Which of the following statements about the coverage for medical payments to others (Coverage F) under the homeowners policy is true? A) Medical payments may be made for any resident of the named insured’s household. B) Medical expenses incurred within 3 years of an accident are covered. C) Medical payments are made only if the […]
HighLev Incorporated borrows heavily and uses the leverage to boost its return on equity to 30% this year, nearly 10% higher than the industry average. However, HighLev’s stock price decreases relative to its industry counterparts. How is this possible? A) The high levels of debt increased the riskiness of HighLev relative to its competitors. B) […]
Section II of the homeowners policy has exclusions applying to all of the following EXCEPT A) activities of the named insured’s minor children. B) business activities. C) transmission of a communicable disease. D) intentional injuries. ANSWER Answer: A
Which of the following accounts belongs on the asset side of a balance sheet? A) depreciation expense B) accruals C) inventory D) accounts payable ANSWER C
Which of the following situations is covered under Section II of an unendorsed homeowners policy? A) injuries which occur at a park resulting from a motorcycle owned by the insured B) injuries resulting from an auto not subject to registration because it is in dead storage C) injuries resulting from an auto rented by the […]
Small company stocks have historically had higher average annual returns than large company stocks, and also a higher risk premium. Indicate whether the statement is true or false ANSWER TRUE
The present value of a deferred annuity (e.g., an annuity that starts 10 years from today) can be calculated in two steps: (1 ) calculate the future value of the annuity, and (2 ) calculate the present value of the amount determined in step (1 ). Indicate whether the statement is true or false […]
In constructing a pro forma balance sheet a manager can estimate the accounts receivable because: A) managers typically construct a pro forma income statement prior to the balance sheet. Thus, an estimate of sales has already been made and this is critical to estimating accounts receivable. B) if the firm has already made an estimate […]
The provisions of the Sarbanes-Oxley Act of 2002, or SOX, apply to all U.S.-based corporations, as well as to foreign corporations conducting business in U.S. markets. Indicate whether the statement is true or false ANSWER FALSE
How is risk defined? What will be an ideal response? ANSWER Risk means different things to different people, depending on the context and on how they feel about taking chances. While certainly acknowledging these different kinds of risk, we limit our attention to the risk inherent in an investment. In this context, risk […]
