Which of the Following Statements About Portfolio Insurance Is FALSE

question 54

Multiple Choice

Which of the following statements about portfolio insurance is FALSE?

• A)There are several methods of insuring a portfolio.
• B)It seeks to provide a minimum return while offering the opportunity to participate in rising prices.
• C)Futures are typically not used to hedge stock portfolios.
• D)Puts and calls typically are not used to insure portfolios.

Distinguish between risk-averse, risk-neutral, and risk-loving behaviors.

Identify how insurance can redistribute risk and its impact on expected utility.

Understand the role of insurance premiums and how they relate to the concept of fair insurance.

Describe efficient allocation of risk and the principles of diversification and pooling in reducing risk.

---

Definitions:

Health Problems

Issues or conditions that negatively affect an individual's physical or mental wellbeing.

Physical Illness

Any disease or condition that affects the body's ability to function normally, ranging from mild to severe.

Death of Spouse

A significant life event that involves the passing away of one's marital partner, often leading to profound emotional grief and lifestyle changes.

Jail Term

The period of time a person is sentenced to spend in jail as punishment for a crime.