sofe AFE Exam Questions

Questions for the AFE were updated on : Nov 21 ,2025

Page 1 out of 20. Viewing questions 1-15 out of 286

Question 1

What is made on an instrument-by-instrument basis, generally when an instrument is initially
recognized in the financial statements?

  • A. Election
  • B. Disclosure
  • C. Eligibility
  • D. Discount
Answer:

A

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Question 2

Fair quoted techniques used to measure fair value should maximize the use of observable inputs and
minimize the use of unobservable inputs.

  • A. True
  • B. False
Answer:

B

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Question 3

What technique uses a risk-adjusted discount rate and contractual, promised, or most likely cash
flows?

  • A. Asset/Liability weighted
  • B. Fair value
  • C. Present value
  • D. Discount rate adjustment
Answer:

D

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Question 4

To avoid double counting or omitting the effects of risks factors what should reflect assumptions that
are consistent with those inherent in the cash flows?

  • A. Economic flow
  • B. Nominal flows
  • C. Discount rates
  • D. Inflation effect
Answer:

C

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Question 5

A change in _______ or its application is appropriate if the change results in a measurement that is
equally or more representative of fair value in the circumstances.

  • A. Valuation technique
  • B. Value technique
  • C. Investment approach
  • D. Accounting corrections
Answer:

A

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Question 6

The amount that currently would be required to replace the service capacity of an asset is called:

  • A. Risk approach
  • B. Market approach
  • C. Income approach
  • D. Cost approach
Answer:

D

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Question 7

What uses valuation techniques to convert future amounts to a single present amount?

  • A. Risk approach
  • B. Market approach
  • C. Income approach
  • D. Cost approach
Answer:

C

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Question 8

Valuation technique should be used to measure fair value and is consistent with:

  • A. market, income and risk approach
  • B. market, performance and cost approach
  • C. security, income and risk approach
  • D. market, income and cost approach
Answer:

D

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Question 9

The risk that the obligation will not be fulfilled and affects the value at which the liability is
transferred is known as:

  • A. performance risk
  • B. nonperformance risk
  • C. hypothetical risk
  • D. relocation risk
Answer:

B

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Question 10

The highest and best use of the asset is ______________, if the asset would provide maximum value
to market participants principally on the standalone basis.

  • A. in-exchange
  • B. in-use
  • C. in-market
  • D. in-sale
Answer:

A

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Question 11

The market in which the reporting entity would sell the asset or transfer the liability with the
greatest volume and level of activity for the asset or liability is known as:

  • A. Transfer market
  • B. Transport market
  • C. Principal market
  • D. Turn-around market
Answer:

C

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Question 12

is the price in a hypothetical transaction at the measurement date in the market in which the
reporting entity would transact for the asset or liability

  • A. Feasible financial price
  • B. Asset/Liability price
  • C. Principal price
  • D. Exchange price
Answer:

D

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Question 13

The price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date is called:

  • A. face value
  • B. fair value
  • C. market value
  • D. transaction value
Answer:

B

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Question 14

The evaluation and subsequent purchase or sale of investments is based on the judgment of the
entity’s investment and finance committees.

  • A. True
  • B. False
Answer:

A

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Question 15

What encompasses investment income and gains and losses, as well as custody of investment and
recordkeeping?

  • A. Valuation data
  • B. Verification note
  • C. Transaction cycle
  • D. Investment evaluation
Answer:

C

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