Which of the Following Is True of Risk Pooling

question 42

Multiple Choice

Which of the following is true of risk pooling?

• A) The cost of default by a single borrower usually outweighs the pro?table proceeds from risk pooling.
• B) Risk pooling can lead to a bank failure if a single borrower defaults.
• C) Risk pooling allows banks to fund projects that are too risky for a single individual.
• D) Risk pooling involves choosing a correlated set of risks.

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Definitions:

Interest Rate Schedules

Tables or charts detailing the interest rates applicable for various financial products or loans over time.

Markup Pricing

A pricing strategy where a fixed percentage is added to the cost of goods to cover expenses and profit.

Limit Pricing

A strategy where a firm sets its product prices low enough to deter new competitors from entering the market.

Price Leader

A company or product that has a large enough market share to influence the price levels of its products or services in the industry.