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:

Pupillary Light Reflex

A reflex that controls the diameter of the pupils in response to the intensity of light that falls on the retinal surface, serving to protect the eyes from intense light.

Visual Fields

The total area in which objects can be seen in the peripheral vision while the eye is focused on a central point.

Periorbital Edema

Swelling around the eyes due to fluid accumulation, often resulting from allergies, infections, or injuries.

Exophthalmos

A condition characterized by an abnormal protrusion of the eyeball(s) from the orbit, commonly associated with thyroid disease, specifically Graves' disease.