The Number of Title Insurance Companies Operating in State Z

question 1

Multiple Choice

The number of title insurance companies operating in State Z is relatively low.Recently,the largest of these companies (50 percent market share) acquired the second largest company (30 percent market share) .Immediately after the acquisition,the insurer raised premiums by 75 percent.This scenario demonstrates which of the following rationales for the regulation of insurance?

• A)maintain insurer solvency
• B)compensate for inadequate consumer knowledge
• C)ensure reasonable rates
• D)make insurance available

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Definitions:

Capital Investment Analysis

The process of evaluating the advisability of investing in long-term assets, based on potential returns.

Present Value

A rephrased definition denoting the current value of a future amount of money discounted at a particular rate of return.

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Average Rate of Return

A financial ratio that demonstrates the profitability of an investment by comparing the average annual profit to the initial investment cost.