Consider the Following Statements When Answering This Question;

question 103

Multiple Choice

Consider the following statements when answering this question;
I. Without fire insurance, the expected value of home ownership for a risk averse homeowner is $W. Insurance companies are willing to sell this homeowner a policy that guarantees the homeowner a wealth of $W.
II. In a neighborhood where the price of houses are identical, the probability of a fire is identical, and the value of damage done by fires is identical, the risk premium for an insurance policy that repays all the cost of the fire damage does not vary across homeowners.

• A) I and I are true.
• B) I is true, and II is false.
• C) I is false, and II is true.
• D) I and II are false.

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Definitions:

Delivery Mode

The method or medium used to convey information, goods, or services to recipients.

Backchannel

A secondary or covert route of communication used for private conversation or exchange of information alongside the primary communication channel.

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Confidence

The feeling or belief that one can rely on someone or something; self-assurance arising from one's appreciation of one's own abilities or qualities.