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QUESTION Suppose the inflation rate is expected to be 7% next year, 5% the following year, and 3% thereafter. Assume that the real risk-free rate, $r^{*}$, will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5-year or longer-term T-bonds. a. Calculate the interest rate on 1-, 2-, 3-, 4-, 5-, 10-, and 20-year Treasury securities and plot the yield curve. b. Suppose a AAA-rated company (which is the highest bond rating a firm can have) had bonds with the same maturities as the Treasury bonds. Estimate and plot what you believe a AAA-rated company’s yield curve would look like on the same graph with the Treasury bond yield curve. (Hint: Think about the default risk premium on its long-term versus its short-term bonds.) c. On the same graph, plot the approximate yield curve of a much riskier lower-rated company with a much higher risk of defaulting on its bonds. Verified answer Other Quizlet setsRelated questionsUpgrade to remove ads Only SGD 41.99/year
Terms in this set (60)who establishes the fees that must be paid in conjunction with an application for an insurance license? A. the director A which of the following would be required to be licensed as an insurance producer? A. a salaried employee who advertises and solicits insurance A which of the following persons is required to hold a producer license? A. a person who creates insurance advertisements D which of the following is NOT true about an insurance consultant in the State of Oregon? A. a consultant must hold a valid license B which of the following is licensed solely to advise insureds about their policies? A. consultant A Chris, who is unlicensed, works part-time in her father's insurance agency. She may perform all of the following activities EXCEPT A. make appointments with clients and prospective clients and prospective clients to meet with her father D to collect premiums and explain coverages, he needs to get a license Bob was issued a temporary insurance producer's license 90 days ago. the license will expire in how many days? A. 0 D temporary producer licenses should last for 180 days a temporary license in this state is valid for A. 30
days D Paul is a producer in Washington and wants to become a producer in Oregon. A. Reciprocity A this state provides for a temporary license for all of the following EXCEPT A. the death of a producer D in order to get a nonresident license in this state, producers must A. represent an agency
located in this state C how often must a producer renew his or her insurance license? A. annually B A producer's Life and Health license expired on December 31, 1997; however, A. The Director will not renew the license. C how many hours of Ethics must a producer complete as part of continuing education every 2 years A. 2 B within what time period can a producer reinstate a lapsed license without having to pass a written examination? A. 12 months A which of the following is true about license reinstatement? A. a license can only be reinstated within 6 months from the renewal date D an insurance producer moves into a new house. How many days does he have to notify the Director of his address change? A. he does not need to notify the Director because the change of address involves his residence, not his business
D what authority issues a Cease and Desist Order? A. the Director of the Department of Consumer and Business Services A notice of hearing for a cease and desist order must be given at least how many days in advance? A.
7 A A producer became subject to an administrative action by a governmental A. The producer must notify the Director within 30 days of the final disposition of the matter. A producer A is prosecuted for a crime. He must notify the Director within what time frame after the initial pretrial hearing date? A. 3 months D which of the following is an example of a producer being involved in an unfair trade practice of rebating? A. telling a client that his first premium will be waived if he purchases the insurance policy today A Which of the following would be considered an unfair claims settlement practice? A. Requesting the insured to submit a signed proof of loss statement, after the insured has already verbally advised the insurer of the claim D all of the following events will terminate a producer's certificate of appointment EXCEPT A. a new Director is put into office A which of the following would not be a violation of State insurance regulations? A. producer C uses her license to write uncontrolled business only A which of the following would NOT be considered an unfair and deceptive practice? A. rebating D if a nonresident producer for this state changes his or her home address, what must the producer to do comply with the Oregon rules? A. notify the NAIC within 30 days B an agent offers his client free tickets to sporting event in exchange for the purchase of an insurance policy. The agent is guilty of A. coercion D what is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A. revocation of license B Paul is a producer in Washington and wants to
become a producer in Oregon. The Director will waive certain examination requirements, provided that Washington would waive these same requirements if an Oregon producer sought licensure in Washington. What term is used to describe this phenomenon? C the requirement that producers must account for all insurance funds collected, and are not permitted to commingle those funds with their own funds (without the expressed consent of the insurance company) is known as A. fiscal responsibility C how long must records associated with an insurance policy be kept? A. until the insurance company is no longer in business C which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? A. defamation A an insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? A. legal, provided that the other insurers are paid royalties for the usage of their names B
if the director finds a license in violation of the Insurance Code on unfair practices or methods of competition, he/she will issue a A. rebate C cease and desist order means the licensee must stop the violation which of the following would be an example of an insurer participating in an unfair competition practice of discrimination A. charging the insured higher premiums based on their life expectancy B how long must insurers keep the records of the transactions under the license? A. 5 years after
policy issue D any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to A. 3 years C If a Cease and Desist order is issued what must the violator do? A. quit the actions stipulated in the order A which of the following best describes the unfair trade practice of defamation A. refusing to deal with other insurers B which of the following best describes a misrepresentation? A. making a deceptive or untrue statement about a person engaged in the insurance business D if the Director requests information regarding a claim, within how many days must the insurer provide a response? A. 3 days C in comparison to consumer reports, which of the following describes a unique characteristic of investigate consumer reports A. they provide additional information from an outside source about a particular risk D the Insurance Director shall examine every authorized insurer. How long must insurers keep records pertaining to the insurance transactions under the license? A. 3 years A all of the following are unfair claims settlement practices EXCEPT A. failing to acknowledge pertinent communication pertaining to a claim B which of the following is an example of a producer's fiduciary responsibilities A. a producer offering additional coverage to his client B if a producer changes locations, what must be done A. notify the DOI within 30 days A Bob the insurance producer just sold an insurance policy to his sister. What kind of business is this? A. controlled A selling policies to family, friends, coworkers are called controlled business under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report A. must be advised that a copy of the report is available to anyone who requests it C when a producer was reviewing a potential customer's coverage was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of the other insurer. The producer could be found guilty of A. nothing, unless the remarks were in writing B inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as A. rebating A state law specifically prohibits using illegal inducement in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT A. inviting prospective clients to the grand opening of the company's new office A concerning insurance, the definition of a fiduciary is A. a retail clerk B which of the following entities is in charge of making sure that producers follow the Insurance Code properly? A. state law enforcement D what is the maximum civil penalty for individual producers for violating the Insurance Code? A. $5,000 D on its advertisement, a company claims that it has funds in its possession that are, in face, not available for the payment of losses or claims. The company is guilty of A. unfair claim practice C two men are twins. When they applied for the life insurance from Company, the insurance company found that while neither of them smoked and both had a very similar lifestyle, the first twin was in a much stronger financial position than his brother. Because of this, the company charged the first twin a higher rate for his insurance. This practice would be considered A. discrimination A to comply with Oregon rules and regulations, producers are required to communicated all of the following changes to the Department of Insurance EXCEPT A. if a
nonresident producer changes her residence address A which of the following includes information regarding a person's credit, character, reputation, and habits? A. insurability report C which of the following is TRUE regarding payment of claims by an insurer? A. if a claim investigations is extended beyond the initial period, the insurer must keep the claimant informed of the progress every 30 days B Sets with similar termsCH 10 VA State Health and Insurance Exam54 terms Tommylikethegun92 Chapter 12 Pennsylvania Laws and Rules50 terms priyank26 Chapter 15: state laws43 terms toniedmo Simulate Exam (Law)67 terms dewnsierra Other sets by this creatorReview 225 terms Nhan_Tran136 Review 140 terms Nhan_Tran136 Exam FX Oregon Life/Health insurance64 terms Nhan_Tran136 Life insurance guarantee exam part 29 terms Nhan_Tran136 Other Quizlet sets5-1 Base Support Plan and Expeditionary Site Plan22 terms Hunter_Wyckoff7 Unit 2: Study Questions29 terms jesspawsPLUS CCD Quiz30 terms DanielRobitaille MKT ch 4 hw25 terms evepetro Which of the following is an example of a producer being involved in an unfair trade practice of?Which of the following is an example of a producer involved in an unfair trade practice of rebating? Telling a client that his or her's first premium will be waived if he/she purchased the insurance policy today. At distribution, all amounts received by the employee are tax free.
Which of the following best describes a rebate quizlet?Which of the following best describes a rebate? A producer returning part of her commission to her client, as an inducement to buy.
Which of the following terms describes making false statements about the financial condition of any insurer?Defamation is making statement which are false as to the financial condition of any insurer and which are calculated to injury any person engaged in the business of insurance.
When a producer was reviewing a potential customers coverage written by another company the producer made several remarks?The company can still be liable for its policies in any court of this state. When a producer was reviewing a potential customers coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer.
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