Which of the Following Statements Provides the Best Definition for "The

question 16

Multiple Choice

Which of the following statements provides the best definition for "the insurance principle," as that phrase was used in the text?

• A)Because of the difficulties associated with title searches in registry systems, it is often prudent for the parties to a sale of land to purchase insurance that will provide a source of compensation if the chain of title is not properly established.
• B)The purchaser can sue the vendor for compensation if the vendor fails to provide clear title to land.
• C)Because of the concept of indefeasibility, the land titles system includes a fund that will compensate people who lose their interests in land as a result of a mistake within the land title system.
• D)A lawyer should be hired to help in the purchase of land, partly because the lawyer will have insurance and therefore can be successfully sued if something goes wrong.
• E)A purchaser of land should purchase property insurance that takes effect as soon as title is transferred from the vendor.

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Definitions:

Payout Rates

The percentage of earnings paid to shareholders in the form of dividends.

Marginal Tax Rate

The rate at which the next dollar of taxable income is taxed, illustrating how much tax applies to an additional dollar of income.

Income Tax Schedule

A chart that delineates the tax rates applicable to different levels of income, used to calculate taxes owed.

Average Tax Rate

The fraction of total income that an individual or entity pays in taxes, calculated by dividing total taxes by the total taxable income.