Decide Whether the Statement Makes Sense

question 68

Essay

Decide whether the statement makes sense. Explain your reasoning.
-Insurance policy A costs $250 and has no deductible. Insurance policy B costs $275 and has
a $500 yearly deductible. Candace thinks the extra $25 per month is worth it to get the
$500 deductible, so she buys policy B.

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Definitions:

Sensitivity Analysis

A financial model used to estimate how different values of an independent variable affect a particular dependent variable under a given set of assumptions.

Scenario Analysis

Scenario analysis is a process of analyzing possible future events by considering alternative possible outcomes (scenarios), thereby assessing the impact of various factors on decision outcomes.

Simulation Analysis

A method used in risk management that uses statistical models to predict the outcome of a decision under conditions of uncertainty.

Degree Of Operating Leverage

A measure of how sensitive a company's operating income is to a change in its sales volume, indicating financial risk.