to include the target
customers willing to pay an acceptable price to you?
C. Defendable - can you serve the segment better than competitors?
D. Exclusive channels - are there channels of communication or distribution exclusively
devoted to reaching these targets?
E. Stability - has the segment been recognized and established for a long time, ensuring it
will remain unchanged in the future?
Correct
Answer D and E are NOT real tests of whether you have found a true segment. D - although it is vital to
have channels of communication and distribution they do not have to be exclusive. E - a long established
segment is likely to be served already and using this criterion would in any case eliminate interesting
emerging segments.
104. You have been asked to define the competitive positioning for your business unit, a supplier of laser
printers.Which one of the following statements would NOT represent a component of the business unit's
competitive position?
A.
B.
C.
D.
Supply affordable laser printers and related supplies.
Target Home Office computer users.
Taking a phased approach to expanding the distribution network.
Sell through both retail stores and online.
Correct
Answer C is correct. All of the other responses represent a definition of either product/service, target
customers, or channels, all of which are competitive positioning decisions. Answer C is more concerned
with timing and resource decisions for building the company
105. Which of the following options describes a function outside the purview of the Quality Review Board?
A.
B.
C.
D.
Correct
Fix standards for the services provided by the members of the Institute
Review the quality of services provided by the members including actuarial audit services
Promote the status of the Actuarial profession
Guide members of the Institute to improve the quality of services and adherence to the various
statutory and other regulatory requirements
Correct Answer: C
106. In the business game, The Way Forward, if a company sold a simple but very effective product that
was designed many years ago, which one of the following words would be the most appropriate to use in
its advertising?
A.
B.
C.
D.
Distinctive.
Fashionable.
Green.
Reliable.
Correct
The correct answer is D as ‘reliable' would suggest a non-complicated product that has stood the test of
time. ‘Distinctive' would suggest a more modern product that has been specially designed to be different
from other available products. ‘Fashionable' would suggest a very recently designed product. ‘Green' is a
modern phenomenon and would not be a product designed many years ago
107. Choose the correct statement:
A. The Bill of Rights of the Indian Constitution is binding between the state vis-à-vis individual; and
individual vis-à-vis individual i.e. it has both a vertical and a horizontal application.
B. The Bill of Rights extends protection to all Indians and even to people who are not Indian citizens,
provided that they (i.e. foreigners) have a residence permit to be in India.
C. The Bill of Rights cannot be amended by any court or by the executive and can only be amended
by a statute of Parliament after Parliament itself has complied with all the procedures and
prerequisites for amendment as laid down by the Constitution.
D. A and C above.
Correct
Answer D is correct. The Indian Bill of Rights has both vertical and horizontal application. This makes it
one of the most unique constitutions in the world. The Constitution protects everyone on Indian soil
whether they are in this country legally or illegally. Even a fugitive of justice can activate the rights
entrenched in our Constitution. It will be for the courts to determine whether the rights of any person on
Indian soil have been unjustifiably infringed. The Constitution cannot be amended by a court of law. Nor
can the executive amend the Constitution. The Constitution can only be amended by Parliament by
following special procedures and by ensuring that all the prerequisites (such as obtaining a two-thirds
majority of votes in Parliament) for amendment have been followed. The Constitutional Court has to
confirm any amendments to the Constitution, and it is the function of the Constitutional Court to ensure
that all the procedures for amendment have been followed. Should it turn out that Parliament has not
followed all the procedures or that the prerequisites for amendment have not been met, the Constitutional
Court is obliged to set aside the constitutional amendment
108. Brian wants to have the outside of his house painted and telephones Lalla’s Painters for a quote. On
8 April, Penelope, the owner of Lalla’s Painters, has a look at Brian’s house and gives a quote of R20
000. Later that day (8 April), Penelope faxes the quotation document to Brian and one of the sentences
reads as follows:
“Quotation of R20 000 is valid until 13 May” and the quote furthermore states that acceptance of the
quote must be done in writing and can either be faxed or posted to Lalla’s Painters. On 10 May, Brian
posts a letter of acceptance to Lalla’s Painters. The letter of acceptance reached Lalla’s Painters on 15
May. As a result of this, Lalla’s Painters argue that the acceptance was out of time and no contract has
come into existence between the parties.
Your advice to Brian is that:
A. There is no contract, as the acceptance was not received by 13 May and the so-called
‘information’ theory applies on this set of facts.
B. There is no contract, as the acceptance was not received by 13 May and the so-called
‘expedition’ theory applies on this set of facts.
C. There is a valid and binding contract, as it is irrelevant that the acceptance was not received by
13 May, for the so-called ‘information’ theory applies on this set of facts.
D. There is a valid and binding contract, as it is irrelevant that the acceptance was not
received by 13 May, for the so-called ‘expedition’ theory applies on this set of facts.
Correct
Answer D is correct. With postal contracts, the expedition theory of contract formation applies.
According to this theory, a contract comes into existence the moment the offeree posts his acceptance to
the offeror. As long as the offeree can prove that he posted the acceptance before 13 May, a valid
contract will come into being
109. If you were classifying a company in terms of how it made decisions when responding to
changing market conditions, which one of the following descriptions would define a 'defender'?
A. Historically successful, but conservative, and potentially becoming complacent.
Will raise quality and cut prices to improve market position.
B. Historically successful, by adopting high-risk strategies. Keen on detailed analyses to
improve ideas.
C. Dynamic, risk-taking. Constantly looking for new opportunities. Not keen to wait around
for detailed analyses.
D. Not keen on high risk, but keen to adapt and improve ideas. Often achieve strong returns
and visibility in the market.
Correct
Answer A is correct. Defenders are often well-established companies with a strong position that needs
Defending from others seeking to steal market share from them. They have resources they can use to
attack competitors. Sometimes their relative strength can make them over confident. D - Describes Fast
Follower organizations who are less happy with high risk than Innovators, but can often achieve greater
returns and visibility than Innovators gain. B - Describes a combination of Defenders, Innovators and Fast
Followers. C - Describes Innovators.
110. Which one of the following authorities is responsible for setting the ethical standards that
member of the Institute of Actuaries in the India should comply with?
A. Insurance Regulatory and Development Authority
B. The Institute of Actuaries of India
C. Reserve Bank of India
D. Securities and Exchange Board of India
Correct
Correct Answer: B
111. Which of the following mistakes will not be considered material?
A. Basil thinks he is entering into a sale with Agatha, but Agatha thinks that it is a donation.
B. Basil thinks that he is buying dog biscuits from Agatha, but actually Agatha is selling antiaging
cream.
C. Basil thinks that he is employing a woman called Agatha with a BCom degree, but, due to
an administrative error, he mistakenly offers the job to a different person, Alice, who
holds an LLB degree.
D. Basil thinks that he is buying his newspaper from Agatha, but actually he is buying
it from a different person, Alice.
Correct
Answer D is correct. A mistake as regards the type of contract that is being entered into would be
material. A mistake in respect of the subject matter of a contract would be material. The identities of the
contracting parties are generally considered immaterial. However, there are times when identity can be
important. It depends on the type of contract. With an employment contract, the identity of the employee
would be material. However, in a sale agreement, where the underlying purpose of the sale is unaffected
by the identities of the parties, a mistake as to the identities of the parties would be immaterial. In the
above case, the identities of the parties in the employment contract would be material. However, the
identities of the parties in the sale agreement is immaterial as the identities of the parties would have no
bearing on the subject matter and would not have been causal for the conclusion of the contract.
112. In meeting customer or client needs which of the following would not normally be true?
A. It is important for a company to know who its customers are and to be clear about the
needs it is meeting.
B. A company will not normally make assumptions about what its customers want without asking
them.
C. Customers' needs change over time.
D. Customers often find that a company will do things for them that they do not care about.
Correct
The answer is B in accordance with the 'are we meeting customer needs?' tutorial.
113. Actuaries Act 2006 provide for the constitution of various Committees.
These Committees report to?
A. President of the Institute
B. The Council
C. The Prosecuting Director
D. The member appointed by the Government of India to the Council
Correct
Correct Answer: B
114. Choose the correct statement:
A. The law of delict is concerned with providing remedies for breach of contract.
B. The law of delict is concerned with providing compensation to victims who have
Suffered a civil wrong
C. The law of delict is concerned with providing compensation to victims who have suffered
a civil wrong and who are unable to prove a criminal case beyond reasonable doubt.
D. Answer (a) and (c) above.
Correct
The answer is B. Although there may be an overlap between the law of delict and criminal law, an action
in delict is not dependent on the result of any criminal suit. Furthermore, although misrepresentation in
the law of contract gives rise to delictual remedies, the purpose of the law of delict is much wider.
115. Which of the following statements describes the characteristics of power-based organizations in
terms of organizational decision-making?
Select the two relevant options.
A. Decision-making may be based on instinct or swayed by key influencers more than
key data/research.
B. Logic, rules, procedures, activities and job roles are tightly specified. Easier to predict
likely actions as policies are set down.
C. Two or more functions are critical to the company's success.
D. Junior/specialist staff are exposed to more responsibility and issues beyond one function.
E. Company stability depends on a key person remaining in place.
Correct
Answers A and E are characteristics of power-based organizations. A - a central power source is usually
associated with young companies, or those where the founder has not wished to expand greatly. B Describes a characteristic of a hierarchical organization. C - is a characteristic of matrix organizations. D Is a characteristic of matrix organizations. E- organizations where power is highly concentrated in one or
few individuals are compromising their future stability if those decision makers cannot continue and no
successors have been identified.
116. You run the office cleaning division at International GlobalCorp, and you are setting your
group's objectives. IGC's corporate goal is to grow market share in all its businesses.
Which of the following objectives for your area directly supports the corporate objective?
A. Increase the number of active customers by 15%.
B. Reduce costs of purchased cleaning products by 10%.
C. Buy four new mobile cleaning vans.
D. Achieve Silver status in the Association of Cleaners awards.
Correct
Answer A is correct. While the other objectives might indirectly contribute to the ability to grow market
share, answer A is the only one that directly results in increased share (assuming that the market as a
whole grows less than 15%).
117. In maximizing the value of a company, which of the following is the best measure of value
to use?
A. Annual profit.
B. Annual return on assets.
C. Net present value of future profits.
D. There is no one perfect measure.
Correct
The answer is D as there is no single measure of value in accordance with the 'financial objectives'
tutorial, it is best to consider that specific measures are providing information on specific aspects of the
business.
118. In maximising the value of a company, which of the following is the best measure
of value to use?
A. Annual profit
B. Annual return on assets
C. Net present value of future profits
D. There is no one perfect measure
Correct
The answer is D as there is no single measure of value in accordance with the 'Financial objectives'
tutorial, it is best to consider that specific measures are providing information on specific aspects of
the business
119. As a result of the Morris Review, which body will oversee The Actuarial Profession
in future?
A. The Financial Reporting Council
B. The Financial Services Authority
C. The Board for Actuarial Standards
D. The Treasury
Correct
Answer A is correct and you are recommended to read at l