Question 1

Who has the strongest incentive to monitor the performance of individual pension plans such as Keoghs and IRAs? Explain.

Accepted Answer

The individuals who have the strongest i

Question 2

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 3

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 4

The earliest form of insurance was ________ insurance.

Accepted Answer

A) life 
B) health 
C) automobile 
D) property and casualty 
A) life 
B) health 
C) automobile 
D) property and casualty

Question 5

Insurance companies' attempts to minimize adverse selection and moral hazard explain which of the following insurance practices?

Accepted Answer

A) collection of information and screening of potential policyholders 
B) risk-based premiums 
C) cancellation of insurance 
D) all of the above 
A) collection of information and screening of potential policyholders 
B) risk-based premiums 
C) cancellation of insurance 
D) all of the above

Question 6

The broad categories of life insurance products including which of the following?

Accepted Answer

A) term 
B) whole life 
C) universal life 
D) all of the above 
A) term 
B) whole life 
C) universal life 
D) all of the above

Question 7

Health maintenance organizations (HMOs)shift the risk from the provider to the insurance company.

Accepted Answer

A) True 
 B)False

Question 8

Privatization of Social Security

Accepted Answer

A) would transform the program from an unfunded pay-as-you-go system to a fully funded pension plan. 
B) would mean that workers' current contributions to Social Security would no longer be available to pay benefits to current retirees. 
C) receives less public support when the stock market declines. 
D) all of the above 
E) none of the above 
A) would transform the program from an unfunded pay-as-you-go system to a fully funded pension plan. 
B) would mean that workers' current contributions to Social Security would no longer be available to pay benefits to current retirees. 
C) receives less public support when the stock market declines. 
D) all of the above 
E) none of the above

Question 9

Describe how insurance companies try to reduce adverse selection and moral hazards.

Accepted Answer

Insurance companies use various strategi

Question 10

Which of the following is not a feature of the Terrorism Risk Insurance Act of 2002?

Accepted Answer

A) Losses that exceed $100 billion are not covered. 
B) The law does not apply to acts of international terrorism when losses are less than $5 million. 
C) Government pays 50 percent of losses in excess of $100 billion. 
D) Government pays 90 percent of the losses. 
A) Losses that exceed $100 billion are not covered. 
B) The law does not apply to acts of international terrorism when losses are less than $5 million. 
C) Government pays 50 percent of losses in excess of $100 billion. 
D) Government pays 90 percent of the losses.

Question 11

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 12

Why do life insurance companies and pension plans invest heavily in long-term assets?

Accepted Answer

The answer of Why do life insurance companies and pension...

Question 13

Demographic trends and changes in retirement patterns suggest that Social Security funding problems will ease over the next few decades.

Accepted Answer

A) True 
 B)False

Question 14

________ 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 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

A basic product of life insurance companies is ________.

Accepted Answer

A) disability insurance 
B) annuities 
C) health insurance 
D) all of the above 
A) disability insurance 
B) annuities 
C) health insurance 
D) all of the above

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

Which proposal for insuring that sufficient funds will be available to provide Social Security benefits to future retirees does the AARP find least objectionable?

Accepted Answer

A) Raise the maximum income cap on which workers and employers are taxed. 
B) Provide more generous annual cost of living increases. 
C) Privatize Social Security. 
D) Lower immigration restrictions to increase the number of workers paying into the Social Security system. 
A) Raise the maximum income cap on which workers and employers are taxed. 
B) Provide more generous annual cost of living increases. 
C) Privatize Social Security. 
D) Lower immigration restrictions to increase the number of workers paying into the Social Security system.

Question 19

In the case of an insurance policy, ________ occurs when the existence of insurance encourages the insured party to take risks that increase the likelihood of an insurance payoff; ________ occurs when those most likely to get large insurance payoffs are the ones who want to purchase insurance the most.

Accepted Answer

A) moral hazard; insurance market discrimination 
B) moral hazard; insurance segregation 
C) moral hazard; adverse selection 
D) adverse selection; moral hazard 
A) moral hazard; insurance market discrimination 
B) moral hazard; insurance segregation 
C) moral hazard; adverse selection 
D) adverse selection; moral hazard

Question 20

Why must insurance companies screen applicants so carefully?

Accepted Answer

The answer of Why must insurance companies screen applicants so...

Exam 21: Insurance Companies and Pension Funds

Who has the strongest incentive to monitor the performance of individual pension plans such as Keoghs and IRAs? Explain.

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

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

The earliest form of insurance was ________ insurance.

Insurance companies' attempts to minimize adverse selection and moral hazard explain which of the following insurance practices?

The broad categories of life insurance products including which of the following?

Health maintenance organizations (HMOs)shift the risk from the provider to the insurance company.

Privatization of Social Security

Describe how insurance companies try to reduce adverse selection and moral hazards.

Which of the following is not a feature of the Terrorism Risk Insurance Act of 2002?

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

Why do life insurance companies and pension plans invest heavily in long-term assets?

Demographic trends and changes in retirement patterns suggest that Social Security funding problems will ease over the next few decades.

________ 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.

A credit default swap, or CDS, is essentially

A basic product of life insurance companies is ________.

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

Which proposal for insuring that sufficient funds will be available to provide Social Security benefits to future retirees does the AARP find least objectionable?

Why must insurance companies screen applicants so carefully?

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 Why Are They so Damaging to the Economy

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

Savings Associations and Credit Unions

Finance Companies

Filters