Contingent Contracts

question 51

Multiple Choice

Contingent contracts

• A)are inefficient when monitoring is possible.
• B)equally divide the risk between principal and agent.
• C)can be used when monitoring is not reasonably possible.
• D)put the risk on the principal.

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Definitions:

Empirical Rule

A statistical rule stating that for a normal distribution, nearly all data will fall within three standard deviations of the mean.

Distribution

Refers to the way in which values in a dataset are spread out or distributed.

Arithmetic Mean

The arithmetic mean is a statistical measure that represents the sum of all values in a dataset divided by the number of values.

Geometric Means

A statistical measure defined as the nth root (where n is the count of numbers) of the product of n numbers, particularly useful in calculating average rates of growth.