Question 1

What insurance protects against liability for harm the insured may cause to others as a result of product failure or accidents?

Accepted Answer

A)  Property insurance 
B)  Health insurance 
C)  Life insurance 
D)  Casualty insurance 
A)  Property insurance 
B)  Health insurance 
C)  Life insurance 
D)  Casualty insurance

Question 2

Insurance companies employ underwriters

Accepted Answer

A)  as an alternative to higher deductibles. 
B)  to control the risky behavior of their policyholders. 
C)  to control the risk incurred on their behalf by agents. 
D)  to encourage the loyalty of exclusive agents. 
E)  to maintain the independence of independent agents. 
A)  as an alternative to higher deductibles. 
B)  to control the risky behavior of their policyholders. 
C)  to control the risk incurred on their behalf by agents. 
D)  to encourage the loyalty of exclusive agents. 
E)  to maintain the independence of independent agents.

Question 3

Which of the following pensions does not promise employees a specific retirement benefit?

Accepted Answer

A)  Defined-benefit plan 
B)  Defined-contribution plan 
C)  Overfunded plan 
D)  Underfunded plan 
A)  Defined-benefit plan 
B)  Defined-contribution plan 
C)  Overfunded plan 
D)  Underfunded plan

Question 4

Social Security is a

Accepted Answer

A)  fully funded pension plan. 
B)  federally insured private pension plan. 
C)  government sponsored private pension plan. 
D)  "pay-as-you-go" system. 
A)  fully funded pension plan. 
B)  federally insured private pension plan. 
C)  government sponsored private pension plan. 
D)  "pay-as-you-go" system.

Question 5

Insurance management tools that give policyholders incentives to avoid accidents insured against include ________.

Accepted Answer

A)  deductibles 
B)  risk-based premiums 
C)  coinsurance 
D)  all of the above 
A)  deductibles 
B)  risk-based premiums 
C)  coinsurance 
D)  all of the above

Question 6

A whole life insurance policy pays a death benefit if the policyholder dies.

Accepted Answer

A) True 
 B)False

Question 7

A defined-contribution plan promises employees a specific amount of retirement income.

Accepted Answer

A) True 
 B)False

Question 8

Most private pension plans are insured by the Penny Benny,which pays benefits when a plan's sponsor goes bankrupt.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not what can we expect in the future regarding pension funds?

Accepted Answer

A)  Pension funds will help create more stable financial markets. 
B)  Pension funds will continue their growth and popularity. 
C)  Pension fund variety will continue to expand. 
D)  Pension funds will gain increased control over corporations as they invest in the equity of these companies. 
A)  Pension funds will help create more stable financial markets. 
B)  Pension funds will continue their growth and popularity. 
C)  Pension fund variety will continue to expand. 
D)  Pension funds will gain increased control over corporations as they invest in the equity of these companies.

Question 10

________ is an insurance product that will help if you live longer than you expect.For an initial fixed sum or stream of payments,the insurance company agrees to pay you a fixed amount for as long as you live.

Accepted Answer

A)  Life insurance proper 
B)  Disability insurance 
C)  An annuity 
D)  Health insurance 
A)  Life insurance proper 
B)  Disability insurance 
C)  An annuity 
D)  Health insurance

Question 11

Which life insurance policy usually requires the insured to pay a level premium for the duration of the policy,and the overpayment accumulates as a cash value that can be borrowed by the insured at reasonable rates?

Accepted Answer

A)  Whole life 
B)  Term 
C)  Universal life 
D)  None of the above 
A)  Whole life 
B)  Term 
C)  Universal life 
D)  None of the above

Question 12

What are the major differences between life insurance and property and casualty insurance?

Accepted Answer

Life insurance and property and casualty

Question 13

Of the following financial intermediaries,which holds the least liquid assets?

Accepted Answer

A)  Property and casualty insurance companies 
B)  Life insurance companies 
C)  Money market mutual funds 
D)  Commercial banks 
A)  Property and casualty insurance companies 
B)  Life insurance companies 
C)  Money market mutual funds 
D)  Commercial banks

Question 14

The Pension Benefit Guarantee Corporation performs a role similar to that of the Office of Thrift Supervision.

Accepted Answer

A) True 
 B)False

Question 15

A credit default swap,or CDS,is essentially

Accepted Answer

A)  insurance against default on a financial instrument. 
B)  a method for swapping credit agreements between banks. 
C)  a method for companies in default to swap credit ratings. 
D)  insurance against the default of a party in a swap agreement. 
A)  insurance against default on a financial instrument. 
B)  a method for swapping credit agreements between banks. 
C)  a method for companies in default to swap credit ratings. 
D)  insurance against the default of a party in a swap agreement.

Question 16

The problem of ________ occurs when those most likely to get large insurance payoffs are the ones who want to purchase insurance the most.

Accepted Answer

A)  asymmetric information 
B)  moral hazard 
C)  adverse selection 
D)  fraudulent behavior 
A)  asymmetric information 
B)  moral hazard 
C)  adverse selection 
D)  fraudulent behavior

Question 17

Adverse selection occurs when those most likely to get insurance payoffs are the ones who want to purchase the insurance the most.

Accepted Answer

A) True 
 B)False

Question 18

The Social Security system is an example of a pension plan that is fully funded.

Accepted Answer

A) True 
 B)False

Question 19

Which is not a management practice for reducing the problems of adverse selection and moral hazard in insurance?

Accepted Answer

A)  Deductibles 
B)  Restrictive provisions 
C)  Coinsurance 
D)  Reinsurance 
A)  Deductibles 
B)  Restrictive provisions 
C)  Coinsurance 
D)  Reinsurance

Question 20

Social Security is a "pay-as-you-go" system.

Accepted Answer

A) True 
 B)False

Exam 21: Insurance Companies and Pension Funds

What insurance protects against liability for harm the insured may cause to others as a result of product failure or accidents?

Insurance companies employ underwriters

Which of the following pensions does not promise employees a specific retirement benefit?

Social Security is a

Insurance management tools that give policyholders incentives to avoid accidents insured against include ________.

A whole life insurance policy pays a death benefit if the policyholder dies.

A defined-contribution plan promises employees a specific amount of retirement income.

Most private pension plans are insured by the Penny Benny,which pays benefits when a plan's sponsor goes bankrupt.

Which of the following is not what can we expect in the future regarding pension funds?

________ is an insurance product that will help if you live longer than you expect.For an initial fixed sum or stream of payments,the insurance company agrees to pay you a fixed amount for as long as you live.

Which life insurance policy usually requires the insured to pay a level premium for the duration of the policy,and the overpayment accumulates as a cash value that can be borrowed by the insured at reasonable rates?

What are the major differences between life insurance and property and casualty insurance?

Of the following financial intermediaries,which holds the least liquid assets?

The Pension Benefit Guarantee Corporation performs a role similar to that of the Office of Thrift Supervision.

A credit default swap,or CDS,is essentially

The problem of ________ occurs when those most likely to get large insurance payoffs are the ones who want to purchase insurance the most.

Adverse selection occurs when those most likely to get insurance payoffs are the ones who want to purchase the insurance the most.

The Social Security system is an example of a pension plan that is fully funded.

Which is not a management practice for reducing the problems of adverse selection and moral hazard in insurance?

Social Security is a "pay-as-you-go" system.

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

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