Why Is an Insured Entitled to Collect Only the Amount

question 64

Multiple Choice

Why is an insured entitled to collect only the amount of the actual loss incurred from its insurance coverage?

• A) Contracts of indemnity prevent profiting from an insured against event.
• B) A bank is entitled to an indemnity contribution on a prorated basis.
• C) Insurance coverage typically covers a minimum portion of the value of property.
• D) A bank may be entitled to an interest in the proceeds for a secured loss.

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Definitions:

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 indicates greater volatility than the market, while a beta below 1 indicates less.

Risk-Free Rate

A hypothetic return rate on a risk-free investment, usually shown by the returns on government securities.

Expected Return

The weighted average of all possible returns from an investment, accounting for the likelihood of each outcome.

Standard Deviation

Standard Deviation measures the amount of variation or dispersion from the average, indicating the risk associated with a variable.