Question 1

All of the following are true regarding the interest rate risk EXCEPT

Accepted Answer

A)  rising interest rates cause bond prices to rise as well. 
B)  all investors are subject to this risk. 
C)  changes in interest rate can affect both an investor's income stream and the value of the investor's assets. 
D)  rising interest rates cause bond prices to fall. 
E)  when interest rates rise, it is more expensive to borrow money. 
A)  rising interest rates cause bond prices to rise as well. 
B)  all investors are subject to this risk. 
C)  changes in interest rate can affect both an investor's income stream and the value of the investor's assets. 
D)  rising interest rates cause bond prices to fall. 
E)  when interest rates rise, it is more expensive to borrow money. A

Question 2

Allister's Auto Insurance Company adjusts its rates on automobile insurance annually. The price of the company's policies reflects all of the following EXCEPT the

Accepted Answer

A)  perceived danger of driving. 
B)  previous year's accidents. 
C)  replacement value of the automobile. 
D)  driver's driving record. 
E)  age of the automobile. 
A)  perceived danger of driving. 
B)  previous year's accidents. 
C)  replacement value of the automobile. 
D)  driver's driving record. 
E)  age of the automobile. A

Question 3

Clayton buys an insurance policy that invests his set savings amount into financial assets without guaranteeing the return. Thus, Clayton has the opportunity to get a better return than the guaranteed rate. Which type of insurance policy does this scenario best describe?

Accepted Answer

A)  investors life insurance 
B)  fixed-rate life insurance 
C)  term life insurance 
D)  whole life insurance 
E)  variable life insurance 
A)  investors life insurance 
B)  fixed-rate life insurance 
C)  term life insurance 
D)  whole life insurance 
E)  variable life insurance E

Question 4

The law of large numbers postulates that as a sample size grows, the mean of the sample will get further away from the mean of the total population.

Accepted Answer

A) True 
 B)False

Question 5

EduPub, a small educational publishing company, is struggling to keep up with its competitors and continue to grow its earnings. This company is finding that new players and technology are changing the landscape for the entire publishing industry, and its poor management and lack of forward planning is causing it to fall behind the curve. Which type of risk does this scenario best describe?

Accepted Answer

A)  liquidity risk 
B)  currency risk 
C)  financial risk 
D)  operating risk 
E)  business risk 
A)  liquidity risk 
B)  currency risk 
C)  financial risk 
D)  operating risk 
E)  business risk

Question 6

Kim invests in the market, and thus, she is subject to market risks. By diversifying her portfolio, she can minimize price volatility or at least keep the volatility of returns equal to or less than the market in which she invests. She can use statistical measures such as the standard deviation or beta to measure her ability to minimize volatility. If Kim wants her risk to equal that of the market, she should invest in stocks with

Accepted Answer

A)  a beta of 1.0. 
B)  betas greater than 1.0. 
C)  betas less than 1.0. 
D)  a beta of 0.1. 
E)  betas greater than 0.1. 
A)  a beta of 1.0. 
B)  betas greater than 1.0. 
C)  betas less than 1.0. 
D)  a beta of 0.1. 
E)  betas greater than 0.1.

Question 7

All of the following are types of property for which you can buy property casualty insurance EXCEPT

Accepted Answer

A)  intangible possessions. 
B)  houses. 
C)  automobiles. 
D)  stamp collections. 
E)  physical possessions. 
A)  intangible possessions. 
B)  houses. 
C)  automobiles. 
D)  stamp collections. 
E)  physical possessions.

Question 8

What explains why property casualty insurance is sometimes called property and liability insurance?

Accepted Answer

A)  because the policy takes away any responsibility the policyholder might have if his or her own property is damaged 
B)  because the policy protects the policyholder if someone else damages his or her property 
C)  because the policy covers the policyholder's liabilities and assets 
D)  because the policy protects the policyholder from faulty products 
E)  because the policy includes coverage for damage to other people or property 
A)  because the policy takes away any responsibility the policyholder might have if his or her own property is damaged 
B)  because the policy protects the policyholder if someone else damages his or her property 
C)  because the policy covers the policyholder's liabilities and assets 
D)  because the policy protects the policyholder from faulty products 
E)  because the policy includes coverage for damage to other people or property

Question 9

You can insure against the possibility of financial risk of loss by buying casualty insurance.

Accepted Answer

A) True 
 B)False

Question 10

Carlos manages a portfolio composed of many different companies and asset classes such as stocks and bonds, foreign stocks, and bonds and securities in developed and emerging markets. As a result, his portfolio is considered to be

Accepted Answer

A)  globalized. 
B)  positively correlated. 
C)  diversified. 
D)  classified. 
E)  risky. 
A)  globalized. 
B)  positively correlated. 
C)  diversified. 
D)  classified. 
E)  risky.

Question 11

Craig's Construction Company borrowed money to buy the heavy machinery it needs to complete its construction projects. As a result, this company has a high ________ risk.

Accepted Answer

A)  operating 
B)  financial 
C)  business 
D)  liquidity 
E)  currency 
A)  operating 
B)  financial 
C)  business 
D)  liquidity 
E)  currency

Question 12

All of the following are true regarding life insurance policies EXCEPT

Accepted Answer

A)  you can name anyone as your beneficiary or even have multiple beneficiaries. 
B)  beneficiaries must be people. 
C)  people often buy these policies to leave money to cover debts they want paid. 
D)  some companies provide these policies as part of their employment contract. 
E)  these policies can be purchased for $10,000 or millions of dollars, depending on how much you want your beneficiary to receive. 
A)  you can name anyone as your beneficiary or even have multiple beneficiaries. 
B)  beneficiaries must be people. 
C)  people often buy these policies to leave money to cover debts they want paid. 
D)  some companies provide these policies as part of their employment contract. 
E)  these policies can be purchased for $10,000 or millions of dollars, depending on how much you want your beneficiary to receive.

Question 13

Which of the following accurately compares business risk and operating risk?

Accepted Answer

A)  Business risk is related to the inability of a firm to hold its competitive position and maintain stability and growth in earnings, while operating risk focuses on the volatility of operating earnings. 
B)  Business risk involves the ratio of sales to assets; while operating risk involves changes to the competitive environment due to changing consumer tastes, new players, and new technology. 
C)  Business risk and operating risk are exactly the same. 
D)  Both occur because the company does not keep up with its competitors due to lack of research and development, lack of forward planning, and poor management. 
E)  Both can be measured by the standard deviation of operating earnings. 
A)  Business risk is related to the inability of a firm to hold its competitive position and maintain stability and growth in earnings, while operating risk focuses on the volatility of operating earnings. 
B)  Business risk involves the ratio of sales to assets; while operating risk involves changes to the competitive environment due to changing consumer tastes, new players, and new technology. 
C)  Business risk and operating risk are exactly the same. 
D)  Both occur because the company does not keep up with its competitors due to lack of research and development, lack of forward planning, and poor management. 
E)  Both can be measured by the standard deviation of operating earnings.

Question 14

All of the following are considered to be uninsurable risks EXCEPT

Accepted Answer

A)  the economic risk of lost market share. 
B)  interest rate risk. 
C)  the political risk of investing in foreign countries. 
D)  currency fluctuations. 
E)  loss due to personal injury. 
A)  the economic risk of lost market share. 
B)  interest rate risk. 
C)  the political risk of investing in foreign countries. 
D)  currency fluctuations. 
E)  loss due to personal injury.

Question 15

All of the following are true regarding health insurance EXCEPT

Accepted Answer

A)  it is expensive. 
B)  it covers the two basic areas of hospitalization and medical. 
C)  it generally covers the two basic areas of preventative care and prescription drugs. 
D)  there may be a co-pay or minimum payment the insured has to pay toward hospital expenses. 
E)  surgical medical insurance usually pays for the doctor's fee, the anesthesiologist, and surgical expenses. 
A)  it is expensive. 
B)  it covers the two basic areas of hospitalization and medical. 
C)  it generally covers the two basic areas of preventative care and prescription drugs. 
D)  there may be a co-pay or minimum payment the insured has to pay toward hospital expenses. 
E)  surgical medical insurance usually pays for the doctor's fee, the anesthesiologist, and surgical expenses.

Question 16

Why do insurance companies like to insure many people?

Accepted Answer

A)  the law of actuaries 
B)  the law of risk taking 
C)  the risk-return trade-off 
D)  the law of large numbers 
E)  risk aversion theory 
A)  the law of actuaries 
B)  the law of risk taking 
C)  the risk-return trade-off 
D)  the law of large numbers 
E)  risk aversion theory

Question 17

Jonathan lost his job and the health insurance coverage that his employer had provided. As a result of the Affordable Care Act, what may he experience in getting a new policy?

Accepted Answer

A)  He may have trouble finding any health insurance options. 
B)  He may not qualify for health insurance. 
C)  He may be able to sue his previous employer and get continued health insurance coverage. 
D)  He may find that he is entitled to basic free coverage, so he doesn't need to get a new policy. 
E)  He may have to pay more for a new policy. 
A)  He may have trouble finding any health insurance options. 
B)  He may not qualify for health insurance. 
C)  He may be able to sue his previous employer and get continued health insurance coverage. 
D)  He may find that he is entitled to basic free coverage, so he doesn't need to get a new policy. 
E)  He may have to pay more for a new policy.

Question 18

What is true regarding annuities?

Accepted Answer

A)  They only benefit you if you live longer than expected. 
B)  They give you variable returns and a higher rate of return. 
C)  They are less risky than the stock and bond markets because they let you know what your monthly income will be. 
D)  They only benefit you if you don't retire. 
E)  They usually benefit the insurance company more than they benefit you. 
A)  They only benefit you if you live longer than expected. 
B)  They give you variable returns and a higher rate of return. 
C)  They are less risky than the stock and bond markets because they let you know what your monthly income will be. 
D)  They only benefit you if you don't retire. 
E)  They usually benefit the insurance company more than they benefit you.

Question 19

Briefly discuss the risks that cannot be insured by companies.

Accepted Answer

Risks that cannot be insured by companie

Question 20

Laurel works for an accounting firm that offers dental insurance as one of its benefits. What would this policy most likely include?

Accepted Answer

A)  the partial cost of fillings up to a fixed yearly limit 
B)  the full cost of fillings with no fixed yearly limit 
C)  the full cost of crowns up to a fixed yearly limit 
D)  three teeth-cleaning appointments per year 
E)  one teeth-cleaning appointment per year 
A)  the partial cost of fillings up to a fixed yearly limit 
B)  the full cost of fillings with no fixed yearly limit 
C)  the full cost of crowns up to a fixed yearly limit 
D)  three teeth-cleaning appointments per year 
E)  one teeth-cleaning appointment per year

All of the following are true regarding the interest rate risk EXCEPT

Allister's Auto Insurance Company adjusts its rates on automobile insurance annually. The price of the company's policies reflects all of the following EXCEPT the

Clayton buys an insurance policy that invests his set savings amount into financial assets without guaranteeing the return. Thus, Clayton has the opportunity to get a better return than the guaranteed rate. Which type of insurance policy does this scenario best describe?

The law of large numbers postulates that as a sample size grows, the mean of the sample will get further away from the mean of the total population.

All of the following are types of property for which you can buy property casualty insurance EXCEPT

What explains why property casualty insurance is sometimes called property and liability insurance?

You can insure against the possibility of financial risk of loss by buying casualty insurance.

Carlos manages a portfolio composed of many different companies and asset classes such as stocks and bonds, foreign stocks, and bonds and securities in developed and emerging markets. As a result, his portfolio is considered to be

Craig's Construction Company borrowed money to buy the heavy machinery it needs to complete its construction projects. As a result, this company has a high ________ risk.

All of the following are true regarding life insurance policies EXCEPT

Which of the following accurately compares business risk and operating risk?

All of the following are considered to be uninsurable risks EXCEPT

All of the following are true regarding health insurance EXCEPT

Why do insurance companies like to insure many people?

Jonathan lost his job and the health insurance coverage that his employer had provided. As a result of the Affordable Care Act, what may he experience in getting a new policy?

What is true regarding annuities?

Briefly discuss the risks that cannot be insured by companies.

Laurel works for an accounting firm that offers dental insurance as one of its benefits. What would this policy most likely include?

The Dynamics of Business and Economics

Business Ethics and Social Responsibility

Business in a Borderless World

Options for Organizing Business

Small Business, Entrepreneurship, and Franchising

The Nature of Management

Organization, Teamwork, and Communication

Managing Operations and Supply Chains

Motivating the Workforce

Managing Human Resources

Customer-Driven Marketing

Dimensions of Marketing Strategy

Digital Marketing and Social Networking

Accounting and Financial Statements

Money and the Financial System

Financial Management and Securities Markets

Personal Financial Planning and Legal and Regulatory Environment

Appendix A: Guidelines for the Development of the Business Plan

Appendix B: Personal Career Plan

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Exam 20: Appendix C: Risk: The Basics of Risk Management

All of the following are true regarding the interest rate risk EXCEPT

Allister's Auto Insurance Company adjusts its rates on automobile insurance annually. The price of the company's policies reflects all of the following EXCEPT the

Clayton buys an insurance policy that invests his set savings amount into financial assets without guaranteeing the return. Thus, Clayton has the opportunity to get a better return than the guaranteed rate. Which type of insurance policy does this scenario best describe?

The law of large numbers postulates that as a sample size grows, the mean of the sample will get further away from the mean of the total population.

All of the following are types of property for which you can buy property casualty insurance EXCEPT

What explains why property casualty insurance is sometimes called property and liability insurance?

You can insure against the possibility of financial risk of loss by buying casualty insurance.

Carlos manages a portfolio composed of many different companies and asset classes such as stocks and bonds, foreign stocks, and bonds and securities in developed and emerging markets. As a result, his portfolio is considered to be

Craig's Construction Company borrowed money to buy the heavy machinery it needs to complete its construction projects. As a result, this company has a high ________ risk.

All of the following are true regarding life insurance policies EXCEPT

Which of the following accurately compares business risk and operating risk?

All of the following are considered to be uninsurable risks EXCEPT

All of the following are true regarding health insurance EXCEPT

Why do insurance companies like to insure many people?

Jonathan lost his job and the health insurance coverage that his employer had provided. As a result of the Affordable Care Act, what may he experience in getting a new policy?

What is true regarding annuities?

Briefly discuss the risks that cannot be insured by companies.

Laurel works for an accounting firm that offers dental insurance as one of its benefits. What would this policy most likely include?

The Dynamics of Business and Economics

Business Ethics and Social Responsibility

Business in a Borderless World

Options for Organizing Business

Small Business, Entrepreneurship, and Franchising

The Nature of Management

Organization, Teamwork, and Communication

Managing Operations and Supply Chains

Motivating the Workforce

Managing Human Resources

Customer-Driven Marketing

Dimensions of Marketing Strategy

Digital Marketing and Social Networking

Accounting and Financial Statements

Money and the Financial System

Financial Management and Securities Markets

Personal Financial Planning and Legal and Regulatory Environment

Appendix A: Guidelines for the Development of the Business Plan

Appendix B: Personal Career Plan

Filters