Question 1

Which type of life insurance policy can offer flexibility on the size and timing of premium payments?  ​

Accepted Answer

A) whole life 
B) term 
C) universal life 
D) decreasing term 
A) whole life 
B) term 
C) universal life 
D) decreasing term

Question 2

The most common use of funds for property and casualty insurance companies is for

Accepted Answer

A) corporate bonds and municipal securities. 
B) Treasury bills. 
C) corporate stock. 
D) commercial paper. 
A) corporate bonds and municipal securities. 
B) Treasury bills. 
C) corporate stock. 
D) commercial paper.

Question 3

Mortgage insurance protects

Accepted Answer

A) homeowners against damage to their home from storms, fire, or other hazards. 
B) homeowners in the event that they cannot make their mortgage payments. 
C) the lender who provided the mortgage in the event that the homeowner defaults on the mortgage. 
D) All of these are correct. 
A) homeowners against damage to their home from storms, fire, or other hazards. 
B) homeowners in the event that they cannot make their mortgage payments. 
C) the lender who provided the mortgage in the event that the homeowner defaults on the mortgage. 
D) All of these are correct.

Question 4

Which of the following is a difference between life insurance companies and property and casualty insurance companies?

Accepted Answer

A) Property and casualty policies are longer term. 
B) The types of policies offered by life insurance companies are less focused. 
C) Future compensation amounts to be paid on property and casualty policies are more difficult to forecast. 
D) Life insurance companies need to maintain a more liquid asset portfolio. 
A) Property and casualty policies are longer term. 
B) The types of policies offered by life insurance companies are less focused. 
C) Future compensation amounts to be paid on property and casualty policies are more difficult to forecast. 
D) Life insurance companies need to maintain a more liquid asset portfolio.

Question 5

Which type of life insurance policy does NOT build a cash value for policyholders?

Accepted Answer

A) whole life 
B) term 
C) universal life 
D) All of these build a cash value. 
A) whole life 
B) term 
C) universal life 
D) All of these build a cash value.

Question 6

Which type of life insurance policy specifically accommodates the needs of people who need more insurance now than later? ​

Accepted Answer

A) whole life 
B) term 
C) decreasing term 
D) universal life 
A) whole life 
B) term 
C) decreasing term 
D) universal life

Question 7

____ is(are)not a typical source of funds for life insurance companies.

Accepted Answer

A) Deposit insurance premiums 
B) Annuity plans 
C) Investment income 
D) Life and health insurance premiums 
A) Deposit insurance premiums 
B) Annuity plans 
C) Investment income 
D) Life and health insurance premiums

Question 8

The adverse selection problem as related to the insurance industry means that people who have insurance are less likely to suffer losses than people who do not have insurance.

Accepted Answer

A) True 
 B)False

Question 9

____ insurance provides insurance for a policyholder only over a specified period.

Accepted Answer

A) Term 
B) Whole life 
C) Universal 
D) Term AND Universal 
A) Term 
B) Whole life 
C) Universal 
D) Term AND Universal

Question 10

____ effectively reallocates a portion of an insurance company's return and risk to other insurance companies.

Accepted Answer

A) Reinsurance 
B) Cash flow underwriting 
C) Factor insurance 
D) Universal insurance 
A) Reinsurance 
B) Cash flow underwriting 
C) Factor insurance 
D) Universal insurance

Question 11

A ____ life insurance company is owned by its policyholders; most life insurance companies are ____.

Accepted Answer

A) stock-owned; mutual 
B) mutual; mutual 
C) stock-owned; stock-owned 
D) mutual; stock-owned 
A) stock-owned; mutual 
B) mutual; mutual 
C) stock-owned; stock-owned 
D) mutual; stock-owned

Question 12

An insurance company's liquidity is measured as

Accepted Answer

A) net profit minus losses. 
B) premium income minus policy expenses. 
C) invested assets divided by loss reserves and unearned premium reserves. 
D) None of these are correct. 
A) net profit minus losses. 
B) premium income minus policy expenses. 
C) invested assets divided by loss reserves and unearned premium reserves. 
D) None of these are correct.

Question 13

____ mortgages are the most common type of mortgage held by life insurance companies.

Accepted Answer

A) Commercial 
B) Residential 
C) Farm 
D) None of these are correct. 
A) Commercial 
B) Residential 
C) Farm 
D) None of these are correct.

Question 14

The moral hazard problem as related to the insurance industry means that some people take more risks once they are insured.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is NOT correct?

Accepted Answer

A) Insurance provides a payment to the insured under conditions specified by the insurance policy contract. 
B) Individuals who are less exposed to specific conditions that cause financial damage are more likely to purchase insurance against those conditions. 
C) Insurance can cause the insured to take more risks because they are protected. 
D) Insurance companies employ underwriters to calculate the risk of specific insurance policies. 
A) Insurance provides a payment to the insured under conditions specified by the insurance policy contract. 
B) Individuals who are less exposed to specific conditions that cause financial damage are more likely to purchase insurance against those conditions. 
C) Insurance can cause the insured to take more risks because they are protected. 
D) Insurance companies employ underwriters to calculate the risk of specific insurance policies.

Question 16

The practice of adapting insurance prices to interest rates by lowering premiums when interest rates rise and raising premiums when interest rates decline is called

Accepted Answer

A) cyclical rate adjusting. 
B) collateralizing premiums. 
C) cash flow underwriting. 
D) reinsurance. 
A) cyclical rate adjusting. 
B) collateralizing premiums. 
C) cash flow underwriting. 
D) reinsurance.

Exam 25: Insurance and Pension Fund Operations

Which type of life insurance policy can offer flexibility on the size and timing of premium payments? ​

The most common use of funds for property and casualty insurance companies is for

Mortgage insurance protects

Which of the following is a difference between life insurance companies and property and casualty insurance companies?

Which type of life insurance policy does NOT build a cash value for policyholders?

Which type of life insurance policy specifically accommodates the needs of people who need more insurance now than later? ​

____ is(are)not a typical source of funds for life insurance companies.

The adverse selection problem as related to the insurance industry means that people who have insurance are less likely to suffer losses than people who do not have insurance.

____ insurance provides insurance for a policyholder only over a specified period.

____ effectively reallocates a portion of an insurance company's return and risk to other insurance companies.

A ____ life insurance company is owned by its policyholders; most life insurance companies are ____.

An insurance company's liquidity is measured as

____ mortgages are the most common type of mortgage held by life insurance companies.

The moral hazard problem as related to the insurance industry means that some people take more risks once they are insured.

Which of the following statements is NOT correct?

The practice of adapting insurance prices to interest rates by lowering premiums when interest rates rise and raising premiums when interest rates decline is called

Role of Financial Markets and Institutions

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Regulation

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Mutual Fund Operations

Securities Operations

Pension Fund Operations

Filters

Which type of life insurance policy can offer flexibility on the size and timing of premium payments?

Which type of life insurance policy specifically accommodates the needs of people who need more insurance now than later?

A life insurance company is owned by its policyholders; most life insurance companies are .