Which of the Following Statements Is FALSE

question 5

Multiple Choice

Which of the following statements is FALSE?

• A)Because insurance reduces the risk of financial distress, it can relax this tradeoff and allow the firm to increase its use of debt financing.
• B)By lowering the volatility of the stock, insurance discourage concentrated ownership by an outside director or investor who will monitor the firm and its management.
• C)When a firm is subject to graduated income tax rates, insurance can produce a tax savings if the firm is in a higher tax bracket when it pays the premium than the tax bracket it is in when it receives the insurance payment in the event of a loss.
• D)In a perfect market without other frictions, insurance companies should compete until they are just earning a fair return and the NPV from selling insurance is zero. The NPV is zero if the price of insurance equals the present value of the expected payment; in that case, we say the price is actuarially fair.

Recognize the application of personality testing in career counseling.

Identify the unique focuses of different personality tests.

Understand common criticisms of personality tests.

Understand Freudian concepts as they relate to psychology tests and theories.

---

Definitions:

Genetic

Pertaining to genes or heredity, describing the study or influence of hereditary characteristics.

Proximal Stimulus

The energies from the outside world that directly reach our sense organs.

British Empiricism

A philosophical viewpoint that emphasizes the role of sensory experience in the formation of ideas, stating that knowledge comes only or primarily from sensory experience.

Tabula Rasa

A theory suggesting that individuals are born without built-in mental content, and all knowledge comes from experience or perception.