LOMA 291 Exam Study Guide with
Complete Solutions
Stakeholders (constituents) - Answer️️ -A party that has an interest in how a company
conducts its business
Dividend - Answer️️ -Compensation that a company may pay to owners upon a vote
by thr company's board of directors
Reinsurance ...
Organization by distribution channel - Answer✔️✔️-An organizational structure which
arranges a company's major divisions according to the distribution channels that deliver
products to customers
Required return - Answer✔️✔️-The return an investor needs to earn in order to make the
investment, given the risk of the investment; typically found by adding the risk free rate
of return to the risk premium
Risk free rate - Answer✔️✔️-The return on a risk free investment (the least risky
investment opportunity available)
Risk premium - Answer✔️✔️-The component of investment return that compensates the
investor for taking on the risk associated w a specific investment; the rate of return
required in addition to the risk free rate for the investor to make the investment
Investment risk - Answer✔️✔️-The possibility that an investor will fail to earn some or all
of an expected return or will lose all or part of the original investment
Market risk (financial market risk) - Answer✔️✔️-A risk of unexpected outcomes due to
fluctuations in the market values in a given financial market
Interest rate risk - Answer✔️✔️-The risk that unpredictable movements or stagnation in
market interest rates will cause assets to lose value or liabilities to gain value
Default risk - Answer✔️✔️-The risk that a borrower will fail to repay their debt
Liquidity risk - Answer✔️✔️-The risk of being unable to quickly convert an asset to cash
for its underlying value
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