Question 1

With mutual funds using more and more derivatives, regulators are:

Accepted Answer

A)  Demanding more training in derivatives 
B)  More concerned about foreign investments 
C)  More concerned about the risk exposure for investors 
D)  All of the above 
E)  None of the above 
A)  Demanding more training in derivatives 
B)  More concerned about foreign investments 
C)  More concerned about the risk exposure for investors 
D)  All of the above 
E)  None of the above C

Question 2

Commercial finance companies focus principally on accounts receivable financing and factoring to business customers.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is not a trend affecting financial institutions today?

Accepted Answer

A)  Financial institutions face declining profit margins as interest, labor and capital expenses rise 
B)  Financial institutions are expanding their operations through consolidations 
C)  Financial institutions are reducing the number of services they offer in an effort to reduce costs 
D)  Regulators and politicians are attempting to harmonize laws and regulations so that all financial institutions internationally face the same competition 
E)  All of the above are trends facing financial institutions today 
A)  Financial institutions face declining profit margins as interest, labor and capital expenses rise 
B)  Financial institutions are expanding their operations through consolidations 
C)  Financial institutions are reducing the number of services they offer in an effort to reduce costs 
D)  Regulators and politicians are attempting to harmonize laws and regulations so that all financial institutions internationally face the same competition 
E)  All of the above are trends facing financial institutions today C

Question 4

Life insurance companies buy mostly state and local government securities rather than federal government securities for their investment portfolios.

Accepted Answer

A) True 
 B)False

Question 5

Hedge funds are investment companies that are:

Accepted Answer

A)  Regulated by the SEC 
B)  Unregulated 
C)  Regulated by the U.S. Treasury 
D)  Regulated by the Defense Department 
E)  None of the above 
A)  Regulated by the SEC 
B)  Unregulated 
C)  Regulated by the U.S. Treasury 
D)  Regulated by the Defense Department 
E)  None of the above

Question 6

Most property-casualty insurance firms plan to break even on their insurance product lines and earn income on their investments.

Accepted Answer

A) True 
 B)False

Question 7

Hedge funds often ask for a minimal investment of at least $1 million or more, catering to the wealthy.

Accepted Answer

A) True 
 B)False

Question 8

An investment fund which purchases securities from firms in trouble in the hope of scoring exceptional returns should these firms recover or when their more valuable assets are liquidated is called a:

Accepted Answer

A)  Hedge fund 
B)  Venture fund 
C)  High-yield or "junk" fund 
D)  Vulture fund 
E)  Index fund
F) None of the above 
A)  Hedge fund 
B)  Venture fund 
C)  High-yield or "junk" fund 
D)  Vulture fund 
E)  Index fund
F) None of the above

Question 9

Life insurance companies typically insure their policyholders or their beneficiaries against which of the following risks?

Accepted Answer

A)  Premature death 
B)  Living too long 
C)  Serious illness or accident 
D)  All of the above 
E)  None of the above 
A)  Premature death 
B)  Living too long 
C)  Serious illness or accident 
D)  All of the above 
E)  None of the above

Question 10

Corporate stocks represent more than 60 percent of the mutual-fund industry's assets.

Accepted Answer

A) True 
 B)False

Question 11

Among the most rapidly growing investment companies of late are lifecycle funds that seem to be gradually replacing more traditional pension plans.

Accepted Answer

A) True 
 B)False

Question 12

Rapid increases in legal claims arising from the exposure of individuals to illness or injury from asbestos, nuclear radiation and other hazardous substances are known as:

Accepted Answer

A)  Toxic torts 
B)  Reinsurance claims 
C)  Multiple-line exposures 
D)  No fault insurance 
E)  None of the above 
A)  Toxic torts 
B)  Reinsurance claims 
C)  Multiple-line exposures 
D)  No fault insurance 
E)  None of the above

Question 13

The principal reason life insurers hold U.S. Government securities in their asset portfolios is to:

Accepted Answer

A)  Maximize interest income 
B)  Avoid call privileges which are attached to most corporate bonds 
C)  Satisfy state and federal regulations 
D)  Minimize their federal tax liability 
E)  None of the above 
A)  Maximize interest income 
B)  Avoid call privileges which are attached to most corporate bonds 
C)  Satisfy state and federal regulations 
D)  Minimize their federal tax liability 
E)  None of the above

Question 14

When an employer or converts from a traditional pension plan to a cash balance plan, the employer determines the accumulated value held in the old pension under each employee's name and may transfer all or only a portion of debt accumulated value into the employee's new account.

Accepted Answer

A) True 
 B)False

Question 15

The principal investment security held by life insurance companies is:

Accepted Answer

A)  Corporate bonds 
B)  Corporate stock 
C)  Mortgages on farm, residential and commercial properties 
D)  U.S. government and federal agency securities 
E)  None of the above 
A)  Corporate bonds 
B)  Corporate stock 
C)  Mortgages on farm, residential and commercial properties 
D)  U.S. government and federal agency securities 
E)  None of the above

Question 16

The principal asset held by private pension funds is corporate notes and bonds.

Accepted Answer

A) True 
 B)False

Question 17

The Financial Accounting Standards Board requires unfunded pension benefits to be reported as an intangible asset.

Accepted Answer

A) True 
 B)False

Question 18

Finance companies typically charge higher interest rates than do banks because they make higher risk loans.

Accepted Answer

A) True 
 B)False

Question 19

Mortgage banks are similar to savings and loans in that they hold most of the mortgages they originate.

Accepted Answer

A) True 
 B)False

Question 20

The U.S. life insurance industry's population reached a high of almost 2,350 in 1988 and has been falling since that time.

Accepted Answer

A) True 
 B)False

Exam 16: Exploring Various Aspects of Pension Funds, Finance Companies, and Insurance Industry

With mutual funds using more and more derivatives, regulators are:

Commercial finance companies focus principally on accounts receivable financing and factoring to business customers.

Which of the following is not a trend affecting financial institutions today?

Life insurance companies buy mostly state and local government securities rather than federal government securities for their investment portfolios.

Hedge funds are investment companies that are:

Most property-casualty insurance firms plan to break even on their insurance product lines and earn income on their investments.

Hedge funds often ask for a minimal investment of at least $1 million or more, catering to the wealthy.

An investment fund which purchases securities from firms in trouble in the hope of scoring exceptional returns should these firms recover or when their more valuable assets are liquidated is called a:

Life insurance companies typically insure their policyholders or their beneficiaries against which of the following risks?

Corporate stocks represent more than 60 percent of the mutual-fund industry's assets.

Among the most rapidly growing investment companies of late are lifecycle funds that seem to be gradually replacing more traditional pension plans.

Rapid increases in legal claims arising from the exposure of individuals to illness or injury from asbestos, nuclear radiation and other hazardous substances are known as:

The principal reason life insurers hold U.S. Government securities in their asset portfolios is to:

When an employer or converts from a traditional pension plan to a cash balance plan, the employer determines the accumulated value held in the old pension under each employee's name and may transfer all or only a portion of debt accumulated value into the employee's new account.

The principal investment security held by life insurance companies is:

The principal asset held by private pension funds is corporate notes and bonds.

The Financial Accounting Standards Board requires unfunded pension benefits to be reported as an intangible asset.

Finance companies typically charge higher interest rates than do banks because they make higher risk loans.

Mortgage banks are similar to savings and loans in that they hold most of the mortgages they originate.

The U.S. life insurance industry's population reached a high of almost 2,350 in 1988 and has been falling since that time.

Understanding the Financial System and Its Impact on the Economy and Markets

Financial Systems, Monetary Units, and the Role of Money in the Economy

Financial Indices, Market Information, and Economic Data

The Financial Crisis and Its Impact on the Mortgage Market and Economy

Understanding Interest Rates, Savings, and the Wealth Effect

Financial Concepts and Interest Rates

Effects of Inflation and Yield Curves on Stock Prices and Investments

Understanding Risk and Market Factors in Financial Securities

Exploring Financial Markets and Hedging Strategies

Factors Affecting the Volume of CDs

Exploring the Reserve Accounting System, Money Markets, and Financial Instruments

Exploring Central Banks and Their Impact on the Economy and Financial System

Central Banking and Monetary Policy: Exploring Tools and Strategies

Banking and Financial Services: Regulations, Operations, and Trends

Comparative Analysis of Financial Institutions and Their Operations

The Impact of Deregulation and Regulation on Financial Institutions and Banking Industry in the United States

Treasury Auctions, Public Debt, and Government Borrowing: Exploring the Us Treasury System

Corporate Bond Pricing, Market Development, and Financing Strategies

The Truth About Regulation Fd and Stock Holdings: Debunking Common Myths in the Financial Market

Flexible Savings Account Options

Mortgage Market and Mortgage Instruments

International Financial Transactions and Balance of Payments

International Banking and Financial Regulations

Exploring the Complexities of Financial Services and Regulation

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