Question 1

A term life insurance policy provides

Accepted Answer

A) insurance benefits only. 
B) savings benefits only. 
C) both insurance and savings benefits. 
D) none of the above. 
A) insurance benefits only. 
B) savings benefits only. 
C) both insurance and savings benefits. 
D) none of the above.

Question 2

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 3

A monoline insurance company is an insurance company which specialize in credit insurance alone.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

Life insurance and property and casualty

Question 5

Why will Social Security funding problems rise in the coming decades? Identify and evaluate the proposals that have been suggested to ease or reverse these problems.

Accepted Answer

Social Security funding problems are exp

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

The certainty equivalent for risk-averse people who buy insurance is the

Accepted Answer

A) maximum loss they may sustain. 
B) expected loss they may sustain. 
C) insurance premium they pay. 
D) profit the insurance company earns. 
A) maximum loss they may sustain. 
B) expected loss they may sustain. 
C) insurance premium they pay. 
D) profit the insurance company earns.

Question 9

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) deductibles and coinsurance 
D) all of the above 
E) only A and B of the above 
A) collection of information and screening of potential policyholders 
B) risk-based premiums 
C) deductibles and coinsurance 
D) all of the above 
E) only A and B of the above

Question 10

The fact that insurance companies charge young males higher automobile insurance premiums than young females is an example of

Accepted Answer

A) risk-based premiums. 
B) an attempt to minimize adverse selection. 
C) coinsurance. 
D) all of the above. 
E) only A and B of the above. 
A) risk-based premiums. 
B) an attempt to minimize adverse selection. 
C) coinsurance. 
D) all of the above. 
E) only A and B of the above.

Question 11

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

Accepted Answer

A) risk-assessment screening 
B) risk-based premiums 
C) restrictive provisions 
D) all of the above 
E) only A and B of the above 
A) risk-assessment screening 
B) risk-based premiums 
C) restrictive provisions 
D) all of the above 
E) only A and B of the above

Question 12

To prevent the moral hazard problem, health and life insurance companies may write policies

Accepted Answer

A) that increase benefits dramatically once the policyholder is discovered to have contracted an illness so that the patient can recover sooner. 
B) containing provisions which either reduce or eliminate benefits to persons who contract prespecified illnesses. 
C) boosting the amount the companies will pay health providers in the event that claims are submitted by policyholders. 
D) with only A and B of the above provisions. 
A) that increase benefits dramatically once the policyholder is discovered to have contracted an illness so that the patient can recover sooner. 
B) containing provisions which either reduce or eliminate benefits to persons who contract prespecified illnesses. 
C) boosting the amount the companies will pay health providers in the event that claims are submitted by policyholders. 
D) with only A and B of the above provisions.

Question 13

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 14

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 15

Keogh plans and IRAs are

Accepted Answer

A) individual pension plans. 
B) government pension plans. 
C) corporate pension plans. 
D) public pension plans. 
A) individual pension plans. 
B) government pension plans. 
C) corporate pension plans. 
D) public pension plans.

Question 16

During the 2007-2009 financial crisis, state and local governments now found their interest costs rising. Which of the following were causes of this?

Accepted Answer

A) lower tax revenues because of the weaker economy 
B) weakened value of monoline insurance guarantees on their debt 
C) both A and B 
D) none of the above 
A) lower tax revenues because of the weaker economy 
B) weakened value of monoline insurance guarantees on their debt 
C) both A and B 
D) none of the above

Question 17

________ companies get a tax advantage; most new insurance companies organize as ________ companies.

Accepted Answer

A) Mutual insurance; mutual insurance 
B) Mutual insurance; stock 
C) Stock; stock 
D) Stock; mutual insurance 
A) Mutual insurance; mutual insurance 
B) Mutual insurance; stock 
C) Stock; stock 
D) Stock; mutual insurance

Question 18

The fact that insurance companies charge young males higher automobile insurance premiums than young females is an example of coinsurance.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true of life insurance companies?

Accepted Answer

A) They primarily hold long-term assets that are not particularly liquid. 
B) They primarily hold short-term liquid assets. 
C) Payouts to policyholders are relatively predictable. 
D) Both A and C of the above are true. 
A) They primarily hold long-term assets that are not particularly liquid. 
B) They primarily hold short-term liquid assets. 
C) Payouts to policyholders are relatively predictable. 
D) Both A and C of the above are true.

Exam 21: Insurance Companies and Pension Funds

A term life insurance policy provides

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?

A monoline insurance company is an insurance company which specialize in credit insurance alone.

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

Why will Social Security funding problems rise in the coming decades? Identify and evaluate the proposals that have been suggested to ease or reverse these problems.

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

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

The certainty equivalent for risk-averse people who buy insurance is the

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

The fact that insurance companies charge young males higher automobile insurance premiums than young females is an example of

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

To prevent the moral hazard problem, health and life insurance companies may write policies

Social Security is a

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

Keogh plans and IRAs are

During the 2007-2009 financial crisis, state and local governments now found their interest costs rising. Which of the following were causes of this?

________ companies get a tax advantage; most new insurance companies organize as ________ companies.

The fact that insurance companies charge young males higher automobile insurance premiums than young females is an example of coinsurance.

Which of the following is true of life insurance companies?

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

companies get a tax advantage; most new insurance companies organize as companies.