It Is Better to Pool Risks Because You Can

question 5

Multiple Choice

It is better to pool risks because you can:

• A)increase your income.
• B)reduce your expected income but increase its standard deviation.
• C)reduce the variability of expected income.
• D)increase your expected income.

---

Definitions:

Equity Method

An accounting technique used by a company to record its investment in another company when it has significant influence but does not have full control over that company.

Fair Value

An estimate of the price at which an asset or liability could be traded in an orderly transaction between market participants at the measurement date.