1.
Which of these is not an issue in underwriting?
Correct Answer
C. Interest
Explanation
Interest is not an issue in underwriting because it refers to the amount of money charged by a lender for borrowing funds. Underwriting, on the other hand, involves assessing and evaluating the risk associated with providing insurance or financial services. While risk, reward, and exclusivity are all factors that underwriters consider, interest is not directly related to the underwriting process.
2.
Which of these is most desirable in underwriting?
Correct Answer
A. Reward
Explanation
In underwriting, the most desirable factor is "Reward." Underwriting involves assessing and evaluating risks associated with insurance policies or investments. The goal of underwriting is to minimize potential losses and maximize profits. By focusing on the potential rewards, underwriters can identify and select the most profitable opportunities. This involves analyzing the potential returns and benefits that can be gained from the underwritten policy or investment. By prioritizing reward, underwriters can make informed decisions that align with the company's financial goals and objectives.
3.
Which of these is not in consumer loan underwriting?
Correct Answer
C. Gross margin
Explanation
In consumer loan underwriting, various factors are considered to determine the borrower's creditworthiness. Employment history is important as it helps assess the stability of the borrower's income source. Financial statements provide insights into the borrower's overall financial health. Salary is a crucial factor in determining the borrower's ability to repay the loan. However, gross margin is not typically considered in consumer loan underwriting as it is more relevant to business loans. It represents the profitability of a company and is not directly related to an individual borrower's ability to repay a consumer loan.
4.
Which of these is not in commercial underwriting?
Correct Answer
C. Salary
Explanation
The question is asking which of the options is not included in commercial underwriting. Commercial underwriting involves assessing the risk and determining the terms and conditions for insuring businesses. The factors considered in commercial underwriting typically include profitability, revenue trends, and gross margin as they help evaluate the financial stability and potential of the business. However, salary is not directly related to the financial stability of the business and therefore is not typically considered in commercial underwriting.
5.
Which of these is unrelated to underwriting?
Correct Answer
C. BrokerĀ
Explanation
A broker is unrelated to underwriting because underwriting refers to the process of evaluating and assuming the risk of insuring or financing something, such as securities or insurance policies. Commercial paper, corporate bonds, and government securities are all types of financial instruments that can be underwritten, but a broker is not directly involved in this process. A broker acts as an intermediary between buyers and sellers in financial markets, facilitating the buying and selling of securities, but they do not typically assume any risk or guarantee the issuance of securities.
6.
Which of these may be used to examine the applicant's health status?
Correct Answer
D. Hazard underwritingĀ
Explanation
Hazard underwriting may be used to examine the applicant's health status. Hazard underwriting involves assessing the potential risks and hazards associated with insuring an individual. In the context of health insurance, this would include evaluating the applicant's health status, medical history, and any pre-existing conditions they may have. By examining these factors, insurance companies can determine the level of risk associated with insuring the applicant and adjust premiums accordingly.
7.
Which of these is not a form of underwriting?
Correct Answer
C. Subjective underwritingĀ
Explanation
Subjective underwriting is not a form of underwriting because underwriting typically involves a systematic evaluation of risks and determining the terms and conditions of insurance policies or financial investments. It is based on objective criteria and data analysis. However, subjective underwriting implies a more personal or individualized approach that relies on personal opinions or judgments rather than objective assessments.
8.
Which of these institutions raise capital through underwriting?
Correct Answer
B. Investment banks
Explanation
Investment banks raise capital through underwriting. Underwriting is the process where an investment bank guarantees the sale of a company's securities and assumes the risk of purchasing them. This allows the company to raise capital by selling its securities to investors. Central banks, cooperative societies, and insurance institutions do not typically raise capital through underwriting.
9.
What part of underwriting deals with the likelihood of financial loss?
Correct Answer
B. Risk
Explanation
The correct answer is "Risk." Underwriting deals with assessing the potential risks involved in a financial transaction or investment. It involves evaluating the likelihood of financial loss and determining the appropriate terms and conditions to mitigate those risks.
10.
Which of these is irrelevant in underwriting?
Correct Answer
C. Broker influence
Explanation
Broker influence is irrelevant in underwriting because underwriting is the process of evaluating the risk of insuring a person or entity and determining the premium that should be charged. It involves analyzing factors such as predictive analytics and financial information. Broker influence, on the other hand, refers to the potential impact that a broker may have on the underwriting process, which is not considered relevant as it can introduce biases or conflicts of interest. Therefore, broker influence is not a factor that should be considered in underwriting decisions.