Risk Management Test Bank Chapter 9

Chapter 9 Risk Aversion and Risk Management by Individuals and Corporations I.Multiple Choice 1.The study underlying force that motivates individuals to purchase restitution even though insurance insurance bounteousnesss exceed rate claim costs is: a.profit b. danger aversion c.expect passing gamees d.premium warheads suffice: b eccentric: K 2.An individuals crave for insurance dep odditys on all of the following factors keep turn up: a.income b.wealth c.premium despatch d.portfolio return reception: d causa: K 3.Suppose that you have $20,000 in wealth and face a 20% chance of losing $10,000. Without insurance, your mathematical wealth outcomes are: a.$20,000, $18,000 b.$20,000, $10,000 c.$10,000, $2,000 d.$20,000, $18,000 upshot: b Type: A 4.Using the corresponding scenario in principal #3, what is the pass judgment value of your wealth without insurance? a.$20,000 b.$10,000 c.$18,000 d.$16,000 Ans wer: c Type: A 5.Using the same scenario in Question #3, if you purchase $10,000 in insurance coverage for a set of $2,500, what are your executable wealth outcomes? (Assume that the premium would be pay at the end of the course of instruction and that the breathing out would occur at the end of the year so that you can ignore the meter value of money.) a.$20,000, $10,000 b.$17,500 c.$17,500, $7,500 d.

$18,000 Answer: b Type: A 6.An example of a non-monetary loss is: a.childrens funeral costs b.damage to your automobile which isnt covered by your insurance c.pain and suffering d.loss o f time at work Answer: c Type: A 7.! Suppose that an insurance company views Jennifer as having the following diffusion for the present value of losses: sacking =$10,000with opportunity .10 $2,000with probability .20 $500with probability .50 $0with probability .20 What is the fair premium for full coverage if the insurers competitive loading for administrative costs and capital costs is 10% of expected discounted claims? a.$1,815...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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