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    Questions on Insurance and Life Insurance

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    Question 1 - Life insurance companies have a portion of their assets invested in common stocks most likely because

    A- there's no other way to finance whole life insurance policies.

    B- the company probably offers variable-life insurance policies.

    C- it reduces the risk of the corporate bond portfolio.

    D- common stockholders desire a small amount of their return in life insurance.

    Question 2 - Which statement is not true about life insurance companies?

    A- they have relatively predictable inflows and outflows.

    B- their liabilities are long-term in nature.

    C- they invest heavily in short-term highly marketable securities.

    D- they sell contracts that offer financial protection against premature death and against living too long.

    Question 3 - All but one of the following is a reason mutual thrifts have converted to stock institutions:

    A- to obtain federal deposit insurance

    B- to sell stock and increase their net worth

    C- to acquire subsidiaries more easily

    D- to merge with other institutions more easily

    Question 4 - Earnings of the S&L industry suffered in the 1980s from both maturity imbalances and

    A- loan losses related to new asset powers granted in 1980.

    B- high, sustained interest rates.

    C- the high rates paid on NOW accounts.

    D- higher yields from consumer credit card loans.

    Question 5 - Thrifts' return on average assets (ROAA) has increased in recent years primarily due to

    A- increased loan loss reserves per average assets.

    B- decreased noninterest expenses per average assets.

    C- increased noninterest income per average assets.

    D- the decline in average assets in the period.

    Question 6 - The sale of mortgages would offer the thrift institution all of the following except:

    A- a source of liquidity from the mortgage portfolio.

    B- a source of interest income.

    C- an opportunity to reduce a high negative GAP position.

    D- an opportunity to make additional mortgage loans.

    Question 7 - Annuities protect against

    A- the economic consequences of living too long.

    B- varying interest rates.

    C- aggressive beneficiaries.

    D- default by life insurance companies.

    Question 8 - The difference between an insured versus a noninsured pension plan is

    A- the insured plan is insured under the Pension Benefit Guaranty Corporation, while the noninsured is not.

    B- the insured plan is a government pension fund; the noninsured is in the private sector.

    C- the insured plan obligations are issued by a life insurance company with promises to pay specific amounts in the future, while the

    noninsured are managed by a trustee with no guarantee of amounts distributed in the future.

    D- the employer of the insured guarantees payments, but not so in the case of the uninsured

    Question 9 - To protect against moral hazard, disability income policies

    A- do not cover disabilities from moral problems.

    B- do not provide a high percentage of pre-disability income and require a waiting period.

    C- usually pay more than 100 per cent of an insured's income.

    D- usually require a five-year waiting period before benefits begin.

    Question 10 - Which statement is not true about casualty insurance companies?

    A- they are subject to federal income tax.

    B- they invest heavily in municipal bonds.

    C- they have more predictable cash flows related to claims than life insurance companies.

    D- they invest in corporate stock.

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    Multiple Choice - Financial Institutions quiz
    Question 1 - Life insurance companies have a portion of their assets invested in common stocks most likely because

    A- there's no other way to finance whole life insurance policies.

    B- the company probably offers variable-life insurance policies.

    C- it reduces the risk of the corporate bond portfolio.

    D- common stockholders desire a small amount of their return in life insurance.

    Information: Variable Life Insurance - also called Variable Appreciable Life Insurance - provides permanent protection to your beneficiary upon your death. This type of life insurance is "variable" because it allows you to allocate a portion of your premium dollars to a separate account comprised of various investment funds within the insurance company's portfolio, such as an equity fund, stocks, a money market fund, a bond fund, or some combination thereof.

    Question 2 - Which statement is not true about life insurance companies?

    A- they have relatively predictable inflows and outflows.

    B- their liabilities are long-term in nature.

    C- they invest heavily in short-term highly marketable securities.

    D- they sell contracts that offer financial protection against premature death and against living too long.

    Information: Insurance companies invest heavily in corporate bonds and hold a good mix of Medium and long term bonds.

    Question 3 - All but one of the following is a reason mutual thrifts have converted to stock institutions:

    A- to obtain federal deposit insurance

    B- to sell stock and increase their net worth

    C- to acquire ...

    Solution Summary

    Questions on Insurance and Life Insurance

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