Question 1 - Life insurance companies have a portion of their assets invested in common stocks most likely because
A- there's no other way to finance whole life insurance policies.
B- the company probably offers variable-life insurance policies.
C- it reduces the risk of the corporate bond portfolio.
D- common stockholders desire a small amount of their return in life insurance.
Question 2 - Which statement is not true about life insurance companies?
A- they have relatively predictable inflows and outflows.
B- their liabilities are long-term in nature.
C- they invest heavily in short-term highly marketable securities.
D- they sell contracts that offer financial protection against premature death and against living too long.
Question 3 - All but one of the following is a reason mutual thrifts have converted to stock institutions:
A- to obtain federal deposit insurance
B- to sell stock and increase their net worth
C- to acquire subsidiaries more easily
D- to merge with other institutions more easily
Question 4 - Earnings of the S&L industry suffered in the 1980s from both maturity imbalances and
A- loan losses related to new asset powers granted in 1980.
B- high, sustained interest rates.
C- the high rates paid on NOW accounts.
D- higher yields from consumer credit card loans.
Question 5 - Thrifts' return on average assets (ROAA) has increased in recent years primarily due to
A- increased loan loss reserves per average assets.
B- decreased noninterest expenses per average assets.
C- increased noninterest income per average assets.
D- the decline in average assets in the period.
Question 6 - The sale of mortgages would offer the thrift institution all of the following except:
A- a source of liquidity from the mortgage portfolio.
B- a source of interest income.
C- an opportunity to reduce a high negative GAP position.
D- an opportunity to make additional mortgage loans.
Question 7 - Annuities protect against
A- the economic consequences of living too long.
B- varying interest rates.
C- aggressive beneficiaries.
D- default by life insurance companies.
Question 8 - The difference between an insured versus a noninsured pension plan is
A- the insured plan is insured under the Pension Benefit Guaranty Corporation, while the noninsured is not.
B- the insured plan is a government pension fund; the noninsured is in the private sector.
C- the insured plan obligations are issued by a life insurance company with promises to pay specific amounts in the future, while the
noninsured are managed by a trustee with no guarantee of amounts distributed in the future.
D- the employer of the insured guarantees payments, but not so in the case of the uninsured
Question 9 - To protect against moral hazard, disability income policies
A- do not cover disabilities from moral problems.
B- do not provide a high percentage of pre-disability income and require a waiting period.
C- usually pay more than 100 per cent of an insured's income.
D- usually require a five-year waiting period before benefits begin.
Question 10 - Which statement is not true about casualty insurance companies?
A- they are subject to federal income tax.
B- they invest heavily in municipal bonds.
C- they have more predictable cash flows related to claims than life insurance companies.
D- they invest in corporate stock.