Adverse Selection Refers to the Idea That Insurance Is

question 69

Multiple Choice

Adverse selection refers to the idea that insurance is

• A) frequently purchased by those who cannot pay for it.
• B) purchased by those least likely to file a claim.
• C) only a good deal if a claim is never filed.
• D) more frequently purchased by those most likely to make a claim.
• E) only a good deal if a claim is filed.

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Definitions:

Stockholders' Equity

Stockholders' Equity is the residual interest in the assets of a corporation after deducting its liabilities, indicating the ownership interest of the shareholders.

Trading Portfolio

A collection of financial assets such as stocks, bonds, commodities, currencies, and derivatives, actively managed and traded to achieve short-term financial gains.

Fair Value Adjustment

A financial process that alters the reported value of an asset or liability to reflect its current market value.

Common Stock C

A classification of common stock that may have specific rights, privileges, or restrictions compared to other classes.