Fins

File: Chapter 02 The Financial Services Industry: Other Financial Institutions

Multiple Choice

[QUESTION]

Which of the following statements is true?

A: Policy reserves are a liability item for insurers that reflects their worst-case payment commitments on existing policy contracts.

B: Policy reserves are an asset item for insurers that reflects their best-case payment inflows on existing policy contracts.

C: Policy reserves are an asset item for insurers that reflects their expected payment inflows on existing policy contracts.

D*: Policy reserves are a liability item for insurers that reflects their expected payment commitments on existing policy contracts.

Answer: D

Level of difficulty: 3

[QUESTION]

Which of the following statements is true?

A. The cash surrender value of a policy is normally only a portion of the contract’s face value.

B. The cash surrender value of a policy is normally equal to the contract’s face value.

C. The cash surrender value of a policy is normally more than the contract’s face value.

D. A generalisation of the cash surrender value of a policy in relation to its face value is not possible.

Answer: A

Level of difficulty: 2

[QUESTION]

Which of the following statements is true?

A. The surrender value of a policy is the cash value received from the insurer if a policyholder surrenders the policy prior to maturity.

B. The surrender value of a policy is the cash value received from the insurer if a policyholder surrenders the policy at maturity.

C. The surrender value of a policy is the cash value received from the policyholder if the insurance company surrenders the policy prior to maturity.

D. The surrender value of a policy is the cash value received from the policyholder if the insurance company surrenders the policy at maturity.

Answer: A

Level of difficulty: 2

[QUESTION]

Which of the following statements is true?

A. A junk bond is a corporate bond rated more than investment grade by bond...