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Question
Which of the following is true of off-balance-sheet activities?
A. They involve generation of fees without exposure to any risk.
B. They include contingent activities recorded in the current balance sheet.
C. They invite regulatory costs and additional "taxes."
D. They have both risk-reducing as well as risk-increasing attributes.
E. The risk involved is best represented by notional or face value.
Answer
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Related questions
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The Insurance Regulatory Information System (IRIS) is a standardized examination system used to measure the profitability of insurance companies.
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Property-casualty insurers tend to have a higher level of liquidity risk than life insurers.
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The largest property-casualty (PC) insurance companies have become less influential over the past decade.
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In the case of an insurance company failure, policyholders immediately receive a payout of the cash surrender value of their policies.
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The policy reserves on the liability side of the balance sheet of a life insurance company are estimated based on actuarial assumptions of expected future liability commitments on currently existing contracts.
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The two policy categories offered by property-casualty insurers that are most likely to be subject to rate regulation are
A. auto insurance and worker's compensation.
B. homeowner multiple peril and commercial multiple peril.
C. earthquake and flood.
D. surety bonds and financial guaranty.
E. product liability and farm owner multiple peril.
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The McCarran-Ferguson Act of 1945
A. separated commercial banking from insurance activities.
B. mandated federal insurance company charters.
C. stipulated that insurance companies are to be regulated at the state level.
D. initiated a national insurance guaranty fund.
E. limited insurance company assets to low risk government securities.
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The surrender value of an insurance policy is
A. the expected payment commitment on existing policy contracts.
B. a fund established and held separately from the company's other assets.
C. the cash value paid to the policyholder if the policy is terminated before it matures.
D. the same as the endowment payout.
E. the price at which the company may repurchase the policy.
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Annuities offered by life insurance companies are a financial contract that
A. is used to build up a fund.
B. pays only fixed returns to groups of employees.
C. is used to liquidate a fund.
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E. None of the above are correct.
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An insurance policy that often is the least expensive to the insured because of the policy does not include a savings plan is called
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C. whole life.
D. endowment life.
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An insurance policy that protects an individual over an entire lifetime as long as the premiums are paid is called
A. term life.
B. universal life.
C. whole life.
D. endowment life.
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Which of the following is NOT considered a trading activity of securities firms?
A. Position trading.
B. Pure arbitrage.
C. Liquidity trading.
D. Risk arbitrage trading.
E. Program trading.
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A corporate venture capital firm
A. has publicly-traded common stock.
B. provides equity funds to companies that already have publicly traded common stock.
C. is a subsidiary of a nonfinancial corporation.
D. provides debt funding to only to established corporations.
E. is subject to more stringent disclosure requirements than other venture capital firms.
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Which of the following would be a key area of activity for an investment bank specializing in the commercial side of the business?
A. Purchase of existing securities.
B. Sale of securities in the secondary market.
C. Brokerage of existing securities.
D. Underwriting issues of new securities.
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Market making involves creating a primary market in a financial asset.
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