Insurance and Risk Management 9

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Objective Questions and Answers of MBA: Insurance and Risk Management 9

Subject: Objective Questions and Answers of MBA: Insurance and Risk Management 9

Part 9: Objective questions and answers of Insurance and Risk Management


Q1. The concept of insurance is ______________.

a) To share the losses by many

b) To make money out of death.

c) To earn interest

d) To earn a status


Q2. Risk means ______________

a) Economy

b) Possibility of loss

c) Reduction of anxiety

d) Meeting externally imposed obligations


Q3. The two aspects of risk managers are ______________

a) Record keeping and reporting of the activities

b) Maintaining accounts and reporting

c) Carry out analysis and control

d) Marketing


Q4. Organizations are mainly concerned with managing

a) Pure risk

b) Speculative risk

c) Personal risk

d) None of the above


Q5. Fire insurance can be taken in respect of ______________.

a) Movable properties only

b) Immovable properties

c) Movable and immovable

d) Persons only


Q6. 'Reinsurance' refers to the practice by insurance companies of:

a) Issuing new policies

b) Terminating existing policies

c) Renewing existing policies

d) Buying insurance from another firm

e) Insuring the same risk twice


Q7. A 'pay-as-you-go' pension is one in which:

a) Pensioners are obliged to buy an annuity

b) Workers build up a fund of savings during their working life

c) Pension benefits are linked to a price index

d) Pension benefits are paid by the employer

e) Pension benefits are paid from the contributions of those in work


Q8. A bank with cash of 5, deposits at the central bank of 3, investments of 20, advances of 22 and customer deposits of 50 has a reserve ratio of:

a) 0.5

b) 0.23

c) 0.36

d) 0.16

e) 0.1


Q9. A bond issued in July 1997 will mature in July 2013 for £100. In July 2003, its original maturity and residual maturity would be (respectively):

a) 16 and 10

b) 10 and 6

c) 6 and 10

d) 16 and 6

e) 6 and 16


Q10. A central bank wishes to indicate that its official interest rate will be 4.5% from tomorrow. What repurchase price should it set for 28 day repo deals in government bonds valued at £1m?

a) £1,045,000

b) £1,003,452

c) £1,003,000

d) £1,002,000

e) £955,000


Q11. A company has just declared a dividend of 8p per share on shares current valued at £1.50. Dividends have been growing steadily at 5 per cent p.a. The dividend yield on these shares is:

a) 5.6%

b) 5.3%

c) 13%

d) 10.6%

e) 10.3%


Q12. A downward sloping yield curve most likely indicates:

a) The central bank has restricted short-term borrowing

b) Low prices for long-dated bonds

c) Investors have become capital risk averse

d) Markets expect short-term rates to fall

e) A strong demand for short-dated assets


Q13. A government sale of treasury bills to the central bank is the nearest thing in a modern economy to:

a) Financing a government deficit

b) Reducing the national debt

c) Increasing the national debt

d) Printing money

e) Reducing liquidity


Q14. A mutual fund manager shifts part of his portfolio from long-dated bonds to money market instruments even though yields are unchanged. Most likely he is expecting:

a) A fall in the rate of inflation

b) A reduction in the riskiness of bonds

c) A rise in the exchange rate

d) A fall in short-term interest rates

e) A rise in long-term interest rates


Q15. A share with a β-coefficient of 0.9 has a rate of return of 16%, when the whole market return is 17%. What return should it produce if the risk free rate rises from 7% to 8%, ceteris paribus?

a) 16%

b) 17%

c) 23.3%

d) 16.1%

e) 22.3%


Q16. A treasury bill which matures in 62 days for £250,000 is currently trading at 248,000.

The rate of discount on this bill is:

a) 4.74%

b) 8%

c) 0.806%

d) 0.8%

e) 4.7%


Q17. A unit trust fund is established with assets of £200m divided into 150m units. The value of the underlying assets rises to £250m. The value of each unit is:

a) £1.66

b) £0.80

c) £1.25

d) £1.33

e) £0.60


Q18. According to the liquidity preference theory of interest, an increase in uncertainty, other things being equal, will:

a) Reduce the demand for money

b) Decrease output and employment

c) Raise interest rates

d) Reduce the supply of money

e) Increase risk aversion


Q19. According to the rational expectations hypothesis:

a) People do not make mistakes in forecasting inflation

b) People make only small mistakes in forecasting inflation

c) People do not make random mistakes in forecasting inflation

d) People do not make avoidable mistakes in forecasting inflation

e) Some people do not make mistakes in forecasting inflation


Q20. All demand for money functions that are tested are macroeconomic relationships between the aggregate demand for money and other economic variables because:

a) Microeconomic relationships are less interesting

b) The purpose of studying the demand for money is to help in understanding the effect of monetary policy

c) Microeconomic relationships are unpredictable

d) Macroeconomic relationships are always more stable than microeconomic relationships


Part 9: Objective questions and answers of Insurance and Risk Management


Q1. Answer a


Q2. Answer b


Q3. Answer a


Q4. Answer a


Q5. Answer c


Q6. Answer d


Q7. Answer e


Q8. Answer d


Q9. Answer a


Q10. Answer b


Q11. Answer b


Q12. Answer b


Q13. Answer a


Q14. Answer e


Q15. Answer b


Q16. Answer e


Q17. Answer a


Q18. Answer c


Q19. Answer d


Q20. Answer b

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