If the Price of Insurance Equals the Net Present Value

question 7

Multiple Choice

If the price of insurance equals the net present value (NPV) of the expected payment,it is said to be

• A)actuarially fair.
• B)market-based.
• C)balanced.
• D)equalized.
• E)at equilibrium.

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Definitions:

Earns

The act of receiving money in exchange for goods or services, or as profit from investments.

Sub-Contracting

The practice of a company hiring a third-party to perform tasks, handle operations or provide services that are either difficult to manage or outside the company's expertise.

Discount Rate

The discount rate that is used to compute the present value of forthcoming cash flows.

Annual Payments

Recurring payments made once a year.