An Insurance Contract Is NOT Considered to Be an Illegal

question 40

Multiple Choice

An insurance contract is NOT considered to be an illegal form of "wagering" because

• A)one must have an insurable interest in the person being insured.
• B)insurance contracts are underwritten by reputable companies.
• C)insurance activities are regulated by the state department of insurance.
• D)the money being paid out comes from premiums collected over time.

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Definitions:

Rights Offer

Rights Offer is a financial mechanism whereby a company offers existing shareholders the opportunity to purchase additional shares directly from the company at a discounted price before offering to the public.

Firm Commitment Issue

A type of underwriting where the underwriter buys the entire issue of securities from the issuer and sells it to the public.

Underwriter's Compensation

The fee or commission earned by an underwriter for underwriting securities of companies, typically involved in IPOs or issuing new securities.

Green Shoe Provision

An option that allows underwriters of an initial public offering (IPO) to sell additional shares to the public if the demand is higher than expected, to stabilize the stock price.