Which of the Following Statements Regarding Insurance and Hedging Is

question 4

Multiple Choice

Which of the following statements regarding insurance and hedging is true?

• A)Both insurance and hedging deal only with pure risks.
• B)Insurance reduces objective risk while hedging involves only risk transfer and not risk reduction.
• C)Hedging reduces objective risk while insurance involves only risk reduction and not risk transfer.
• D)Both insurance and hedging reduce objective risk but do not involve the transfer of risk.

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