AU60 Final Exam Test Solved Rated A+
A start-up company, New Corporation, issued 10,000 shares of stock with a par value of
$15 a share at $20 a share. What is the amount of New's paid-in capital? - ANSWER-
$200,000 (20x10k)
ABC Company purchased a building in Manhattan in 1935. There is no mortgage on the
property. Which one of the following statements best describes a limitation of the
financial statements when evaluating ABC's financial position? - ANSWER-The fair
value of the building may be much higher than cost.
ABC Insurance Company's actuary has calculated the pure premium for the company's
homeowner's insurance line as $40. Fixed expenses for the line are $2.50 per exposure
unit and variable expenses are 12 percent. The company's loading for profits and
contingencies is 5 percent. Using the pure premium ratemaking method and rounding to
the nearest whole dollar, which one of the following is the rate per exposure unit that
ABC needs to charge? - ANSWER-$51
All of the following are advantages of the sole proprietorship type of business
ownership, EXCEPT: - ANSWER-Limited liability
All of the following are objectives of rate regulation, EXCEPT: - ANSWER-Rates
promote availability and affordability of insurance.
All of the following are reasons that an underwriter might want to obtain information in
addition to the application, EXCEPT: - ANSWER-To postpone a decision
An underwriter uses a firm's current assets when calculating the current ratio. Current
assets are - ANSWER-Cash and easily-liquidated assets.
Contractors often form which one of the following alternative forms of business
ownership to perform a large construction project? - ANSWER-Joint venture
Home builder Jerry Barton engaged an electrician to install overhead ceiling fans in
many new homes. Jerry paid the electrician by the hour, supervised his work, and had
the right to discharge him. Which one of the following terms best describes the
employment status of the electrician? - ANSWER-Employee
In developing insurance rates, which one of the following is generally used as a starting
point to estimate future losses? - ANSWER-Past loss experience
A start-up company, New Corporation, issued 10,000 shares of stock with a par value of
$15 a share at $20 a share. What is the amount of New's paid-in capital? - ANSWER-
$200,000 (20x10k)
ABC Company purchased a building in Manhattan in 1935. There is no mortgage on the
property. Which one of the following statements best describes a limitation of the
financial statements when evaluating ABC's financial position? - ANSWER-The fair
value of the building may be much higher than cost.
ABC Insurance Company's actuary has calculated the pure premium for the company's
homeowner's insurance line as $40. Fixed expenses for the line are $2.50 per exposure
unit and variable expenses are 12 percent. The company's loading for profits and
contingencies is 5 percent. Using the pure premium ratemaking method and rounding to
the nearest whole dollar, which one of the following is the rate per exposure unit that
ABC needs to charge? - ANSWER-$51
All of the following are advantages of the sole proprietorship type of business
ownership, EXCEPT: - ANSWER-Limited liability
All of the following are objectives of rate regulation, EXCEPT: - ANSWER-Rates
promote availability and affordability of insurance.
All of the following are reasons that an underwriter might want to obtain information in
addition to the application, EXCEPT: - ANSWER-To postpone a decision
An underwriter uses a firm's current assets when calculating the current ratio. Current
assets are - ANSWER-Cash and easily-liquidated assets.
Contractors often form which one of the following alternative forms of business
ownership to perform a large construction project? - ANSWER-Joint venture
Home builder Jerry Barton engaged an electrician to install overhead ceiling fans in
many new homes. Jerry paid the electrician by the hour, supervised his work, and had
the right to discharge him. Which one of the following terms best describes the
employment status of the electrician? - ANSWER-Employee
In developing insurance rates, which one of the following is generally used as a starting
point to estimate future losses? - ANSWER-Past loss experience
