If Actuarial Assumptions Change Such That the Annuity Payable Is

question 42

Multiple Choice

If actuarial assumptions change such that the annuity payable is actually less than originally recorded, the change should be reported

• A) Immediately as a reduction in the annuity payable.
• B) Immediately as an expense.
• C) As an expense at the time the annuity obligations are fulfilled.
• D) As a reduction of annuity payable at the time the annuity obligations are fulfilled.

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Definitions:

Bond

A fixed-income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental, which includes terms regarding the interest rate and when the loaned funds (bond principal) must be paid back (maturity).

Effective EAR

The Effective Annual Rate is the actual return on an investment, taking into account the effect of compounding interest.

Par Value

The nominal or face value of a bond, stock, or coupon as stated by the issuer, which is often used to calculate interest payments.

Annual Coupon Payments

The fixed interest payments made by a bond issuer to the bondholders at regular intervals over the life of the bond.