Exam (elaborations)
CPCU 500 Practice Exam 7
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- CPCU 500 Practice Exam 7
CPCU 500 Practice Exam 7
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CPCU 500 Practice Exam 7Which one of the following statements is true about an organization's
balance sheet?
Select one:
A. Total liabilities minus owners' equity equals total assets on the balance
sheet.
B. The balance sheet shows the financial position of a business on a specific
date.
C. The balance sheet summarizes revenues and expenses for an accounting
period.
D. Total assets must equal total liabilities on the balance sheet. - -B. The
balance sheet shows the financial position of a business on a specific date.
-The process of creating a marketable investment security based on the
expected cash flows from a financial transaction is
Select one:
A. Trading.
B. Investment.
C. Securitization..
D. Derivation. - -C. Securitization..
-One financial risk for an insurer is that the insured will not pay all of the
premiums when the premiums are due. This type of risk is called
Select one:
A. Underwriting risk.
B. Credit risk.
C. Interest rate risk.
D. Price risk. - -B. Credit risk.
-Like most insurance companies, the majority of Insurance Company's
portfolio is invested in bonds. If interest rates increase, the value of the
bonds in the portfolio will decrease. This risk to Insurance Company is called
Select one:
A. Price risk.
B. Interest rate risk.
C. Liquidity risk.
D. Credit risk. - -B. Interest rate risk.
-Jeremy purchased some long-term corporate bonds when he retired. He
plans to use the periodic interest payments from the bonds to supplement
his other sources of retirement income. However, some of the companies
, that issued the bonds that Jeremy purchased may become insolvent and
unable to make periodic interest payments. This risk that Jeremy took when
he invested in the corporate bonds is called
Select one:
A. Price risk.
B. Interest rate risk.
C. Exchange-rate risk.
D. Credit risk. - -D. Credit risk
-Owners' equity represents the capital contributed by an organization's
owners plus the organization's
Select one:
A. Treasury stock.
B. Net worth.
C. Retained earnings.
D. Net assets. - -C. Retained earnings
-A construction company based in the U.S. has building contracts in five
different foreign nations. The construction company agreed to accept
payment for its work in each country's currency. The risk of loss of value
when these foreign payments are converted to U.S. dollars is called
Select one:
A. Pure risk.
B. Liquidity risk.
C. Credit risk.
D. Exchange-rate risk. - -D. Exchange-rate risk
-Which one of the following statements about the balance sheet is correct?
Select one:
A. Net worth is positive whenever the value of assets exceeds the value of
liabilities and negative if the value of liabilities exceeds the value of assets.
B. The balance sheet must always balance, but an exception is that the
balance sheet will not balance if net worth is a negative number.
C. The balance sheet contains important financial information about net
worth and assets, both which indicate the source of an organization's
funding.
D. Change in asset and liability valuation from historical cost to fair value has
no effect on the value of shareholders' equity. - -A. Net worth is positive
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