Multiple Choices

INSURANCE OPERATIONS
1. Why does the premium include a markup beyond the present value of the
payment?
a. To discourage people from buying insurance
b. To cover overhead expenses and provide a profit
c. To reduce the likelihood of adverse selection
d. To make the premium more affordable for everyone

2. What is the purpose of the risk-based capital ratio reported by insurance

companies?
a. To minimize state oversight
b. To determine executive bonuses
c. To ensure adequate capital based on exposure to risks
d. To calculate profit margins

3. Considering the rise of stock investments in companies’ assets since the early
1990s, which best describes the situation?
a. companies mostly ignore stocks, sticking to traditional corporate bonds
b. stocks are now crucial, overtaking corporate bonds in companies’
portfolios
c. companies abandon both stocks and bonds for other investments
d. corporate bonds still dominate, overshadowing any impact from stocks

4. A high frequency of claims at a single point in time could force a company to

liquidate assets at a time when the market value is low.
a. Market Risk
b. Credit Risk
c. Liquidity Risk
d. Interest Rate Risk

5. Regarding the interactions between commercial banks and savings institutions

with insurance companies, which of the following activities is commonly
associated with them?
a. Competing with insurance companies to provide insurance- related
services
b. Merging with insurance companies to offer various insurance related
services
c. Completing insurance companies to finance leveraged buyouts.
d. Providing loans to insurance companies
6. In the realm of pension funds and their management, which relationship is
sometimes observed with insurance companies?
a. Pension funds are often managed by insurance companies
b. Pension funds merge with insurance companies to provide comprehensive
financial services
c. Pension funds compete directly with insurance companies in offering
annuities
d. Pension funds serve as brokers for insurance companies in the secondary
market.

7. A financial market that maintains a portion of their funds in money market

securities, such as Treasury bills and commercial paper, to ensure adequate
liquidity.
a. Bond Markets
b. Options Markets
c. Mortgage Markets
d. Money Markets

8. Type of insurance that preferred provider organizations usually allow insured

individuals to see any physician without referral?
a. Property and Casualty Insurance
b. Health Care Insurance
c. Mortgage Insurance
d. Bond Insurance

9. An insurance that protects liability and other events that result in economic or
noneconomic damage.
a. Bond Insurance
b. Mortgage Insurance
c. Health Care Insurance
d. Property and Casualty Insurance

10. It is the process of determining the worth of an asset or company.

a. Valuation
b. Value
c. Validity
d. Valid
 SECURITIES OPERATIONS

1. Which of these are the two most common types of Financial Markets?
a. Money market and Capital market
b. Money market and Stock market
c. Capital market and Stock market
2. Is an exchange where futures contracts are traded by participants who are
interested in buying or selling these derivatives.
a. Options market
b. Futures market
c. Swap market
3. They charge cheaper fees because they offer a smaller selection of goods and
do not give investing advice.
a. Full-service brokerage firm
b. Market orders
c. Discount brokerage firm
4. It is caused by fluctuation in the investor’s local currency compared to the foreign
investment currency
a. Exchange rate risk
b. Interest rate risk
c. Market risk
5. When stock prices are rising there is a greater volume of stock offerings and
secondary market transactions, this is under what exposure to risk?
a. Exchange rate risk
b. Interest rate
c. Market risk
6. Which service can ask the broker to purchase or sell only at a specific price?
a. Market order
b. Limit order
c. Short selling
7. When did Bear Stearns inform the Federal Reserve that it was facing difficulties
obtaining cash and, if unsuccessful, would have to file for bankruptcy the next
day?
a. March 13, 2007
b. March 14, 2008
c. March 13, 2008
8. These regulations aim to ensure fair, transparent, and efficient trading, protect
investors, and maintain the integrity of the financial system.
a. Regulations
b. Stock Exchange Regulations
c. Regulation F D (Fair Disclosure)
9. These acts govern the issuance and trading of securities and establish disclosure
requirements for public companies.
a. Securities Acts
b. Regulation F D (Fair Disclosure)
c. Stock Exchange Regulations
10. It is a rule that was adopted by the U.S. Securities and Exchange Commission
(SEC) in 2000.
a. Stock Exchange Regulations
b. Regulations F D (Fair Disclosure)
c. Securities Acts
True or False
INSURANCE OPERATIONS
1. The probability of having to provide a payment influences the insurance
premium. TRUE
2. The assessment system in insurance regulation is primarily focused on
overseeing competition among insurance companies. FALSE
3. The financial reform act implemented by july 2010, creating the federal insurance
office within the department of the treasury to watch over the insurance industry
and suggest ideas to congress about insurance rules. TRUE
4. Universal Life Insurance protects insured until death. FALSE
5. Commercial Banks and savings institutions provide loans to insurance
companies. TRUE
6. Securities Firms primarily compete directly with insurance companies in offering
mutual funds. FALSE
7. Futures markets may take position in stock market index futures to hedge their
stock portfolios against market risk. TRUE
8. Stock market may purchase put options or write call options on stocks they own
that may experience a temporary decline in price. FALSE
9. The premiums for managed health care plans are generally lower and payment is
typically made directly to the provider. TRUE
10. The higher the ratio the more liquid the company. TRUE

SECURITIES OPERATIONS

1. Several exchanges where shares of publicly traded firms are bought and sold are
together referred to as the "stock market." TRUE
2. Futures market grants its holders the right to purchase or sell securities at a
certain price in the future. FALSE
3. Securities firms can be affected by regulations, technology, market conditions
and competition. FALSE
4. The risk free interest rate is normally positive related to inflation, economic
growth and the budget deficit level. TRUE
5. Merger & acquisition can only occur when one company purchases another
company. FALSE
6. Full-service brokers typically charge between 1% and 2% of a client's managed
assets. TRUE
7. Moral hazard problem is where financial institutions might take high-risk
opportunities assuming they will be bailed out if their strategies fail. TRUE
8. In a best efforts agreement the IBF doesn’t not guarantee a price to the issuing
corporation. TRUE
9. Stock exchange regulations in securities operations are a set of rules and
guidelines established by regulatory bodies to govern the conduct of participants
in the securities market. TRUE
10. The purpose of Regulation FD is to promote fair and full disclosure of information
by publicly traded companies. TRUE