Question 1

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 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

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 4

Fraudulent practices and other abuses of private pension funds led Congress to enact the ________.

Accepted Answer

A) Federal Deposit Insurance Corporation Act 
B) Employee Retirement Income Security Act 
C) Federal Reserve Act 
D) Social Security Act 
A) Federal Deposit Insurance Corporation Act 
B) Employee Retirement Income Security Act 
C) Federal Reserve Act 
D) Social Security Act

Question 5

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 6

Which of the following has not contributed to the growth of pension plans?

Accepted Answer

A) privatization of Social Security 
B) urbanization 
C) retirement at earlier ages 
D) increases in life expectancy 
A) privatization of Social Security 
B) urbanization 
C) retirement at earlier ages 
D) increases in life expectancy

Question 7

Which of the following types of life insurance provides no savings element?

Accepted Answer

A) term 
B) whole 
C) universal 
D) none of the above 
A) term 
B) whole 
C) universal 
D) none of the above

Question 8

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 9

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 10

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 11

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 12

The fastest growing financial intermediary is ________.

Accepted Answer

A) commercial banks 
B) pension plans 
C) life insurance companies 
D) mutual funds 
A) commercial banks 
B) pension plans 
C) life insurance companies 
D) mutual funds

Question 13

The largest share of life insurance companies' assets are ________.

Accepted Answer

A) corporate stock 
B) corporate bonds 
C) government securities 
D) cash reserves 
A) corporate stock 
B) corporate bonds 
C) government securities 
D) cash reserves

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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.

Accepted Answer

A) moral hazard 
B) opportunism 
C) adverse selection 
D) shirking 
A) moral hazard 
B) opportunism 
C) adverse selection 
D) shirking

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

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 20

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

Accepted Answer

A) True 
 B)False

Exam 21: Insurance Companies and Pension Funds

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

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?

Keogh plans and IRAs are

Fraudulent practices and other abuses of private pension funds led Congress to enact the ________.

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

Which of the following has not contributed to the growth of pension plans?

Which of the following types of life insurance provides no savings element?

A basic product of life insurance companies is ________.

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

The earliest form of insurance was ________ insurance.

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

The fastest growing financial intermediary is ________.

The largest share of life insurance companies' assets are ________.

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

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.

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

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

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

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

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

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

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