Profit maximization is NOT an adequate goal of the firm when making financial decisions because: A) it does not necessarily reflect shareholder wealth maximization. B) it ignores the risk inherent in different projects that will generate the profits. C) it can over-emphasize a project’s short-term returns. D) All of the above. ANSWER D
One benefit payable under a typical no-fault plan is “essential services expenses.” Which of the following would be covered under this benefit? A) funeral expenses B) housekeeping expenses C) hospital bills D) loss of income ANSWER Answer: B
“No pay, no play” laws have which of the following characteristics? A) Uninsured motorists are prevented from suing for noneconomic damages. B) Recovery by accident victims is limited to the amount of liability coverage that they have purchased. C) Driving privileges are automatically terminated if the vehicle operator is stopped by the police and does […]
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
