Janet was unable to obtain auto insurance in the voluntary insurance market. She was contacted by the state insurance department and notified that XYZ Insurance would be her insurer. The mechanism used in Janet’s state to provide auto insurance to high-risk drivers is a(n) A) automobile insurance plan. B) joint underwriting association. C) specialty automobile […]
The “perfect storm” of factors that contributed to the economic crisis of 2007 include A) agency costs, inefficient markets, and perfect capital markets. B) poorly chosen mortgage loans, falling housing prices, and a contracting economy. C) financial deregulation, unchecked commodity prices, floating currency exchange rates. D) increases in the minimum wage rate, unchecked illegal immigration, […]
Which of the following conclusions would be true if you earn a higher rate of return on your investments? A) The greater the present value would be for any lump sum you would receive in the future. B) Your rate of return would not have any effect on the present value of any sum to […]
Amber believes that her auto insurance premium is too high. Which of the following would most likely lower Amber’s premium? A) Amber could increase her physical damage deductible. B) Amber could move from the rural area where she lives to an urban or suburban area. C) Amber could increase the amount of liability insurance that […]
Which of the following goals of the firm are synonymous with the maximization of shareholder wealth? A) Profit maximization B) Risk minimization C) Maximization of the total market value of the firm’s common stock D) None of the above ANSWER C
Scott had trouble obtaining auto insurance. After three companies refused to insure him, he called the state insurance department. A representative suggested he obtain coverage through Last Chance Insurance Company because “that’s all they insure—high-risk drivers.” Scott contacted Last Chance. He was not refused coverage; however, the premium Scott was required to pay was three […]
In the state where Susan lives, drivers whom private insurance companies do not want to insure are placed in a common pool, and each insurer pays its pro rata share of pool losses and expenses. A common policy is used for all high-risk drivers. Susan’s state handles high-risk drivers through a(n) A) automobile insurance plan. […]
An investment banker assumes underwriting risk in both negotiated purchases and privileged subscriptions with standby agreements. Indicate whether the statement is true or false ANSWER FALSE
Which of the following statements is (are) true with respect to the use of credit-based insurance scores as an auto insurance rating factor? I. Insurers claim that drivers who have poor insurance scores are expected to have relatively more accidents. II. The use of insurance scores has been banned as a rating factor in all […]
The goal of most financial managers is to reduce the amount of long-term debt to zero, thus maximizing shareholder wealth. Indicate whether the statement is true or false ANSWER FALSE
