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SOFE SOFA-CFE Exam - Topic 5 Question 118 Discussion

Which of the following is Correct?
B) The insurance company transfers to the buyer of a call option the opportunity for capital gain-if the stock rises by an amount exceeding the exercise price, plus the cost of the option (premium).
A) The insurance company transfers to the seller of a call option the opportunity for capital loss-if the stock rises by an amount exceeding the exercise price, plus the cost of the option (premium).
C) The insurance company transfers to the seller of a call option the opportunity for capital loss-if the stock decreases by an amount exceeding the exercise price, plus the cost of the option (premium).
D) The insurance company transfers to the buyer of a floor option the opportunity for option gain-if the stock rises by an amount exceeding the exercise price, plus the cost of the option (premium).

SOFE SOFA-CFE Exam - Topic 5 Question 118 Discussion

Actual exam question for SOFE's SOFA-CFE exam
Question #: 118
Topic #: 5
[All SOFA-CFE Questions]

Which of the following is Correct?

Show Suggested Answer Hide Answer
Suggested Answer: B

by Thad at Nov 20, 2025, 09:56 AM

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Tiera
3 months ago
I’m leaning towards A too. It aligns with standard accounting practices.
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Marsha
3 months ago
D is definitely wrong. More than earned reserves? No way!
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Bev
3 months ago
I agree with A. It's straightforward and clear.
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Gianna
3 months ago
C sounds confusing. Why use earned premium reserves?
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Merilyn
3 months ago
I feel B is misleading. Earned premiums shouldn't include unearned reserves.
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Katie
3 months ago
I think A is correct. It makes sense for unearned premiums.
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Lisbeth
4 months ago
Totally agree with A, it’s straightforward!
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Jaime
4 months ago
Wait, how can D be correct? That doesn't make sense!
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Sharika
4 months ago
Earned premiums = premiums written + unearned reserve at start - unearned reserve at end.
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Caprice
5 months ago
I think B is right, but I'm not sure.
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Kimbery
5 months ago
A) is definitely the correct one.
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Annette
5 months ago
Option B, really? That's like saying the sky is green. Clearly, the correct answer is C.
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Bethanie
5 months ago
This question is making my head spin. I'm just going to guess and hope for the best.
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Rosann
5 months ago
Option A seems to be the most logical choice. Unearned premiums are calculated using the unearned premium reserve.
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Afton
5 months ago
D is definitely off; I remember that earned premiums should not include unearned reserves like that.
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Ettie
6 months ago
C doesn’t seem right to me; I don’t recall anything about an earned premium reserve being used in that way.
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Leota
6 months ago
I remember practicing a question similar to this, and I feel like B might be the correct answer, but I’m second-guessing myself.
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Niesha
6 months ago
I think A sounds familiar, but I’m not entirely sure if it’s the right way to calculate unearned premiums.
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Malinda
6 months ago
I'm feeling pretty confident about this one. The key is recognizing that earned premiums are based on the unearned premium reserve, not the earned premium reserve. Option B is the clear winner here.
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Elfrieda
6 months ago
This is a good test of my knowledge on insurance accounting principles. I'll make sure to show my work and explain my reasoning, even if I'm not 100% sure of the right answer.
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Irma
6 months ago
Okay, I think I've got this. Option B looks like the right answer - earned premiums are calculated by adding the written premiums and the beginning unearned premium reserve, then subtracting the ending unearned premium reserve.
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Felix
7 months ago
Option B is the correct answer. Earned premiums are calculated by taking the sum of the premiums written for the period plus the unearned premium reserve at the beginning of the period less the unearned premium reserve at the end of the period.
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Wynell
7 months ago
Hmm, this is a tricky one. I'm leaning towards option D, but I'm not 100% sure.
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Kristofer
7 months ago
I'm pretty sure option C is the right answer. Earned premiums are calculated using the earned premium reserve, not the unearned premium reserve.
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Teresita
8 months ago
Hmm, I'm a bit confused by the wording here. I'll need to re-read the options a few times to make sure I understand the differences between them.
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Elenore
8 months ago
This looks like a tricky insurance accounting question. I'll need to carefully review the definitions of unearned and earned premiums to determine the correct approach.
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Janessa
2 months ago
I’m leaning towards C. It just seems to fit better!
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Glen
2 months ago
B sounds tempting, but I think it’s misleading.
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Alexia
2 months ago
I feel like A might be the right choice, but I’m not sure.
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Tom
7 months ago
I agree! Unearned vs. earned can be confusing.
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Billye
7 months ago
This is definitely tricky! I think I need to brush up on my definitions.
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