Which of the following is a primary investment vehicle for the funds in which life insurance companies must invest?
A) CDs.
B) Equity securities.
C) Long-term corporate bonds.
D) Both B and C.

Question

Quizplus · Accepted Answer

Life insurance companies have long-term liabilities, and so they invest primarily in long-term investments with a high credit rating. Equity securities provide a higher yield than long-term bonds, but their volatility presents greater risk. Therefore, a combination of Long-term corporate bonds and Equity securities is often considered the best choice for the investment. CDs are generally not considered a primary investment vehicle for life insurance companies as they offer lower yields and are not as attractive to investors.

Which of the Following Is a Primary Investment Vehicle for the Funds