A Risk Premium Is

question 9

Multiple Choice

A risk premium is:

• A)a payment to an insurer by a policy-holder who faces a potential loss.
• B)equal to the purchase price of an insurance policy.
• C)the necessary difference between the expected value of a lottery and the payoff of a sure thing to make the decision maker indifferent between the lottery and the sure thing.
• D)the difference between the expected value and the variance of a lottery.

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Definitions:

Inform

To provide data or facts about something, allowing someone to become aware of or learn about it.

Final Section

The concluding part of a document, presentation, or work that often summarizes content or provides closing remarks.

Introduction

The initial section of a document or speech that sets the topic, provides background information, and outlines the purpose or thesis.

Summary

A brief statement or account of the main points of something.