Insurance Is Possible and Can Be Profitable Because of

question 145

Multiple Choice

Insurance is possible and can be profitable because of

• A) private information.
• B) adverse selection.
• C) moral hazard.
• D) consumers are risk aversion.

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Definitions:

Bonds

Fixed-income securities where an investor loans money to an entity (corporate or sovereign) which borrows the funds for a defined period of time at a variable or fixed interest rate.

Average Rate Of Return

A measure of the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Riskiness

The measure of uncertainty or potential for loss in an investment or economic activity.

Bonds

Financial instruments representing a loan made by an investor to a borrower, typically governmental or corporate entities, with agreed terms for interest payments and the return of principal.