Author name: Administrator

394. Surrender value is a %age of _________

Human life value
Loan value
Paid up value
Monetary value
✅ The correct answer is C.
Surrender value is a %age of Paid up value. Surrender value is the amount payable to the policyholder should he decide to discontinue the policy and encash it. It is payable only after three full years’ premiums have been paid to the insurance company.

397. In options pricing, an exercise price rises from lower to higher which leads to

volatile options
option value increases
option value decreases
option value stable
✅ The correct answer is C.
In options pricing, an exercise price rises from lower to higher which leads to option value decreases. Before venturing into the world of trading options, investors should have a good understanding of the factors determining the value of an option. These include the current stock price, the intrinsic value, time to expiration or the time value, volatility, interest rates, and cash dividends paid.

400. Diversification reduces _________.

Interest rate risk
Market risk
Unique risk
Inflation risk
✅ The correct answer is C.
Diversification reduces Unique risk. Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries, and other categories.

403. If a firm shuts down temporarily, it will incur loss equal to

AFC
AVC
TFC
TVC
✅ The correct answer is C.
If a firm shuts down temporarily, it will incur loss equal to TFC. The intersection of the average variable cost curve and the marginal cost curve, which shows the price where the firm would lack enough revenue to cover its variable costs, is called the shutdown point. If the perfectly competitive firm can charge a price above the shutdown point, then the firm is at least covering its average variable costs. It is also making enough revenue to cover at least a portion of fixed costs, so it should limp ahead even if it is making losses in the short run, since at least those losses will be smaller than if the firm shuts down immediately and incurs a loss equal to total fixed costs.

371. Which of the below is not an advantage of cash value insurance contracts?

Safe and secure investment
Inculcates saving discipline
Lower yields
I.T. advantages
✅ The correct answer is C.
Lower yields is not an advantage of cash value insurance contracts. Cash value insurance is permanent life insurance because it provides coverage for the policyholder’s life. Traditionally, cash value insurance has higher premiums than term insurance because of the cash value element.

374. With increase in premium with age, healthy people tended to withdraw leaving unhealthy people. This lead to development of

Gross premiums
Single premiums
Advance premiums
Level premiums
✅ The correct answer is D.
With increase in premium with age, healthy people tended to withdraw leaving unhealthy people. This lead to development of Level premiums. Level-premium insurance is term life insurance for which the premiums are guaranteed to remain the same throughout the contract, while the amount of coverage provided increases.

377. Offering cash discount to customers result in _______.

reducing the average collection period
increasing the average collection period
increasing sales
decreasing sales
✅ The correct answer is A.
Offering cash discount to customers result in reducing the average collection period. A cash discount is a deduction allowed by some sellers of goods or by some providers of services in order to motivate customers to pay within a specified time. The cash discount is also referred to as an early payment discount.

383. Second step in binomial approach of option pricing is to define range of values

at expiration
at buying date
at exchange closing time
at exchange opening time
✅ The correct answer is A.
Second step in binomial approach of option pricing is to define range of values at expiration. An expiration date in derivatives is the last day that a derivative, such as options or futures, is valid. On or before this day, investors will have already decided what to do with their expiring position.
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