Insurance — Unit test Answers

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1
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Which describes the difference between secured and unsecured credit?

A
Secured credit is backed by an asset equal to the value of a loan, while unsecured credit is not guaranteed by a material object.
B
Unsecured credit is backed by an asset equal to the value of a loan, while secured credit is not guaranteed by a material object.
C
Secured credit is risky because banks cannot seize assets, while unsecured credit is less risky because it is backed by material objects.
D
Unsecured credit enables lenders to seize an asset if a loan is not paid, while secured credit prohibits lenders from taking material objects.
2
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[BLANK]

A
bankruptcy
B
payment
C
dissolution
D
cancellation
3

How can an insurance company make a profit by taking in premiums and making payouts?

A
The value of the premiums the company takes in is higher than the value of the payouts it makes.
B
The value of the premiums the company takes in is equal to the value of the payouts it makes.
C
The company only makes payouts from a pool of funds, not from individual premiums.
D
The company issues its policies to individuals who are unlikely to require payouts.
4

An example of secured credit is a

A
payday loan.
B
credit card.
C
mortgage.
D
medical bill.
5

Roland has purchased a new tablet. How can he reduce the risk of damage or misuse? Choose three correct answers.

A
by using a screen protector
B
by letting his toddler play with it
C
by using an antivirus app
D
by using a protective case
E
by letting his friends borrow it
6

What is a benefit of obtaining a personal loan?

A
getting money with special repayment terms
B
getting money with favorable interest rates
C
getting small amounts of money to use immediately
D
getting large amounts of money to use immediately
7

For which buyer would a lender most likely approve a $200,000 mortgage?

A
a person with a credit score of 800 with a large amount of debt who has recently switched to a lower-paying job
B
a person with a credit score of 760 with a small amount of debt who has had steady employment for many years
C
a person with a credit score of 650 with a large amount of available credit who has a low-paying, but steady job
D
a person with a credit score of 600 with a small amount of available credit who has recently switched to a high-paying job
8

Bryan receives an e-mail from a group posing as a police officers association and asking for bank account information. This is an example of

A
social engineering.
B
phishing.
C
counterfeiting.
D
forgery.
9

Most people prefer to pay health insurance premiums rather than pay out-of-pocket for medical expenses because

A
people are cautious and believe they are less likely to get sick if they have health-insurance coverage.
B
doctors and hospitals always provide better care to people who have health insurance.
C
people still feel more secure with a health insurance policy, even though out-of-pocket costs are often lower.
D
medical costs can be extremely high, and insurance is more affordable than paying out-of-pocket for a hospital stay.
10

A way to build good credit is

A
using only secured loans.
B
taking out many lines of credit.
C
paying bills when they are due.
D
using only credit cards.
11

Which is always a cost when buying insurance?

A
premium
B
deductible
C
co-payment
D
payout
12

What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?

A
$10.00
B
$21.00
C
$33.10
D
$46.41
13

[BLANK]

A
principal borrowed
B
outstanding balance
C
projected balance
14

Which best describes a way people can use personal loans?

A
to buy a house
B
to buy a car
C
to pay for college
D
to pay for groceries
15

In what circumstance would a property insurance claim be rejected?

A
The insurance company finds that a homeowner intentionally caused damage.
B
The property damage is caused by a natural disaster, such as a flood.
C
The insurance company changes its policies after property damage occurs.
D
The property damage is extensive and requires lengthy and expensive repairs.
16

Read the scenario.Casey has been saving for a new car and is ready to make a purchase. Having a substantial amount to put down as a down payment, Casey approaches the car dealership. The salesperson and the loan officer view Casey's willingness to make a high down payment positively.Why would Casey be considered a lower risk by the lender for planning to make a high down payment?

A
It shows that Casey prefers a high-interest rate.
B
It shows that Casey is committed to paying off the loan.
C
It shows that Casey may not need a loan at all.
D
It shows that Casey might refinance the loan soon.
17

A credit score is based in part on

A
employment and race.
B
income and location.
C
employment and trust.
D
payment history and total debt.
18

After he bought a new car, Nelson purchased car insurance. He must pay $75 each month for the plan.Later that month, Nelson caused a car accident when he lost control of his vehicle. He was required to pay the first $500 of his repair costs, and then the insurance company covered the rest.

A
premium
B
co-payment
C
deductible
D
payout
19

Checking a credit report is a good way to

A
know whether credit is improving.
B
reduce the amount of money owed.
C
determine which debts to pay off.
D
decrease interest payments.
20

An entrepreneur keeps backup funds in a savings account so that if their business experiences a loss, they will be able to recuperate. What type of risk management is this an example of?

A
reducing risk.
B
sharing risk.
C
avoiding risk.
D
maximizing risk.

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