Free CAS Exam 5 (Basic Ratemaking and Reserving) Overall Rate Level Indications Practice Questions
Overall rate level indications are the center of the Ratemaking section of CAS Exam 5 (45-55% of the exam, CAS). Questions test the pure premium and loss ratio indication methods, fixed versus variable expense provisions, the profit and contingency load, the cost of reinsurance, credibility weighting an indication and defending the complement chosen, and recommending a final rate change against operational, marketing, and regulatory constraints.
117 questions20 easy34 medium63 hard2026 syllabus
Sample Questions
Question 1
Easy
In a rate indication, which of the following is most appropriately treated as a variable expense that scales with premium?
🎉
Correct Answer: C
Solution
C is correct. Variable expenses are those that move roughly in proportion to premium. Premium taxes (like commissions) are assessed as a percentage of premium, so they rise and fall directly with premium volume and are loaded as a percentage-of-premium variable provision in the rate indication.
Question 2
Medium
An actuary must choose between the pure premium method and the loss ratio method for an overall rate level analysis. Which statement correctly contrasts the two methods?
🎉
Correct Answer: A
Solution
A is correct. The pure premium method builds losses and expenses on a per-exposure basis and produces an indicated average rate, so it requires a well-defined exposure measure but not premium. The loss ratio method compares an experience loss ratio to a permissible loss ratio and produces an indicated rate change relative to current rates, so it requires on-level earned premium. This is why the pure premium method is used when premium history is unavailable, such as a new line of business.
Question 3
Hard
A class has an experience-indicated relativity of 1.75, assigned credibility Z=0.50, with the current relativity of 1.35 used as the complement. The base rate is $300 per exposure. A risk in this class carries a deductible with a loss elimination ratio of 0.12. What is the indicated rate per exposure for the risk?
🎉
Correct Answer: A
Solution
A is correct. First credibility-weight the relativity: 0.50×1.75+0.50×1.35=0.875+0.675=1.55. Apply it to the base rate: 300×1.55=465. Then apply the deductible credit for the eliminated loss: 465×(1−0.12)=465×0.88=409.20.
FreeFellow was built by Jeffrey Ting, a credentialed actuary and CFA charterholder who passed thirteen of the hardest exams in finance on the first attempt, and paid four-figure prep fees for every one. The learning itself was always free. The price was a moat.
So he started writing his own questions, then lessons, then mock exams, until it grew into a full prep platform covering 40 finance credentials with more than 44,000 original practice questions. The name says exactly what it is: the question bank is free, and Fellow is what you become once you pass.
01
Cost shouldn't decide who gets in.
The exam is a fair gate. A four-figure prep course is not. FreeFellow takes the second gate down, so the exam is the only one left.
02
Free should mean free.
No trial clock, no email gate, no credit card. The question bank, worked solutions, lessons, and readiness score stay free, and they are enough to pass.
03
Built by someone who sat where you sit.
He paid for the big-name courses, found nothing he respected, and built the prep he wished had existed. Not a marketing team that has never sat an exam.
