Insurance and Risk Management 8

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Objective Questions and Answers of MBA: Insurance and Risk Management 8

Subject: Objective Questions and Answers of MBA: Insurance and Risk Management 8

Part 8: Objective questions and answers of Insurance and Risk Management

 

Q1. A person who is risk adverse ______________

a) Accepts the risk no matter what

b) Do not accept the risk as a loss hurts them more than gain benefits them

c) Tries to control the loss

d) Avoids insurance

 

Q2. Insurance penetration in India in 2001 was

a) 1.93

b) 2.32

c) 2.71

d) 2.25

 

Q3. A person who dislikes risk is known as ______________

a) Risk lover

b) Risk averse

c) Risk neutral

d) Insurer

 

Q4. The type of reinsurance that forms individual large losses of risk is called as ____.

a) Proportional quota share

b) Excess of loss per event basis

c) Stop loss

d) Facultative

 

Q5. That which takes advantage to the law of large numbers is ______________

a) Risk retention

b) Combination

c) Hedging

d) Inflation

 

Q6. 'Accrued interest' is:

a) The interest on a bond, paid when it matures

b) The interest accumulated since the last coupon date, paid by the purchaser to the seller

c) The interest on a bond, paid every year

d) The interest paid by the issuer of the bond

e) The interest accumulated since the last coupon date, paid by the seller of the bond to the purchaser

 

Q7. A 'pay as you go' pension system is unsuitable for a private firm because:

a) There is a disincentive effect for current workers

b) The benefits are insufficient

c) Employees are not willing to pay

d) The dependency ratio is too high

e) The firm may cease trading

 

Q8. A 'positive term premium' means:

a) Long term loans are riskier than short term loans

b) Short-term rates are likely to fall

c) Long-term interest rates are higher than short-term rates

d) Nominal interest rates are higher than real rates

e) Borrowers prefer to borrow for long periods

 

Q9. A bank's risk: asset ratio compares its capital with it’s:

a) Risk-adjusted assets

b) Reserves

c) Investments

d) Loans

e) Risk-adjusted liabilities

 

Q10. A belief that expectations were exogenous could lead one to the view that judgments about the future were likely to be based on:

a) The best available information

b) Past experience

c) The best available model

d) The forecasts of the person with the best forecasting record

e) Both the 1st and 3rd answer

f) Both the 1st and 2nd answer

 

Q11. A central bank which sets the short-term rate of interest must:

a) Meet the resulting demand for reserves

b) Seek government approval

c) Change the reserve ratios

d) Sell government bonds

e) Buy treasury bills

 

Q12. A corporate bond paying an annual coupon of £9 matures for £100 on 30 September

2011. What is its price on 1 October 2008 if interest rates are 8.5 per cent?

a) £102.56

b) £61.29

c) £101.28

d) £101.97

e) £102.26

 

Q13. A firm announces that its next dividend payment will be 12p per share. The shares are currently priced at £1. The firm's earnings have recently grown at a rate of 9 per cent per year and this is expected to continue. The total annual return on these shares is:

a) 21%

b) 15%

c) 9%

d) 3%

e) 12%

 

Q14. A retirement annuity is particularly attractive to someone who has:

a) High longevity risk

b) A large family

c) Financial myopia

d) Low longevity risk

e) A severe illness

 

Q15. A sudden demand by depositors for notes and coin is an example of:

a) Payment risk

b) Asset risk

c) Capital risk

d) Currency risk

e) Liquidity risk

 

Q16. According to the fisher hypothesis, the nominal rate of interest consists of:

a) A stable real rate plus a variable liquidity premium

b) A stable real rate plus a variable inflation premium

c) A stable real rate plus a variable risk premium

d) An inflation premium plus a liquidity premium

e) A real rate plus a liquidity premium plus a risk premium

 

Q17. According to the policy irrelevance theorem, why is policy irrelevant?

a) Because no one is interested in it

b) Because it has no effect at all

c) Because it can't influence real variables

d) Because governments seldom know what is going to happen next

e) Because it can't influence inflation

 

Q18. An 'open-end' investment fund is one which:

a) Allows anyone to invest in it

b) Publishes its asset portfolio regularly

c) Can invest in any type of asset that it chooses

d) Allows investors to withdraw funds on demand

e) Varies in size with inflows and outflows of funds

 

Q19. An airline expands its fleet of planes just before a serious accident reduces the demand for its flights. This is an example of:

a) Specific risk

b) Income risk

c) Systematic risk

d) Market risk

e) Capital risk

 

Q20. An increase in (i) the price level and (ii) the rate of inflation:

a) Cause the demand for money (i) to fall; (ii) to rise

b) Both cause the demand for money to rise

c) Both cause the demand for money to fall

d) Cause the demand for money (i) to rise; (ii) to fall

 

Part 8: Objective questions and answers of Insurance and Risk Management

 

Q1. Answer b

 

Q2. Answer c

 

Q3. Answer b

 

Q4. Answer a

 

Q5. Answer b

 

Q6. Answer b

 

Q7. Answer e

 

Q8. Answer c

 

Q9. Answer a

 

Q10. Answer b

 

Q11. Answer a

 

Q12. Answer c

 

Q13. Answer a

 

Q14. Answer a

 

Q15. Answer e

 

Q16. Answer b

 

Q17. Answer c

 

Q18. Answer e

 

Q19. Answer a

 

Q20. Answer d

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