When Faced with an Insurance Policy Whose Premium Exceeds the Expected

question 27

Multiple Choice

When faced with an insurance policy whose premium exceeds the expected value of the claim:

• A)no one will buy it.
• B)only risk-tolerant individuals will buy it.
• C)risk-averse individuals will buy it as long as the utility associated with the insurance is greater than the expected utility without the insurance.
• D)risk-averse individuals will buy it as long as the utility associated with the insurance is less than the expected utility without the insurance.

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Definitions:

Retention

The act of keeping or holding something, such as the ability to remember information or maintain possession of employees within an organization.

Practice Problems

Exercises or questions designed to provide practical experience in solving specific types of problems, often used in educational settings to reinforce learning.

Calculus

A branch of mathematics dealing with the study of change, in the same way that geometry deals with shape and algebra with operations.

Integrate

To bring together or incorporate parts into a whole, often aiming for harmonious functioning.