XYZ Insurance Company Writes Coverage for Most Perils Which Can

question 40

Multiple Choice

XYZ Insurance Company writes coverage for most perils which can damage property.XYZ,however,does not write flood insurance on property located in flood plains.Which requirement of an ideally insurable risk might be violated if XYZ wrote flood insurance on property located in flood plains?

• A)There must be a large number of similar exposure units.
• B)The loss should not be catastrophic.
• C)The chance of loss must be calculable.
• D)The losses must be determinable and measurable.

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Definitions:

Debt

The total amount of money owed by an individual, firm, or government to lenders, which can include loans, bonds, and other financial obligations.

Capital Structure

The mix of a company's long-term debt and equity that it uses to finance its operations and projects.

MM

Often refers to Modigliani-Miller propositions, theoretical principles in corporate finance regarding capital structure irrelevance in perfect markets.

Debt Financing

Debt financing involves raising capital through borrowing money that must be repaid over time, typically with interest, from external sources like banks or through issuing bonds.