Which of the Following Statements Is False

question 15

Multiple Choice

Which of the following statements is false?

• A) Not all insurable risks have a beta of zero. Some risks, such as hurricanes and earthquakes, create losses of tens of billions of dollars and may be difficult to diversify completely.
• B) When a firm buys insurance, it transfers the risk of the loss to an insurance company. The insurance company charges an upfront premium to take on that risk.
• C) By its very nature, insurance for non-diversifiable hazards is generally a positive beta asset; the insurance payment to the firm tends to be larger when total losses are low and the market portfolio is high.
• D) Because insurance provides cash to the firm to offset losses, it can reduce the firm's need for external capital and thus reduce issuance costs.

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Definitions:

Language

A system of symbols and rules used for communication and expression among individuals within a society.

Dominant Values

The core beliefs and principles that are widely accepted and upheld within a society or organization.

Observable Artifacts

The visible elements in an organization's culture, including symbols, physical structures, language, and rituals.

Organization's Culture

The shared values, traditions, norms, customs, and general behavior patterns that define how things are done within an organization.