FIN 3080 TEST QUESTIONS WITH
100% CORRECT ANSWERS
An insurance company bond portfolio contains a bond with a current market price of
1,087.52 - Answer- Using duration gives an estimated price change of 91.98 while the
actual price change is 87.52
Select the correct answer regarding regulation of financial institutions - Answer- The
SEC regulates security firms, IBs, and mutual fund companies
Select the incorrect statement about PC insurance company combined ratio - Answer-
combined ratios above 100% occur when losses are low and signal that insurance
companies expect low returns from stock and bond markets
The Hartford Steam Boiler Insurance Company is a property insurer that specializes in
boiler insurance. The company's strategy is to hire highly-skilled employees with very
strong engineering backgrounds to work with policyholders in preventing losses.
Compared to property industry averages, what do you expect to be true of Hartford
Steam Boiler's expense ratio and loss ratio? - Answer- The expense ratio will be higher
and the loss ratio will be lower
Select the correct statement about tradeoffs for insurance companies - Answer- in low
rate environments it is better for insurance companies to have higher underwriting
standards
Which of the following trends accurately describes the insurance industry - Answer-
insurance has experienced consolidation over time but not as much as commercial
banking
Rank the catergories of commercial bank assets from largest to smallest - Answer-
Loans (largest), Investment Securities, Cash
A commercial bank reports the following financials: Net Income 6M, Total Assets 770M,
and Common Equity 123M. Calculate the Equity Multiplier - Answer- 6.26
An insurance company has a bond portfolio with a duration of 4.7 years. it wants to
reduce to 3.2 years in order to immunize its portfolio. which would NOT accomplish this
- Answer- sell bonds with the highest coupon rate and buy bonds with lower coupon
rates
100% CORRECT ANSWERS
An insurance company bond portfolio contains a bond with a current market price of
1,087.52 - Answer- Using duration gives an estimated price change of 91.98 while the
actual price change is 87.52
Select the correct answer regarding regulation of financial institutions - Answer- The
SEC regulates security firms, IBs, and mutual fund companies
Select the incorrect statement about PC insurance company combined ratio - Answer-
combined ratios above 100% occur when losses are low and signal that insurance
companies expect low returns from stock and bond markets
The Hartford Steam Boiler Insurance Company is a property insurer that specializes in
boiler insurance. The company's strategy is to hire highly-skilled employees with very
strong engineering backgrounds to work with policyholders in preventing losses.
Compared to property industry averages, what do you expect to be true of Hartford
Steam Boiler's expense ratio and loss ratio? - Answer- The expense ratio will be higher
and the loss ratio will be lower
Select the correct statement about tradeoffs for insurance companies - Answer- in low
rate environments it is better for insurance companies to have higher underwriting
standards
Which of the following trends accurately describes the insurance industry - Answer-
insurance has experienced consolidation over time but not as much as commercial
banking
Rank the catergories of commercial bank assets from largest to smallest - Answer-
Loans (largest), Investment Securities, Cash
A commercial bank reports the following financials: Net Income 6M, Total Assets 770M,
and Common Equity 123M. Calculate the Equity Multiplier - Answer- 6.26
An insurance company has a bond portfolio with a duration of 4.7 years. it wants to
reduce to 3.2 years in order to immunize its portfolio. which would NOT accomplish this
- Answer- sell bonds with the highest coupon rate and buy bonds with lower coupon
rates
