# MBA/MBA Insurance and Risk Management Mcq Set 5 Sample Test,Sample questions

1.\$101,750

2.\$100,757

3.\$100,505

4.\$100,254

1.\$101,195

2.\$100,760

3.\$101,750

4.\$100,806

## Question: `If people are willing to lend at 7% when inflation is 2% and continue to lend the same amounts when inflation is 4% and interest rates have risen to 8%, they are assumed to be subject to:`

1.Myopic expectations

2.Money illusion

3.Risk aversion

4.Extrapolative expectations

1.1.8%

2.6.1%

3.9.8%

4.4.9%

## Question: `If savers decide to save more, ceteris paribus, the loanable funds theory predicts:`

1.A reduction in investment and interest rates

2.A fall in the exchange rate

3.A reduction in interest rates and more investment

4.An increase in investment and interest rates

1.6.75%

2.5.75%

3.6.5%

4.6.25%

## Question: `If the demand for money is interest-elastic, an increase in interest rates:`

1.Would have little impact on the rest of the economy

2.Would increase the liquidity of financial assets other than money

3.Would cause the supply of money to fall

4.Would have a powerful impact on the rest of the economy

1.1

2.39

3.10

4.3.9

1.133p

2.120p

3.53p

4.145p

1.13%

2.8%

3.10%

4.18%

1.13.8%

2.19.55%

3.18.8%

4.24.55%

## Question: `Imagine a banking system with a reserve ratio of 0.1 and a public's cash ratio is 0.05. According to the base-multiplier approach, an open market purchase of Â£20m bonds from the general public by the central bank should:`

1.Reduce the money supply by Â£20m

2.Reduce the money supply by Â£140m

3.Increase the money supply Â£20m

4.Increase the money supply by Â£140m

1.+Â£100m

2.+Â£200m

3.+Â£150m

4.No change

## Question: `In 2008 you are advising someone with Â£1000 to invest. Their sole investment objective is to earn a rate of return which is absolutely guaranteed over the next four years. Which of the following would you recommend?`

1.Buy corporate bonds maturing in 2010 and then reinvest for two years

2.Buy government bonds maturing in 2012

3.Buy company shares now and sell in 2012

4.Buy perpetual bonds and sell in 2012

## Question: `In Italy in recent years there has been:`

1.A loss of competitiveness in the banking system

2.A reduction in the number of banks

3.An increase in the number of small, more specialist, banks

4.An increase in the role of the government in the banking system

1.0.15%

2.0.6%

3.0.8%

4.12.8%

1.20,000 times

2.20bn times

3.2m times

4.2bn times

1.Â£30m

2.Â£55m

3.Â£69m

4.Â£41m

## Question: `In the flow of funds analysis of money supply determination an increase in government borrowing not financed by the sale of bonds is likely to lead to:`

1.An increase in notes and coin

2.Less bank lending to the general public

3.Higher interest rates

4.An increase in bank deposits

## Question: `In the flow of funds approach to money supply determination a rise in the central bank's official dealing rate will most likely:`

1.Reduce the demand for deposits

3.Reduce the public's cash ratio

4.Reduce the demand for bank loans

## Question: `In the loanable funds theory of interest determination, an increase in the productivity of capital equipment should lead to:`

1.Higher prices

2.A reduction in interest rates

3.A reduction in the amount of saving

4.Higher interest rates

1.Â£83.33

2.Â£833.33

3.Â£103.90

4.Â£120

## Question: `Investment trusts often expose investors to higher capital risk than unit trusts because:`

1.Investment trusts have higher operating costs

2.Unit trusts hold more bonds

3.Investment trusts are less diversified

4.Investment trusts can be 'geared'

## Question: `It is suggested in the text that the demand for money is not of great importance from the point of view of monetary policy because:`

1.Money has largely been replaced in the economy by credit and debit cards.

2.The supply of money is endogenous.

3.The supply of money is exogenous.

4.The demand for money function is unstable.

## Question: `Long dated government bonds tend to have higher yields than short-dated bonds because:`

1.There is a smaller market for them

2.There is a smaller market for them

3.They carry higher capital risk

4.There is less demand

## Question: `Monetary authorities might be able to reduce inflation without causing a recession if their policies are:`

1.Unexpected

2.Thought credible by market agents

3.Supported by the opposition

4.Believed by the voters

## Question: `Mutual and co-operative banks in France charge lower interest rates (than commercial banks) because:`

1.They have no shareholders

2.They offer limited services

3.They use cheap premises

4.Of official regulations

## Question: `My spending is a regular Â£2000 per month. However, I keep an average of Â£3000 per month in by bank account. This suggests that I am using bank deposits as both:`

1.Means of payment and store of wealth

2.Savings and precautionary balances

3.Idle balances

4.Means of payment and medium of exchange

## Question: `Other things being equal, a high p/e ratio shows?`

1.The share is overpriced

2.The firm operates a low dividen policy

3.The share is underpriced

4.Investors expect rapid earnings growth

## Question: `Other things being equal, a rise in the price of a company's shares:`

1.Reduces the cost of equity capital

2.Increases its costs of capital

3.Means that fewer shares will be demanded

4.Reduces the price of its bonds

## Question: `Other things being equal, according to the base multiplier analysis of money supply determination, a decrease in banks' reserve ratios will lead to:`

1.A larger multiplier and decrease in the money supply

2.A reduction in demand for deposits

3.A smaller multiplier and reduction in money supply

4.A larger multiplier and increase in the money supply

## Question: `Other things being equal, according to the base multiplier analysis of money supply determination, an increase in the public's cash ratio will lead to:`

1.Less spending

2.A larger multiplier and increase in the money supply

3.An increase in demand for deposits

4.A smaller multiplier and reduction in money supply

## Question: `Other things being equal, lenders prefer to lend for short periods because:`

1.They can earn higher interest

2.The future is uncertain

3.They have more choice

4.They can reinvest frequently

## Question: `Pension and life insurance funds hold few short-term assets because:`

1.Their cashflows are predictable

2.Most people live for a long time

3.Long-term assets are more profitable

4.Short-term assetsare too dear

1.222p

2.242p

3.168p

4.204p

## Question: `Standard and Poor's bond rating agency reduces your firm's bond rating from AA+ to AA. The likely effect on your firm's bonds will be:`

1.The price will rise

2.Investors will prefer your company's shares

3.Investors will not hold them

4.The price will fall

1.-95p

2.-3p

3.11p

4.165p

1.62p

2.95p

3.141p

4.154p

## Question: `Suppose that three year interest rates rise from 5 per cent to 6 per cent while one year rates remain at 3 per cent. This suggests:`

1.Three year bonds have become less liquid

2.Short term interest rates are likely to rise in future

3.Three year bonds have become more risky

4.The central bank has raised three year rates

## Question: `The 'clean price' of a bond is:`

1.The price when it is first issued

2.The price including the interest which has accrued since the last coupon payment

3.The price excluding accrued interest

4.The price excluding the broker's commission

## Question: `The ability of central banks to influence short-term interest rates rests upon:`

1.Government policy

2.Their role as lenders of last resort

3.Their supervisory role

4.Sales of government bonds

## Question: `The banking systems of Nordic countries are remarkable for their:`

1.Instability

2.Economies of scale

3.Mortgage lending

4.Degree of market concentration

## Question: `The Caisses d'Epargne are:`

1.Mutual banks providing services to local authorities

2.Private commercial banks

3.Co-operative savings banks

4.Mutual banks linked to particular economic activities

## Question: `The conversion of building societies to PLC status allowed them:`

1.To raise funds by bond issues

2.To raise capital by share issues

3.To make personal loans

4.To expand by merger

## Question: `The demand for insurance derives from the fact that people want:`

1.The certainty of a good return

2.To reduce the risk of accidents

3.The possibility of a large loss to the certainty of a small one

4.The possibility of generous compensation

## Question: `The essential characteristic that any monetary asset must possess is:`

1.Stable value

2.Convenience

3.Acceptability in exchange

4.Classification as legal tender

## Question: `The federal insurance of deposits is:`

1.Compulsory for thrifts

2.Compulsory for all banks

3.Compulsory for nationally-chartered banks

4.Voluntary for all banks

## Question: `The German banking system can be divided into 'specialised credit institutions' and:`

1.Co-operative banks

2.'Universal' banks

3.Mortgage banks

4.Foreign banks

## Question: `The Glass-Steagall Act:`

1.Set up the Federal Reserve system

2.Prevented national banks from opening branches

3.Made national banks subject to the same branching restrictions as applied to national banks

4.Established the Federal Deposit Insurance Corporation (FDIC)

1.Shareholders

2.Creditors

3.Managers

4.Borrowers

## More MCQS

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