Which of the Following Is a False Statement

question 45

Multiple Choice

Which of the following is a false statement?

• A) Risk averse people will pay an insurance premium that is greater than the mathematically fair chance of loss in order to relieve themselves of uncertainty.
• B) A risk seeker is willing to assume risk.
• C) The mathematically fair price for insurance is the objective risk for the insurer multiplied by the maximum possible loss.
• D) Insurance is never a mathematically fair trade because the insurer adds several operating and other costs to loss costs when it calculates the premium.

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Definitions:

Present Value Table

A table used to determine the present value of a cash flow or series of cash flows to be received in the future, based on a certain discount rate.

Loan Agreement

A legally binding contract between a borrower and a lender, detailing the terms and conditions of a loan.

Interest

The cost of borrowing money, typically expressed as a percentage of the principal amount, or the income earned from lending funds.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation expense for an asset over its useful life.