Many People Do NOT Fully Insure Against Risk Because

question 44

Multiple Choice

Many people do NOT fully insure against risk because

• A)they are risk averse.
• B)the insurance companies are all crooks.
• C)the insurance offered is less than fair.
• D)the insurance offered is more than fair.

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Definitions:

Correlation Coefficient

A statistic in which the covariance is scaled to a value between −1 (perfect negative correlation) and +1 (perfect positive correlation).

Minimum Variance Portfolio

A portfolio constructed to achieve the lowest possible volatility or variability in returns among a set of potential assets.

Standard Deviation

A statistical measure that quantifies the dispersion or variability of a set of data points or investment returns around their mean (average).

Two-asset Portfolio

A portfolio comprising only two assets, used to study the principles of diversification and risk-return trade-off in finance.