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) […]
Which of the following statements about automobile insurers that specialize in insuring high-risk motorists with poor driving records is (are) true? I. The actual premium paid by an applicant is set by the federal government and is independent of an applicant’s driving record. II. The coverages available may be more limited than those written by […]
Sharon lives in a state that has a no-fault automobile insurance law. Under the law, an injured person has the right to sue the negligent driver only if the bodily injury claim exceeds a dollar or verbal threshold. The no-fault law in Sharon’s state is a(n) A) pure no-fault plan. B) modified no-fault plan. C) […]
Disadvantages of automobile insurance plans include which of the following? I. High premiums may cause many high-risk drivers to go uninsured. II. Large underwriting profits have resulted in high-risk drivers subsidizing the cost of insurance for good drivers in the voluntary markets. A) I only B) II only C) both I and II D) neither […]
Stock W has the following returns for various states of the economy: State of the Economy Probability Stock W’s Return Recession 10% -30% Below Average 20% -2% Average 40% 10% Above Average 20% 18% Boom 10% 40% Stock W’s standard deviation of returns is A) 20% B) 14%. C) 17%. D) 10%. ANSWER […]
Biff deposited $9,000 in a bank account, and 10 years later he closes out the account, which is worth $18,000. What annual rate of interest has he earned over the 10 years? A) 7.18% B) 6.45% C) 10.0% D) 9.10% ANSWER A
Which of the following statements about the characteristics of current no-fault laws is true? A) Most laws in force today are pure no-fault laws. B) Most laws apply to both bodily injury and property damage. C) Most laws permit payment of survivor benefits to a surviving spouse and children. D) States with add-on plans restrict […]
All of the following are arguments for no-fault automobile insurance laws EXCEPT A) No-fault is unnecessary as it’s easy to determine which driver was negligent when a multiple-vehicle accident occurs. B) A large portion of each premium dollar is used for purposes other than compensating accident victims for their losses. C) There are delays in […]
For a well-diversified investor, an investment with an expected return of 10% with a standard deviation of 3% dominates an investment with an expected return of 10% with a standard deviation of 5%. Indicate whether the statement is true or false ANSWER FALSE
