The residual market for auto insurance is designed to provide insurance to A) superior risks who qualify for substantial discounts. B) owners of vintage/antique autos where the replacement cost far exceeds the actual cash value. C) drivers who are unable to obtain coverage in the standard market. D) businesses that need to insure a fleet […]
Liquidity refers to the ability to quickly convert an asset into cash without lowering the selling price. Indicate whether the statement is true or false ANSWER TRUE
In measuring value, the firm’s focus should be on: A) cash flow. B) accounting profits. C) time value of money. D) earnings per share. ANSWER A
Investment banking firms are prohibited from selling securities due to conflicts of interest. Indicate whether the statement is true or false ANSWER FALSE
The syndicate can be thought of as a wholesaler of securities and the dealer organization as a retailer of securities. Indicate whether the statement is true or false ANSWER TRUE
A credit-based score that insurers claim is highly predictive of future claims costs is an individual’s A) combined ratio. B) loss ratio. C) insurance score. D) underwriting score. ANSWER Answer: C
No-fault benefits are provided by adding an endorsement to the auto insurance policy. What is this endorsement typically called? A) uninsured motorists coverage B) personal injury protection coverage C) nonowned vehicle liability coverage D) add-on benefits coverage ANSWER Answer: B
New Jersey’s dollar-a-day auto insurance coverage is limited to A) elderly individuals. B) Medicaid recipients. C) drivers under age 25. D) high-risk drivers. ANSWER Answer: B
John won the lottery on Monday and can take either $50,000 per year for 20 years, or $500,000 today. Bill won the same lottery on Tuesday and has the same options for receiving the cash. A well respected financial advisor is hired by both John and Bill. The advisor recommends that John take the $50,000 […]
Short-term United States Treasury bills are widely used as proxies for risk-free assets, yet the returns on these T-bills are consistently greater than zero. Is this consistent with the concept of a risk-return trade-off? What will be an ideal response? ANSWER Yes. Investors also require a return for delaying consumption as well as […]
