CTFA Online Practice Questions and Answers

Total monthly loan payments divided by monthly gross (before-tax) income; provides a measure of the ability to pay debts promptly is:

A. Solvency ratio

B. Liquidity ratio

C. Savings ratio

D. Debt service ratio

A single, overall cost of capital is often used to evaluate projects because:

A. It avoids the problem of computing the required rate of return for each investment proposal

B. It is the only way to measure a firm's required return

C. It acknowledges that most new investment projects have about the same degree of risk

D. It acknowledges that most new investment projects offer about the same expected return

Which of the following factor contributes to the price volatility of a bond?

A. Maturity

B. Coupon

C. Yield to maturity

D. All of the given options

Which of the following is the difference between an expected return and actual return on an investment?

A. Expected return

B. Normal return

C. Tax return

D. None of these

___________ is contractual right of recovery that entitles the insurer to any proceeds from the disposal of damaged property for which the claim has been made.

A. Claim adjustment

B. Claim recovery

C. Subrogation

D. Salvage

A bond issue may be retired by:

A. calling the bonds if there is a call feature

B. converting the bonds (if convertible) into common stock

C. making a single-sum payment at final maturity

D. All of the above

Protective covenants are:

A. To protect employees

B. To protect the interest of the company

C. To protect shareholders

D. To protect bondholders

Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage?

A. Young people don't need health insurance because they are so healthy

B. You continue to be covered by your parents' insurance as long as you live at home, regardless of your age

C. You are covered by your parents' insurance until you marry, regardless of your age

D. If your parents become unemployed, your insurance coverage may stop, regardless of your age

A universal life insurance provides two types of death protections, i.e. Type A and B. As with any insurance policy, universal life insurance has its own pros and cons. There are two principle advantages. Which of the followings is/are out of those advantages?

A. Flexibility

B. Flexibility and savings feature

C. Flexibility and variability

D. Variability and savings feature

Most of the major types of health plans are sufficient to meet the protection needs of most individuals and families. But, insurance companies offer other options that provide limited protection against certain types of perils. Which one of the following is the example of those limited types of protections?

A. Accident protection

B. Home income policies

C. Comprehensive medical insurance

D. Both A and B