AS-03 Compulsory · Fellowship Actuarial

Finance and Economics for Actuarial Science — Mock Tests & Exam Prep

Finance and economics for actuarial science — corporate finance, economics and investment fundamentals.

Try 5 questions free → Create free account
494
Verified questions
100
Questions per exam
2 hrs
Exam duration
60%
Pass mark
40
Credit points

Try AS-03 free — 5 real questions

These are 5 of the 494 AS-03 questions in Certena, taken from across the paper. Every answer key has been checked against a source — a printed answer key, a textbook extract, or arithmetic — not guessed. Reveal the answer and the explanation below each question. No sign-up needed.

Question 1
Which of the following is an assumption of the law of diminishing marginal utility?
  1. AUtility cannot be measured or quantified in any units
  2. BAll units of the commodity are alike in quantity and quality
  3. CThe marginal utility of money keeps falling as income rises
  4. DThere is a time gap between consumption of successive units
  5. EThe consumer's tastes, fashions and habits keep changing
Show answer & explanation

Answer: B. All units of the commodity are alike in quantity and quality

The assumptions include continuous consumption (no time gap between successive units), homogeneous units of the commodity, no change in the consumer's personal, social and mental conditions, constancy of marginal utility of money and cardinal measurability of utility.

Question 2
Which limitation of the net present value method arises in connection with mutually exclusive projects?
  1. AIt looks only at the cash flows up to the end of the payback period of the project
  2. BIt is an absolute measure and ignores differences in initial outflows and the size of proposals
  3. CIt requires the use of accounting profit instead of cash flows in the calculation
  4. DIt treats a rupee received later as worth more than a rupee received now
  5. EIt cannot show whether a project adds anything at all to the wealth of the shareholders of the firm
Show answer & explanation

Answer: B. It is an absolute measure and ignores differences in initial outflows and the size of proposals

Under the NPV method the decision rests on an absolute measure and ignores differences in initial outflows and the size of proposals when mutually exclusive projects are evaluated.

Question 3
What does a warrant entitle its holder to do?
  1. AConvert the issuer's debentures into cash after expiry
  2. BReceive a fixed dividend on the issuer's stock every year
  3. CBuy the issuer's stock at a fixed exercise price until expiry
  4. DVote at the general meetings of the issuing company
  5. ESell the issuer's stock to the company at a fixed price at any time
Show answer & explanation

Answer: C. Buy the issuer's stock at a fixed exercise price until expiry

A warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry; holders cannot vote or receive dividends.

Question 4
At a discount rate of 12% a project's net present value is Rs. 8,000 and at 16% it is Rs. (6,000). What does this indicate about the project's internal rate of return?
  1. AIt is exactly 14%, the mid-point of the two rates
  2. BIt is higher than 16%
  3. CIt equals the company's cost of capital
  4. DIt is lower than 12%
  5. EIt lies between 12% and 16%
Show answer & explanation

Answer: E. It lies between 12% and 16%

The IRR is the rate at which NPV is zero. NPV is positive at 12% and negative at 16%, so the rate at which it is zero lies between the two.

Question 5
A firm has gross sales of Rs. 12,50,000 and sales returns of Rs. 50,000. Its cost of sales is Rs. 8,40,000 and its administrative expenses are Rs. 1,80,000. Taking sales net of returns, what is the gross profit ratio?
  1. A30.0%
  2. B70.0%
  3. C42.9%
  4. D28.8%
  5. E15.0%
Show answer & explanation

Answer: A. 30.0%

Net sales = 12,50,000 - 50,000 = 12,00,000; gross profit = 12,00,000 - 8,40,000 = 3,60,000. Gross profit ratio = 3,60,000 / 12,00,000 x 100 = 30.0%. Administrative expenses are not deducted in gross profit.

489 more verified AS-03 questions, timed 100-question mock papers, and your weak areas are in the app — create a free account.

What you'll practise

📝
Real exam-style MCQs
Question bank aligned to the III syllabus for AS-03.
⏱
Timed mock exams
Full 100-question, 2-hour papers that mirror the real III format.
💡
Instant explanations
Every question includes a clear explanation of why the answer is correct.
🔁
Spaced repetition
Missed questions resurface at the right time so you retain them.

Frequently asked questions

What is AS-03?
AS-03 (Finance and Economics for Actuarial Science) is a compulsory Fellowship-level examination offered by the Insurance Institute of India (III). Finance and economics for actuarial science — corporate finance, economics and investment fundamentals.
How many questions are in the AS-03 exam?
The AS-03 exam has 100 MCQs to be answered in 120 minutes (2 hours). All questions must be attempted — there is no negative marking.
What is the pass mark for AS-03?
You need to score at least 60% to pass AS-03. Scoring 75% or above earns a Distinction grade.
How many credit points does AS-03 carry?
AS-03 carries 40 credit points. These count toward your III certification — 60 credits for Licentiate, 250 for Associateship, 490 for Fellowship.

Related subjects

IC-01
Principles of Insurance
IC-28
Foundation of Actuarial Science
IC-47
Foundation of Casualty Actuarial Science Part - I
IC-81
Mathematical Basis of Life Assurance
IC-84
Foundation of Casualty Actuarial Science Part - II
IC-92
Actuarial Aspects of Product Development

Ready to prepare for AS-03?

All 494 verified AS-03 questions, timed mock papers and spaced repetition. Free to start — no payment required for practice questions.

Start Free Practice →