Why Are the Class C Bonds Highly Attractive to Insurance

question 89

Multiple Choice

Why are the class C bonds highly attractive to insurance companies and pension funds?

• A)Because of their ability to offer perfect prepayment protection.
• B)Because of the shortest average life with a minimum of prepayment protection.
• C)Because of their long expected duration.
• D)Because they are basically zero coupon bonds and hence carry a minimum amount of risk.
• E)Because of their ability to offer perfect prepayment protection, and because they are basically zero coupon bonds and hence carry a minimum amount of risk.

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Definitions:

Analogy

A comparison between two different things, highlighting similarities for the purpose of explanation or clarification.

Surface Similarity

The extent to which objects share superficial attributes, which can affect how they are grouped in perception and memory tasks.

Mental Set

A tendency to approach situations in a way that has been successful in the past, potentially hindering the ability to find alternative solutions.

Fill-In-The-Blank

A type of question or statement in assessments and tests that requires participants to supply missing information or words.