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 […]
When the corporation sells securities directly to the investment public without involving an investment banker, it is called a privileged subscription. Indicate whether the statement is true or false ANSWER FALSE
All of the following are major rating factors for determining private passenger automobile insurance premiums EXCEPT A) gender. B) age. C) race. D) marital status. ANSWER Answer: C
Which of the following statements about reinsurance facilities for insuring high-risk drivers is (are) true? I. Underwriting losses in the reinsurance facility are shared by all auto insurers in the state. II. An insurer must accept all applicants for insurance, but the insurer has the option of placing high-risk drivers in the reinsurance pool. A) […]
A zero coupon bond pays no annual coupon interest payments. When it matures at the end of 7.5 years it pays out $1,000. If investors wish to earn 2.35% per year on this bond investment, what is the current price of the bond? (Round to the nearest dollar.) A) $875 B) $561 C) $840 D) […]
