University of Illinois at Urbana-ChampaignCollege of BusinessDepartment of FinanceFinance 431 SuretySpring 2008 Class ProjectName: ___________________________ ______________________________________________________Work in groups of two to three on this class project.1. Surety and Insurance are based on the Law of Large numbers.True False2. There are two basic classes of bonds, Contract and Commercial.True False3. The statute of frauds applies to real estate transactions but not to surety.True False4. Banks and sureties expect losses when they write business.True False5. Name the three Cs of credit extension and surety underwriting.Character, Capital, Capacity6. One of the primary differences between surety and insurance is that surety is a three party arrangement and insurance, a two party.a. Name the parties of the surety relationship or contract. Surety, Principal, Obligeeb. Name the parties to an insurance contract. Insurer and insured7. Fast Construction is interested in submitting a proposal for street reconstruction tothe city of Chicago. Fast Construction has never done a bonded job before.(See Back)a. Describe the type of bond Fast may be required to provide when making this bid.Bid Bondb. Name the party protected by the bond in (a). City of Chicagoc. If the contract is awarded to Fast Construction, describe the types of bonds Fast Construction might be required to provide. Performance and Payment Bondsd. Identify the parties these additional bonds protect.Suppliers, Sub-contractors, City of Chicago8. Name three important underwriting considerations in reviewing the Capital of a company’s pre-qualification for surety bonding.- CPA certified, audited financial statements for 3-5 years- Cost control systems- Investment Strategy- Credit History- CFO / financial
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