ECON 101 PFP Ch10 Complete Q&A (2022/2023.)

1. Why is it so difficult to identify a group of assets or other techniques that can fully eliminate portfolio risk? A. They types of assets that can eliminate portfolio risk are only available to professional money managers. B. The lack of a full hedge for the lifetime work-related income streams we call human assets. C. The volatility of portfolio returns over time. D. All of the above. E. None of the above. 2. When a household revises its portfolio, it attempts to establish a risk/return strategy that: A. Minimizes portfolio risk as much as possible while maintaining the current standard of living. B. Will not lead to an audit by the tax authorities. C. Optimizes portfolio income and brings about the highest standard of living possible. D. All of the above. E. None of the above. 3. In practice, we can view risk as: A. The probability of a loss or an outcome that is below expectations. B. The inability to hedge a loss or an outcome that is below expectations. C. The probability that more outcomes are below expectations than above expectations. D. All of the above. E. None of the above. 4. Which of the following defines risk management in practical terms? A. The process by which we identify risks and control them so that we are able to achieve individual goals. B. The process by which we identify risks and eliminate them so that we are able to achieve individual goals. C. The process by which we identify risks and eliminate them so that we are able to achieve societal goals. D. All of the above. E. None of the above. 5. What is the third step of the risk management process? A. Match appropriate risk management tools to exposure. B. Establish exposure. C. Implement. D. Identify available risk management tools. E. None of the above. 6. Which of the following is not a common risk management approach? A. Avoid risk. B. Reduce risk. C. Retain risk. D. Share risk. E. All of the above are common risk management approached. This study source was downloaded by from CourseH on :20:48 GMT -06:00 7. Which of the following best describes self-insurance? A. Actively setting aside money to fund any losses should that occur. B. Using precautionary savings to purchase insurance. C. Diversifying activities to minimize risk. D. All of the above are descriptions of self-insurance. E. None of the above. 8. Which of the following is not a factor in determining the appropriate overall risk management tool to choose? A. The cost of alternative risk management techniques. B. The amount and likelihood of loss. C. Convenience factors. D. The risk tolerance of the risk management tool. E. All of the above are factors. 9. Which of the following is not a risk faced by human-related assets? A. Longevity – premature death. B. Longevity – extended life. C. Health and disability. D. Macro and microeconomic risks. E. All of the above are risks faced by human-related assets. 10. What is longevity risk? A. The possibility of living beyond normal expectations. B. The possibility of dying prematurely. C. The risk of outliving one's insurance policy. D. Both a and b. E. Both a and c. 11. For what does medigap insurance pay? A. The portion of medical expenses covered by the government. B. The portion of medical expenses not covered by the government. C. Assistance at home. D. Payments to a nursing home. E. None of the above. 12. Tangible assets that the household owns are: A. Real assets. B. Human assets. C. Financial assets. D. All of the above. E. None of the above. 13. Maintenance expenses can be though of as: A. Tangible assets. B. Intangible assets. C. Intangible liabilities. D. Tangible liabilities. E. None of the above. 14. Which of the following is not a reason why insurance products are inefficient in a financial sense? A. Overhead Costs. B. Search Costs. C. Underwriting costs. D. Incomplete information. E. All of the above are reasons why insurance products are inefficient in a financial sense. This study source was downloaded by from CourseH on :20:48 GMT -06:00 15. What are search costs? A. Costs that the person desiring to be insured undertakes to find out which policy is best. B. Costs that the insurance company incurs to attract clients. C. The costs that the insured individual incurs when attempting to collect cash from the insurance company. D. Overhead costs. E. None of the above. 16. Which of the following is not a major type of insurance policy? A. Private personal. B. Private property. C. Limited renewal. D. Government. E. All of the above are major types of insurance policies. 17. Which of the following insurance categories provides coverage that makes payments to replace income of the insured once the person is incapacitated? A. Life. B. Long term care. C. Health. D. Disability. E. None of the above. 18. Which of the following is not one of the major types of providers of insurance to individuals? A. The government. B. Private insurance companies through group policies offered institutionally. C. Private insurance compan