26.

The best single predictor of the possibility of default on a loan is

Select one:

a. the amount of assets the borrower has.

b. the amount of compensating balances the borrower has.

c. the type of other liabilities the borrower has.

d. the amount of equity capital the borrower has in the project.

27.

In order to compensate for higher expected payouts for insuring high risk individuals, insurance companies charge

Select one:

a. risk-based premiums.

b. coinsurance.

c. average premiums.

d. deductibles.

28.

A special form of collateral used by banks whereby the borrower is required to keep a proportion of the proceeds of the loan in a checking account in the bank is

Select one:

a. checking balances.

b. deposit balances.

c. loan collateral balance.

d. compensating balances.

29.

A ____ offers protection against financial costs associated with death and disability in exchange for premiums.

Select one:

a. life insurance company

b. casualty and property insurance company

c. liability insurance company

d. health insurance company

30.

A firm that does not want to be concerned with the burden and investment risk of funding a private pension plan for employees would provide a ____ plan.

Select one:

a. non-contributory

b. defined-benefit

c. Keogh

d. defined-contribution

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Please answer ALL correctly!

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