The Pattern in Which Insurance Is Purchased More Frequently by Those

question 54

Multiple Choice

The pattern in which insurance is purchased more frequently by those who are the most costly for companies to insure is referred to as:

• A)adverse selection.
• B)statistical discrimination.
• C)risk aversion.
• D)moral hazard.

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Definitions:

Annual Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity, within a year.

Opportunity Cost

The cost of opting for one choice over another, essentially the benefits you could have received by taking an alternative action.

Internal Rate Of Return

The internal rate of return is a financial metric used to evaluate the profitability of investments, calculating the discount rate that makes the net present value of cash flows from an investment equal to zero.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor, often used in capital budgeting to measure investment risk.