31. Which of the following problems would most likely be a concern for life insurance companies that are worried about differentiating between good risks and bad risks?

A. Adverse selection

B. Catastrophe risk

C. Longevity risk

D. Moral hazard

32.Which of the following statements regarding the capital requirements and regulation of insurance companies is correct?

A. Insurance companies are regulated at both the state and federal level.

B. The guaranty system for insurance companies consists of a permanent fund created from premiums paid by insurers.

C. If an insurance companys capital falls below the solvency capital requirement (SCR), then its business operations may become significantly restricted.

D. The amount of equity required on the balance sheet of a life insurance company is typically lower than that of a P&C insurance company.

33.A new hire is researching the differences between a defined benefit plan and a defined contribution plan. Which of the following statements within the companys policies would indicate that the pension plan is a defined benefit plan? A defined benefit plan

A. involves one individual account associated with one employee.

B. risks underperformance of the plans investments, and this risk is borne solely by the employee.

C. does not explicitly state the amount of the pension that the employee will receive upon retirement.

D. involves one pooled account for all employees as all contributions go into and all payments come out of the one account.

34.Which of the following statements is not correct regarding investment funds available to all investors?

A. Open-end mutual funds always transact at the next available NAV.

B. Stop orders can be used on closed-end funds.

C. Open-end mutual funds can be purchased with a limit order

D. Short selling is available for some ETFs.

35. Which of the following characteristics is a key differentiator between mutual funds and hedge funds?

A. Professional asset management.

B. Immediate access to withdrawals from the fund.

C. Charging a fee for providing investment services.

D. Easy diversification for an investor.

36.What is the expected return to a hedge fund if the fund uses a standard 2 plus 20% incentive fee structure with an investment that has a 35% probability of making 55% and a 65% probability of losing 45%?

A. 3.78%

B. 5.28%

C. 5.71%

D. 6.12%

37.Which type of hedge fund focuses on isolating mispricings in foreign exchange markets?

A. Fixed-income arbitrage hedge funds

B. Global macro hedge funds

C. Managed futures hedge funds

D. Convertible arbitrage hedge funds

38.Which of the following statements is/are most accurate regarding hedge fund performance reporting?

I. When a hedge funds performance is recorded in an index, all of its prior results are also

included.

II. Hedge funds are permitted to self-select if their performance is reported in index averages.

A. I only

B. II only

C. Both I and II

D. Neither I nor II