Capital Markets and Financial Assets Overview
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Questions and Answers

What is a key characteristic of variable life insurance premiums?

  • They do not guarantee death benefits.
  • They are typically variable and change based on market conditions.
  • They are fixed regardless of market performance. (correct)
  • They are usually lower than those of term life insurance.

    • Which of the following types of insurance specifically helps protect against personal liability?

  • Credit life insurance
  • Burial insurance
  • Variable life insurance
  • Casualty insurance (correct)

    • Which statement accurately defines burial insurance?

  • It is a type of term insurance with no cash value.
  • It is linked to investment accounts like bonds and mutual funds. (correct)
  • It pays off a borrower's debts in case of death.
  • It only provides coverage for home-related incidents.

    • What is a primary purpose of mortgage life insurance?

    <p>To pay off your house when you pass away.</p> Signup and view all the answers

    Which type of insurance provides coverage for renters' belongings?

    <p>Renters insurance</p> Signup and view all the answers

    What type of life insurance provides coverage for the entire life of the insured person?

    <p>Whole Life Insurance</p> Signup and view all the answers

    Which institution is authorized to engage in underwriting functions and invest in equities of non-allied undertakings?

    <p>Universal Bank</p> Signup and view all the answers

    Which type of insurance guarantees payment of death benefits to insured beneficiaries?

    <p>Life Insurance</p> Signup and view all the answers

    Which of the following is NOT a type of life insurance mentioned?

    <p>Annuity Insurance</p> Signup and view all the answers

    What is the primary role of the Bangko Sentral ng Pilipinas (BSP)?

    <p>To maintain price stability for economic growth</p> Signup and view all the answers

    Which option is a function of a Commercial Bank?

    <p>Accepting drafts and issuing letters of credit</p> Signup and view all the answers

    What is characteristic of Universal Life Insurance?

    <p>It contains a cash value component linked to market interest rates.</p> Signup and view all the answers

    Which of the following products is offered by an insurance company?

    <p>Disability Insurance</p> Signup and view all the answers

    What is a financial asset primarily characterized by?

    <p>Its contractual rights or claims</p> Signup and view all the answers

    Which component is NOT considered part of a financial system?

    <p>Real estate investments</p> Signup and view all the answers

    What primary function does the financial system serve regarding surplus units (SUs)?

    <p>Channeling funds to deficit units (DUs)</p> Signup and view all the answers

    Which of the following is an example of a debt instrument?

    <p>Corporate bonds</p> Signup and view all the answers

    What is a derivative instrument primarily based on?

    <p>The performance of an underlying asset</p> Signup and view all the answers

    What is the role of the central bank within the financial system?

    <p>To influence economic activity</p> Signup and view all the answers

    Which economic function is NOT attributed to financial assets?

    <p>Generating physical products</p> Signup and view all the answers

    What is a key reason for the globalization of financial assets?

    <p>Expansion of the international trade market</p> Signup and view all the answers

    What does accidental death and dismemberment insurance cover?

    <p>Unintentional death or specific injuries such as loss of limb or eyesight</p> Signup and view all the answers

    Which type of insurance specifically protects directors and officers from personal liability?

    <p>Directors &amp; officers liability insurance</p> Signup and view all the answers

    What is the primary risk insurable under health insurance contracts?

    <p>The cost of medical treatment for insured individuals</p> Signup and view all the answers

    Which type of health insurance is owned by the government in the Philippines?

    <p>Philhealth</p> Signup and view all the answers

    What type of insurance covers income if a policyholder is unable to work due to disability?

    <p>Disability insurance</p> Signup and view all the answers

    Which of the following is NOT a type of liability insurance mentioned?

    <p>Health maintenance organization insurance</p> Signup and view all the answers

    What is the purpose of professional indemnity insurance?

    <p>To provide coverage against negligence claims for professionals</p> Signup and view all the answers

    Which insurance type provides coverage for businesses against claims related to product damage?

    <p>Product liability insurance</p> Signup and view all the answers

    What is trade credit insurance designed to protect businesses against?

    <p>The risk of non-payment by their customers</p> Signup and view all the answers

    Which type of insurance company is owned by its policyholders?

    <p>Mutual insurance companies</p> Signup and view all the answers

    What does demutualization refer to in the insurance industry?

    <p>The conversion of a mutual insurance company to a stock insurance company</p> Signup and view all the answers

    How do insurance companies generate income and profit?

    <p>By collecting premiums and investing them</p> Signup and view all the answers

    What type of insurance provides coverage for long-term care and personal supervision?

    <p>Long-term care insurance</p> Signup and view all the answers

    What is a guaranteed investment contract (GIC)?

    <p>A contract providing guaranteed returns on investments</p> Signup and view all the answers

    Which of the following best describes a structured settlement?

    <p>A series of fixed payments over a specified time</p> Signup and view all the answers

    Which investment-oriented product involves a major component of investments for policyholders?

    <p>Annuities</p> Signup and view all the answers

    Study Notes

    Capital Markets and Financial Assets

    • Financial assets are liquid assets valued based on contractual rights or ownership claims.
    • Future benefits of financial assets arise from claims to future cash flows.
    • Financial instruments are intangible assets, including bank deposits, stocks, and bonds.

    Financial System Components

    • Comprises financial markets, participants, and instruments facilitating fund exchange.
    • Includes institutions like banks, insurance companies, and stock exchanges.
    • Functions to channel funds from surplus units (SUs) to deficit units (DUs), provide a medium of exchange, and allow central bank influence on the economy.

    Equity vs. Debt Instruments

    • Equity Instruments: Represent ownership in a company.
    • Debt Instruments: Indicate the issuer's indebtedness to an investor.
    • Derivative Instruments: Performance is based on an underlying asset's performance.

    Globalization of Financial Assets

    • Drives international trade expansion and attracts foreign investment.
    • Promotes cross-border financial flows and a multinational financial system.

    Economic Roles of Financial Assets

    • Serve multiple roles, including risk sharing and facilitating investments.
    • Pawnshops and various savings institutions are key participants in the financial system.

    Banking Institutions

    • Universal Banks: Engage in both banking and investment house functions.
    • Commercial Banks: Accept deposits and offer drafts and credit facilities.
    • Thrift Banks: Focus on savings and short-term working capital needs.

    Financial Market Regulators

    • BSP (Bangko Sentral ng Pilipinas): Central bank maintaining price stability for economic growth.
    • SEC (Securities and Exchange Commission): Regulates securities market and protects against fraud.

    Types of Life Insurance

    • Term Life Insurance: Provides death benefit over a set term.
    • Whole Life Insurance: Coverage lasts for the insured's life with a savings component.
    • Universal Life Insurance: Flexible premiums with a cash value that grows with market interest rates.
    • Variable Life Insurance: Tied to investment accounts; premium remains fixed.
    • Burial Insurance: Tied to investment accounts for funeral expenses.
    • Group and Mortgage Life Insurance: Lower cost and pays off mortgage debts, respectively.

    Property and Casualty Insurance

    • Protects against risks related to property and liability, covering homeowners, vehicles, and businesses.
    • Types include homeowners, renters, car, and commercial liability insurance.

    Types of Health Insurance in the Philippines

    • Philhealth: Publicly owned health insurance.
    • Health Maintenance Organization (HMO): Employer-provided group health insurance.
    • Private Health Insurance: Individual coverage options.

    Disability and Liability Insurance

    • Disability Insurance: Provides income during work incapacitation.
    • Liability Insurance: Covers legal responsibilities due to injuries or damages caused by the insured.

    Insurance Companies Structure

    • Mutual Insurance Companies: Owned by policyholders, limited in issuing stocks.
    • Stock Insurance Companies: Corporations that can issue stock and are publicly traded.

    Demutualization

    • Process of converting a mutual insurance company into a stock insurance company.

    Generating Income for Insurance Companies

    • Collect premiums from policyholders which are then invested to generate revenue.

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    Capital Markets PDF

    Description

    Explore the essential concepts of capital markets and financial assets. This quiz covers financial instruments, their functions within the economy, the difference between equity and debt instruments, and the impact of globalization on financial assets. Test your understanding of these critical topics in finance.

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