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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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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. 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
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. By virtue of statutory or other judicial authority


II. Disclosure of confidential information is in the public interest
III. 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. 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

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. 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
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. 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. 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.
Quiz Feedback Page 1 of 13

Quiz Feedback 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 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.

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. I only
B. I, III and IV
C. IV only
D. 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. 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-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. Insurance – IRDA
B. Banking – RBI
C. Financial markets – SEBI
D. 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. By applying the “curious bystander test”.


B. That the tacit term is automatically incorporated into the contract by operation of law.
C. That the tacit term is automatically incorporated into the contract by trade usage.
D. 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. 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 are the skills you have to acquire to become a competent actuary?

Your answer (in bold):

A. Communication Skills.
B. Judgment.
C. Management and soft skills.
D. Professionalism and Business Ethics.
E. 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

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. 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.

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. 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.

18. You are given the following facts:

zAll widgets have green stripes


zAll 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. Textbooks
B. Audio
C. Video
D. 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. 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.

22. 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.

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. 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

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 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. 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

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. 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.

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. 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. 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. I only
B. II and III
C. II only
D. 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. 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

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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
(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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Quiz Feedback 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.
Latifah received a aintin from her mother when she turned 21 man ears a o. Her mother
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. I only
B. I, III and IV
C. IV only
D. 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. Insurance – IRDA
B. Banking – RBI
C. Financial markets – SEBI
D. 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. By applying the “curious bystander test”.


B. That the tacit term is automatically incorporated into the contract by operation of law.
C. That the tacit term is automatically incorporated into the contract by trade usage.
D. 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. A complex matrix organisation.


B. A hierarchical organisation.
C. A power-based organisation.
D. 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. Communication Skills.
B. Judgment.
C. Management and soft skills.
D. Professionalism and Business Ethics.
E. 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. 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
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. 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. Textbooks
B. Audio
C. Video
D. 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. 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
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. shareholders.
B. customers.
C. products.
D. 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. I and III
B. II and III
C. II only
D. 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. I only
B. II only
C. III only
D. 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. 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.

28. You run the office cleanin division at International GlobalCor , and ou are settin our
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
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. I only
B. II and III
C. II only
D. 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. 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
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. 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

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. By virtue of statutory or other judicial authority


II. Disclosure of confidential information is in the public interest
III. 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 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. 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

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. 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

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. Disclosure of confidential information is in the public interest
III. 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 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.

26.
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. 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. 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

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?

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. 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. Judgment.
C. Management and soft skills.
D. Professionalism and Business Ethics.
E. 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. 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

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. 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. 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. 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

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. 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

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. 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

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. 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. 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.