Term
The primary difference between a speculative risk and a pure risk is that there is a chance for ___________ in a speculative risk but a chance for ____________ in a pure risk.
1.gain and loss; only gain
2.gain and loss; only loss
3.only gain; gain and loss
4.only loss;gain and loss |
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Definition
The primary difference between a speculative risk and a pure risk is that there is a chance for ___________ in a speculative risk but a chance for ____________ in a pure risk.
2.gain and loss; only loss |
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Term
Owning a big-screen TV is called a(n) ___________, while the potential theft of that TV is called a(n) ___________.
1. Hazard; peril
2. Peril; exposure
3. Exposure; peril
4. Peril; hazard |
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Definition
Owning a big-screen TV is called a(n) ___________, while the potential theft of that TV is called a(n) ___________.
3. Exposure; peril |
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Term
The type(s) of insurance you carry but which will not pay your for your losses is called _________ insurance.
1. liability
2. income
3. auto
4. homeowner's |
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Definition
The type(s) of insurance you carry but which will not pay your for your losses is called _________ insurance.
1. liability |
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Term
Fire, theft, illness, and accidents are all examples of:
1. exposures
2. perils
3. hazards
4. losses |
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Definition
Fire, theft, illness, and accidents are all examples of:
2. perils |
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Term
The loss of property itself, extra expenses that may arise because the property is unusable for a period of time, and loss of income if the property was used in the insured's work are all types of _________ losses.
1. property
2. peril
3. individual
4. location |
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Definition
The loss of property itself, extra expenses that may arise because the property is unusable for a period of time, and loss of income if the property was used in the insured's work are all types of _________ losses.
1. property |
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Term
The maximum possible loss that can occur helps one
1. Evaluate loss frequency
2. choose insurance policy limits
3. identify potential losses
4. distinguish between speculative and pure risk |
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Definition
The maximum possible loss that can occur helps one
2. choose insurance policy limits |
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Term
Selling your car is an example of handling risk through
1. risk avoidance
2. loss control
3. risk reduction
4. transferring risk |
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Definition
Selling your car is an example of handling risk through
1. risk avoidance |
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Term
When a star running back pays an insurance company to insure his legs, this is an example of
1. risk avoidance
2. loss control
3. transferring risk
4. risk retention |
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Definition
When a star running back pays an insurance company to insure his legs, this is an example of
3. transferring risk |
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Term
The decision not to buy collision insurance on an old car is called
1. risk avoidance
2. loss control
3. risk reduction
4. risk retention |
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Definition
The decision not to buy collision insurance on an old car is called
4. risk retention |
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Term
Risk retention would be most appropriate in which of the following cases?
1. collision coverage on a $14,000 car
2. coverage for loss of a contact lens
3. medical expenses for a healthy young adult
4.liability coverage for a middle-income individual |
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Definition
Risk retention would be most appropriate in which of the following cases?
2. coverage for loss of a contact lens |
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Term
Which of the following is not a characteristic of Medicare Part A?
1. available to eligible persons 65 or older
2. requires monthly premium payments
3. available to individuals with kidney disorders
4. provides benefits for hospitalization |
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Definition
Which of the following is not a characteristic of Medicare Part A?
2. requires monthly premium payments |
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Term
Medicare Part A
1. is a hospitalization program for persons over 65
2. requires no premiums
3. provides custodial care in a nursing home
4. is a hospitalization program for persons 65 and older and requires no premiums |
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Definition
Medicare Part A
1. is a hospitalization program for persons over 65 |
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Term
Which of the following government programs is jointly funded by federal and state governments?
1. social security disability income
2. medicare
3. medicaid
4. Veterans Administration hospitals |
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Definition
Which of the following government programs is jointly funded by federal and state governments?
4. Veterans Administration hospitals |
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Term
To qualify for social security disability benefits, the worker must
1. not be able to work at any job
2. not be able to work at his or her job
3. be considered untrainable
4. have at least one dependent |
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Definition
To qualify for social security disability benefits, the worker must
3. be considered untrainable |
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Term
___________ plans are available to cover the children in a middle-income family with no access to a private health care plan.
1. medicare
2. medicaid
3. S-chip
4. residual |
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Definition
___________ plans are available to cover the children in a middle-income family with no access to a private health care plan.
3. S-chip |
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Term
Reimbursement for costs associated with intermediate and custodial care in a nursing facility or at home is provided by
1. medicare
2. long-term care insurance
3. disability income insurance
4. HMOs |
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Definition
Reimbursement for costs associated with intermediate and custodial care in a nursing facility or at home is provided by
2. long-term care insurance |
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Term
The major financial loss resulting from premature death is the
1. readjustment-period expenses
2. lost income of the deceased
3. necessary final expenses
4. debt-repayment expenses |
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Definition
The major financial loss resulting from premature death is the
2. lost income of the deceased |
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Term
Determining the magnitude of possible losses from a premature death can be complicated. The best method is the
1. actuarial method
2. multiple of earnings approach
3. needs-based approach
4. return on investment method |
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Definition
Determining the magnitude of possible losses from a premature death can be complicated. The best method is the
3. needs-based approach |
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Term
|
Definition
| Protects you from financial losses suffered when you are held liable for the losses of others. |
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Term
|
Definition
| Exists in situations when there is potential for gain as well as for loss. |
|
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Term
|
Definition
| Exists when there is no potential for gain, only the possibility of loss. |
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Term
|
Definition
| The items you own and the activities in which you engage that expose you to potential financial loss. |
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Term
|
Definition
| Any event that can cause a financial loss. (fire, wind, theft, vehicle collision, illness, and death) |
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Term
|
Definition
| One method of handling risk in which you refrain from owning items or engaging in activities that expose you to possible financial loss. |
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Term
|
Definition
| One method of handling risk in which you accept that the risk might occur and any cost that may occur with the risk. |
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Term
|
Definition
| A method of handling risk in which you work to reduce loss frequency and loss severity. |
|
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Term
|
Definition
| A way to handle risk in which you transfer responsibility such as when an insurance agency agrees to reimburse you for a loss. |
|
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Term
|
Definition
| A method of handling risk in which you reduce it to acceptable levels, often through an insurance company. |
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Term
|
Definition
Four components:
1. individual's share of the group's losses
2. insurance company reserves set aside to pay future losses
3. a proportional share of the expenses of administering the insurance plan
4. an allowance for profit |
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Term
|
Definition
Any condition increasing the probability that a peril will occur.
1. physical: particular characteristic of the insured person or property that increases the chance of loss (person with high blood pressure)
2. morale: when a person is indifferent to a peril (leaving doors unlocked because they have theft insurance)
3. moral hazard: when a person wants a peril to occur so that they can collect on an insurance policy |
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Term
|
Definition
| Unexpected losses in terms of both their timing and their magnitude |
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Term
| Umbrella liability insurance |
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Definition
| A catastrophic liability policy that covers liability losses in excess of those covered by any underlying liability policies. |
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Term
|
Definition
| A government health care program for low-income individuals and families |
|
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Term
| Health maintenance organizations (HMOs) |
|
Definition
| Provide a broad range of health care services for a set monthly fee on a prepaid basis. The goal is to catch problems early, reducing the probability of subsequent high-cost medical treatment. |
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Term
|
Definition
| A debt instrument issued by an organization that promises repayment at a specific time and the right to receive regular interest payments during the life of the bond. |
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Term
|
Definition
| Using borrowed funds to invest with the goal of earning a rate of return in excess of the after-tax costs of borrowing. |
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Term
|
Definition
| sold or provided collectively to an entire group of people rather to individuals. |
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Term
| How to cover direct medical care costs |
|
Definition
1. Health Maintenance Organizations( HMOs)
2. Traditional Health Insurance
3. High-deductible plans
4. Medicaid, Medicare Parts A & B |
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Term
|
Definition
| Most basic form of ownership of a corporation. |
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Term
|
Definition
| A measure of stock volatility; how much the stock price varies relative to the rest of the market. |
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Term
|
Definition
| The stock of a company that offers the promise of much higher profits tomorrow and has a consistent record of relatively rapid growth in earnings in all economic conditions. |
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Term
|
Definition
| A stock that tends to trade at a low price relative to its company fundamentals. |
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Term
|
Definition
| The stock of a company that has a potential for substantial earnings at some time in the future. |
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Term
|
Definition
| A stock of a company that has been around for a long time, has a well-regarded reputation, dominates its industry, and is known for being a solid, relatively safe investment. |
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Term
| Market capitalization: size classification |
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Definition
Large cap: $3-$4 billion of stocks
Midcap: $750 million to $3 billion
Small-cap: less than $750 million
Microcap: $10-$100 million |
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Term
|
Definition
| School of thought in market analysis that assumes each stock has an intrinsic value based on its expected stream of future earnings. |
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Term
|
Definition
| Method of evaluating securities that uses statistics generated by market activity, such as past prices and volume, over time to determine when to buy or sell a stock. |
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Term
The multiple of earnings approach addresses only the _______________ needs in life insurance needs evaluation.
1. final expense
2. readjustment period
3. debt repayment
4. income replacement |
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Definition
The multiple of earnings approach addresses only the _______________ needs in life insurance needs evaluation.
4. income replacement |
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Term
Straight life is a label sometimes used interchangeably with
1. term life
2. cash value
3. whole life
4. limited pay |
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Definition
Straight life is a label sometimes used interchangeably with
3. whole life |
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Term
| With a cash-value life insurance policy, the value of the insurance _________ over time, and the value of the savings __________ over time. |
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Definition
With a cash-value life insurance policy, the value of the insurance _________ over time, and the value of the savings __________ over time.
4. decreases, increases |
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Term
| Lily McCracken is a 64 year old widow. Assuming both she and her deceased husband qualified for social security, she could receive: |
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Definition
Lily McCracken is a 64 year old widow. Assuming both she and her deceased husband qualified for social security, she could receive:
4. Retirement benefits based on her husband's record or based on her own record, whichever result is higher. |
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Term
Group life insurance would be especially beneficial for persons who
1. are young
2. have no dependents
3. have health problems
4. need a savings program |
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Definition
Group life insurance would be especially beneficial for persons who
3. have health problems |
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Term
Securities are made up of
1. stocks
2. real estate
3. employer-sponsored retirement accounts
4. all of these |
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Definition
Securities are made up of
1. stocks (and bonds) |
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Term
Investing goes beyond saving in that it
1. requires that less be spent than you earn
2. involves increased risk
3. ignores current income
4. is something only few people should do |
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Definition
Investing goes beyond saving in that it
2. involves increased risk |
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Term
Your collection of multiple investments in different assets chosen to meet your financial goals is your
1. monetary assets
2. market basket
3. portfolio
4. net worth |
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Definition
Your collection of multiple investments in different assets chosen to meet your financial goals is your
3. portfolio |
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Term
Selling shares of stock for more than your originally paid is called
1. modern portfolio theory
2. leverage
3. current income
4. capital gain |
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Definition
Selling shares of stock for more than your originally paid is called
4. capital gain |
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Term
__________ risk exists when there is no potential for gain, only the possibility of loss.
1. pure
2. investment
3. speculative
4. unsystematic |
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Definition
__________ risk exists when there is no potential for gain, only the possibility of loss.
1. pure |
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Term
_____________ risk exists in situations that offer potential for gain as well as for loss.
1. systematic
2. pure
3. investment
4. speculative |
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Definition
_____________ risk exists in situations that offer potential for gain as well as for loss.
4. speculative |
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Term
The inverse of the P/E ratio is the
1. dividend yield
2. income curve
3. earnings yield
4. earnings per share |
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Definition
The inverse of the P/E ratio is the
3. earnings yield |
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Term
A stock that has a negative beta tends to
1. be stable compared to the market as a whole
2. be volatile compared to the market as a whole
3. move up when the market as a whole moves down
4. move up when the market as a whole moves up |
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Definition
A stock that has a negative beta tends to
3. move up when the market as a whole moves down |
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Term
A stock that tends to trade at a low price relative to its company fundamentals is labeled a
1. value stock
2. income stock
3. growth stock
4. preferred stock |
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Definition
A stock that tends to trade at a low price relative to its company fundamentals is labeled a
1. value stock |
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Term
____________ analysis is a method of evaluating securities that focuses on statistics generated by market activity, such as past prices and sales volume.
1. fundamental
2. value
3. technical
4. speculative |
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Definition
____________ analysis is a method of evaluating securities that focuses on statistics generated by market activity, such as past prices and sales volume.
3. technical |
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Term
Investors who have to depend on cash dividends to supplement their living expenses should invest in ___________ stocks.
1. income and blue chip
2. income and well-known growth
3. blue-chip and lesser known growth
4. well known growth and speculative |
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Definition
Investors who have to depend on cash dividends to supplement their living expenses should invest in ___________ stocks.
1. income and blue chip |
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Term
Investors who have to depend on cash dividends to supplement their living expenses should invest in ___________ stocks.
1. income and blue chip
2. income and well-known growth
3. blue-chip and lesser known growth
4. well known growth and speculative |
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Definition
Investors who have to depend on cash dividends to supplement their living expenses should invest in ___________ stocks.
1. income and blue chip |
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Term
Which of the following is true regarding growth stocks of well-known companies?
1. the pay above average cash dividends
2. they have relatively low p/e ratios
3. they often have betas of 1.5 or more
4. investors are expecting low to moderate appreciation in stock prices |
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Definition
Which of the following is true regarding growth stocks of well-known companies?
3. they often have betas of 1.5 or more |
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Term
A company that has a capitalization of $300-$750 million is called a ____________ stock.
1. large cap
2. midcap
3. small cap
4. microcap |
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Definition
A company that has a capitalization of $300-$750 million is called a ____________ stock.
3. small cap |
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Term
An investor using the fundamental approach would look at
1. the management of the company
2. the outlook for the profitability of the industry
3. the value of an individual company
4. all of these |
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Definition
An investor using the fundamental approach would look at
4. all of these |
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