The Requirement That Losses Should Be Accidental and Unintentional in Order

question 9

Multiple Choice

The requirement that losses should be accidental and unintentional in order to be insurable results in which of the following?
I.Decrease in moral hazard
II.More accurate prediction of future losses

• A)I only
• B)II only
• C)both I and II
• D)neither I nor II

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Definitions:

Basis Point

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, equivalent to 0.01%.

Interest Rates

The fee, shown as a percentage of the principal amount, that a lender imposes on a borrower for the use of assets.

T-bill Rate

The yield on U.S. Treasury bills, a benchmark for short-term interest rates in the United States.

Futures Price

The agreed-upon price for the future exchange of an asset; a financial contract specifying the price at which an asset, often a physical commodity or a financial instrument, will be bought or sold at a future date.