FINA 3317 Final Exam Review Questions with Correct Answers Latest Update 2025/2026
The McFadden Act grants states the primary right to regulate insurance companies. - Answers
FALSE
The top 10 property and casualty firms underwrite half of all the P&C premiums written. -
Answers TRUE
Liability lawsuits related to asbestos claims are an example of long tail losses. - Answers TRUE
A whole life insurance policy pays the face value of the contract on death of the policyholder to
the beneficiaries. - Answers TRUE
The United States, China, and western Europe dominate the global insurance market. - Answers
FALSE
Which of the following type(s) of life insurance policies do not have a savings feature? -
Answers Term Life
The primary regulator of insurance firms is the: - Answers state insurance regulator.
The largest asset category of life insurers is _______________ and the largest liability category is
___________ - Answers bonds; policy reserves
Hurricane damage in a given area is an example of a ____________________ for which it is difficult
to predict loss exposure. - Answers high-severity, low-frequency event
For P&C insurers, if the combined ratio is more than 100 percent, that firm: - Answers may have
been profitable if investment returns were high enough.
Premiums received before the coverage period are termed: - Answers unearned premiums.
Insurance companies face the problem of ________ when people with highest probability of
getting the insurance payoffs are the ones who purchase insurance. - Answers adverse
selection
Diversified full-line investment banks act as both broker-dealers and securities underwriters. -
Answers TRUE
An example of a national full-line investment banker that specializes in corporate finance is
Goldman Sachs. - Answers TRUE
A market maker buys IBM at $185 for his own account and sells the stock later in the day at
$187. He is acting as a broker in this transaction. - Answers FALSE
A stockbroker acts as a principal on behalf of the customer. - Answers FALSE
If you buy 100 shares of IBM stock in anticipation that earnings will increase by more than
, anticipated, you are engaging in what is termed a risky arbitrage. - Answers TRUE
The Securities Investor Protection Corporation protects investors against losses due to
unfavorable market moves of up to $500,000. - Answers FALSE
FINRA is a government agency that has a mandate to protect America's investors by making
sure the securities industry operates fairly and honestly. - Answers FALSE
Diversified full-line securities firms engage in all but which one of the following? - Answers
Raising money via insured deposits
Investment firms that pool money from individuals and/or institutions and invest equity funds in
start-up firms are called: - Answers venture capital firms.
_____________ are examples of investment bankers offering traditional commercial banking
services. - Answers Cash management accounts
Which one of the following statements about venture capitalists is not correct? - Answers
Venture capitalists are passive investors.
In 2019, the top five underwriters engaged in about _____________ of global equity issues. -
Answers 38.5 percent
The largest liability of broker-dealers in 2016 was: - Answers repurchase agreements.
When the investment banker sells the new securities on commission without guaranteeing the
sale of the whole issue, the process is called: - Answers best effort.
Funds that specialize in municipal bonds and certain types of real estate to minimize tax
liabilities are called hybrid funds. - Answers FALSE
The shares of a closed-end fund with market value assets of $200 million and two million
shares outstanding will always trade at a market value of $100 per share. - Answers FALSE
Offshore hedge funds are not subject to taxation on fund distributions nor to U.S. estate taxes. -
Answers TRUE
Load funds typically provide investors with higher rates of return and offer more services such
as check writing, transfers between funds, and so forth, than no-load funds. - Answers FALSE
Hedge funds and REITS often employ significant amounts of leverage, but standard open-end
mutual funds do not. - Answers TRUE
Load funds charge one-time sales commissions that can be paid either upfront or at end of the
investing period in the mutual fund - Answers TRUE
Index funds have the highest cost among the different types of mutual funds. - Answers FALSE
The McFadden Act grants states the primary right to regulate insurance companies. - Answers
FALSE
The top 10 property and casualty firms underwrite half of all the P&C premiums written. -
Answers TRUE
Liability lawsuits related to asbestos claims are an example of long tail losses. - Answers TRUE
A whole life insurance policy pays the face value of the contract on death of the policyholder to
the beneficiaries. - Answers TRUE
The United States, China, and western Europe dominate the global insurance market. - Answers
FALSE
Which of the following type(s) of life insurance policies do not have a savings feature? -
Answers Term Life
The primary regulator of insurance firms is the: - Answers state insurance regulator.
The largest asset category of life insurers is _______________ and the largest liability category is
___________ - Answers bonds; policy reserves
Hurricane damage in a given area is an example of a ____________________ for which it is difficult
to predict loss exposure. - Answers high-severity, low-frequency event
For P&C insurers, if the combined ratio is more than 100 percent, that firm: - Answers may have
been profitable if investment returns were high enough.
Premiums received before the coverage period are termed: - Answers unearned premiums.
Insurance companies face the problem of ________ when people with highest probability of
getting the insurance payoffs are the ones who purchase insurance. - Answers adverse
selection
Diversified full-line investment banks act as both broker-dealers and securities underwriters. -
Answers TRUE
An example of a national full-line investment banker that specializes in corporate finance is
Goldman Sachs. - Answers TRUE
A market maker buys IBM at $185 for his own account and sells the stock later in the day at
$187. He is acting as a broker in this transaction. - Answers FALSE
A stockbroker acts as a principal on behalf of the customer. - Answers FALSE
If you buy 100 shares of IBM stock in anticipation that earnings will increase by more than
, anticipated, you are engaging in what is termed a risky arbitrage. - Answers TRUE
The Securities Investor Protection Corporation protects investors against losses due to
unfavorable market moves of up to $500,000. - Answers FALSE
FINRA is a government agency that has a mandate to protect America's investors by making
sure the securities industry operates fairly and honestly. - Answers FALSE
Diversified full-line securities firms engage in all but which one of the following? - Answers
Raising money via insured deposits
Investment firms that pool money from individuals and/or institutions and invest equity funds in
start-up firms are called: - Answers venture capital firms.
_____________ are examples of investment bankers offering traditional commercial banking
services. - Answers Cash management accounts
Which one of the following statements about venture capitalists is not correct? - Answers
Venture capitalists are passive investors.
In 2019, the top five underwriters engaged in about _____________ of global equity issues. -
Answers 38.5 percent
The largest liability of broker-dealers in 2016 was: - Answers repurchase agreements.
When the investment banker sells the new securities on commission without guaranteeing the
sale of the whole issue, the process is called: - Answers best effort.
Funds that specialize in municipal bonds and certain types of real estate to minimize tax
liabilities are called hybrid funds. - Answers FALSE
The shares of a closed-end fund with market value assets of $200 million and two million
shares outstanding will always trade at a market value of $100 per share. - Answers FALSE
Offshore hedge funds are not subject to taxation on fund distributions nor to U.S. estate taxes. -
Answers TRUE
Load funds typically provide investors with higher rates of return and offer more services such
as check writing, transfers between funds, and so forth, than no-load funds. - Answers FALSE
Hedge funds and REITS often employ significant amounts of leverage, but standard open-end
mutual funds do not. - Answers TRUE
Load funds charge one-time sales commissions that can be paid either upfront or at end of the
investing period in the mutual fund - Answers TRUE
Index funds have the highest cost among the different types of mutual funds. - Answers FALSE
