1.Corporate risk reduction increases shareholder wealth by a. increasing expected net cash flows b. decreasing expected net cash flows c. decreasing the corporate cost of capital b. decreasing expected net cash flows c. decreasing the corporate cost of capital d. increasing the corporate cost of capital

2.Which of the following statements is true of the tax treatment of uninsured losses? a. it's the same as the financial reporting of uninsured losses b. it allows for a firm to choose when the loss will be deducted. c. it's the same for insurance companies and non-insurance companies d. it requires that the loss be deducted in the year it's paid.

3.The main advantage of using debt financing is the a. effect on cost of capital b. availability of interest tax shields c. lower probability of financial distress d. reduced variability of earnings.

4.The federal government imposes _____ taxes on insurance purchased from insurers domiciled outside of the US. a. sin b. premium c. excise d. non-patriot

5.U.S. corporations can carry losses _____ years forward and 2 years backwards. a. 10 b. 20 c. 22 d. 25

6.An admitted insurer in a particular state a. can be domestic, foreign, or alien. b. is always a domestic insurer c. isn't always licensed to sell insurance in the state. d. faces stricter regulation than non-admitted insurers.

7.Which of the following refers to the decision to accept the uncertainty (variability) associated with a particular risk exposure? a. risk retention b. risk reduction c. risk sharing d. risk mitigation.

8.Which one of the following firms is more likely to use retention? a. A closely held firm b. A firm with a high level of financial leverage c. A publicly traded and widely held firm d. A small firm.

9.Which one of the following is an example of an aggregated approach to risk management? a. Hedging exchange rate risk b. hedging interest rate risk c. purchasing a high level of liability insurance d. using derivatives to stabilize fluctuations in revenue.

10.A bundled insurance policy with a single overall retention limit can help a firm a. avoid the problem of two contracts providing duplicate coverage b. develop simpler contracts c. avoid purchasing unnecessary coverage d. understand the disaggregated loss distributions.

11.A disaggregated risk management approach will generally result in a. higher transaction costs b. lower transaction costs c. lower expected losses d. higher expected losses.