Which of the Following Statements Is FALSE

question 52

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:

Daily Interaction

The routine communication and activities that occur between individuals on a day-to-day basis.

Young Adults

Individuals in their late teens to early twenties, often considered a transitional phase from adolescence to adulthood, marked by increased independence and life changes.

Save Money

The act of setting aside a portion of one's income for future use or in case of emergencies, aiming for financial security.

Helicopter Parents

Parents who take an overly involved or intrusive interest in the lives of their children, often attempting to micromanage their affairs.