A life insurance company purchases $1 billion of corporate bonds from premiums collected on its life insurance policies.Therefore

Question

Quizplus · Accepted Answer

The life insurance policies are the direct securities because they represent a direct contractual relationship between the policyholder and the insurance company. The corporate bonds, on the other hand, are indirect securities because they represent a claim on the assets of the issuing corporation, rather than a direct relationship with the bondholder. Therefore, the correct choice is C, where the corporate bonds are indirect securities and the life insurance policies are direct securities.

A Life Insurance Company Purchases $1 Billion of Corporate Bonds