PRMIA 8010 Exam - Topic 1 Question 74 Discussion

Actual exam question for PRMIA's 8010 exam

Question #: 74
Topic #: 1

For a back office function processing 15,000 transactions a day with an error rate of 10 basis points, what is the annual expected loss frequency (assume 250 days in a year)

A3750

B0.06

C37500

D375

Show Suggested Answer

Suggested Answer: A

An error rate of 10 basis points means the number of errors expected in a day will be 15 (recall that 100 basis points = 1%). Therefore the total number of errors expected in a year will be 15 x 250 = 3750. Choice 'a' is the correct answer.

by Ashton at Jul 12, 2025, 10:36 AM

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Augustine

8 months ago

10 basis points means 0.1%, so 375 sounds right.

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Ty

8 months ago

Wait, how do you even get those numbers?

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Tommy

8 months ago

No way, it’s definitely not 37500!

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Katlyn

9 months ago

I think it’s actually 3750.

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Jamal

9 months ago

That's 375 losses a year, right?

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Cassi

9 months ago

I’m a bit confused about the annual aspect. Do we just multiply the daily errors by 250 days? That seems too straightforward.

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Ena

9 months ago

If I recall correctly, 10 basis points means 0.1%, so we might need to convert that before calculating the total errors for the year.

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Daniela

10 months ago

I remember a similar question where we had to find the expected loss frequency, and I think it involved multiplying the number of transactions by the error rate.

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Salina

10 months ago

I think we need to calculate the total number of errors first, but I'm not entirely sure how to apply the error rate to the daily transactions.

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Sang

10 months ago

Okay, I think I see it now. The error rate of 10 basis points means 0.1%, so the daily error count is 15,000 * 0.001 = 15 errors. And 15 errors per day for 250 days equals an annual expected loss frequency of 3,750. Nice!

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Sol

10 months ago

I've got this! The key is to first calculate the daily expected loss, which is 15,000 * 0.001 = 15 errors per day. Then multiply that by the 250 working days in a year to get the annual expected loss frequency of 3,750.

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Yuki

10 months ago

Wait, I'm a bit confused. How do we calculate the annual expected loss frequency from the given information? I'm not sure I fully understand the question.

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Isabella

11 months ago

Hmm, this seems straightforward enough. I just need to plug the numbers into the right formula and solve for the answer.

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Aretha

11 months ago

Okay, let's think this through step-by-step. We have 15,000 transactions per day with a 10 basis point error rate, and we need to find the annual expected loss frequency.

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Alease

1 year ago

Ah, the old 'back office function' question. If you ask me, the real expected loss is the time I'm wasting on this exam. But hey, at least it's not as bad as the 'time value of money' questions, am I right?

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Wava

1 year ago

I agree with Junita, the error rate is only 10 basis points so it should be A) 3750.

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Junita

1 year ago

But wouldn't it be 3750 since it's 10 basis points of 15,000 transactions?

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Gussie

1 year ago

Hmm, this one's a bit tricky. But I'm pretty sure the answer is B) 0.06. After all, 10 basis points is just 0.1%, and 0.1% of 15,000 is 15. Divide that by 250 days, and you get 0.06. Piece of cake!

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