When an Insurance Company Specifies Certain Precautions That an Insured

question 126

True/False

When an insurance company specifies certain precautions that an insured person must take it is trying to control for moral hazard.

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Definitions:

Effective Interest Rate

The interest rate on a loan or financial product restated from the nominal interest rate as an interest rate with annual compound interest payable in arrears.

Effective Interest Rate

The actual annual interest rate that takes compounding into account, providing a more accurate representation of the cost of borrowing.

Net 25

A payment term indicating that the full payment is due within 25 days from the invoice date.

365-Day Year

A calendar basis used in various financial calculations, assuming the year consists of exactly 365 days for simplifying interest and other time-sensitive computations.