Insurance Companies Primarily Reduce an Individual's Risk By

question 73

Multiple Choice

Insurance companies primarily reduce an individual's risk by:

• A) transporting that risk forward in time.
• B) providing payment services.
• C) spreading that risk across many individuals.
• D) providing low-interest-rate loans.

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Definitions:

Financial Risk

The possibility of losing money on an investment or business venture, often associated with the uncertainty of returns.

Value of a Firm

The total worth of a company, determined by factors such as its assets, earnings, market position, and future growth prospects.

Debt

An amount of money borrowed by one party from another, to be repaid typically with interest.

Cost of Equity

The return a firm theoretically pays to its equity investors to compensate for the risk they undertake by investing in the company.