Which of the Following Is Not an Example of a Moral

question 438

Multiple Choice

Which of the following is not an example of a moral hazard problem?

• A)A manager stays late one evening so that her employee can leave early to attend his child's music recital.
• B)A small child takes an extra cookie from the cookie jar when he thinks his mom isn't watching him closely.
• C)An employee plays solitaire on her computer at 4:30 p.m. on a Friday when her boss has left for the day.
• D)A customer whose new eyeglasses come with a "60-day insurance policy in case of breakage" leaves her glasses out where her new puppy can chew on them.

---

Definitions:

Exchange-Traded Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a specific amount of a security at a set price on or before a certain date.

Call Contract

An options contract that gives the holder the right to buy an underlying asset at a specified price within a certain time frame.

Premium

The amount by which the price of a security, especially a bond or insurance policy, exceeds its principal amount or face value.

American-Style Option

A type of options contract that can be exercised at any time before expiration, offering more flexibility than European-style options.