Which of the Following Individuals Is Most Likely to Purchase

question 124

Multiple Choice

Which of the following individuals is most likely to purchase a life insurance policy that pays out an annual income beginning at a certain age until the individual's death?

• A)Ian, who expects to have a short life expectancy because of an illness
• B)Bradley who has six young children
• C)Avril, a tax attorney who wants to avoid adverse selection
• D)Alma, who expects to live a long life, based on her family history

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Definitions:

Exercise Price

The specified price at which the option holder can buy (call option) or sell (put option) the underlying asset.

Call Option Contracts

Financial agreements giving the buyer the right but not the obligation to purchase an asset at a specified price within a certain period.

Underlying Stock

The specific stock that represents the equity interest in which options, futures, or other derivatives contracts are based on.

Risk-Free Asset

An investment with a guaranteed return and no risk of default, often represented by government bonds from stable governments.