21.Insurance companies manage all but which financial risk?
b.interest rate risk
22.________ risk is the chance of loss, a one-tailed risk, while _________ risk, a two-tailed risk offers returns above and below an average?
c.default risk; pure
23.The major areas of business for a life insurance company are
a.insuring against death and pension fund management.
b.providing life insurance and wealth accumulation for retirement such as a term policy provides.
c.providing life insurance and wealth accumulation for retirement such as a whole life or universal life policy provides.
24.In the last few years, which noninsurance financial institution has been able to offer insurance services to the concern of the insurance industry?
25.The National Association of Insurance Commissioners is an organization of _______ regulators interested in the ________ of insurance regulation.
d.state and federal; efficiency
26.Life insurance protects the insured from
b.the economic consequences of death.
d.pure risks faced by the insured.
27.Purchasing insurance may alter the behavior of the insured and is known as
a.default risk and adverse selection.
b.pure risk and speculative risk
c.moral hazard and adverse selection.
d.moral hazard and speculative risk
28.Insurance companies have to deal with the concept of adverse selection, which is
a.the practice of low-risk insured seeking low premiums.
b.high-risk persons are more likely to purchase insurance.
c.insureds are likely to increase their risky behavior.
d.Insurance salespersons try to sell their most profitable policies.
29.A level-premium, whole life policy is a combination of
a.an annuity and a pension.
b.universal life and an annuity.
c.decreasing term insurance and building a future sum of savings.
d.life and casualty insurance on the insured life and property.
30.A convertibility option added to a term policy gives the insured the option of
a.converting the term insurance to common stock of the insurance company.
b.converting the term policy into cash.
c.converting the term policy to a whole life, level premium policy.
d.canceling the policy at any time.