Which of the Following Statements Is FALSE

question 26

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)By its very nature, insurance for no 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.
• C)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.
• D)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.

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Definitions:

Daily Activities

Daily activities refer to the routine tasks and actions that an individual performs regularly in a day.

Observational Method

A research technique where subjects are observed in their natural environment without any manipulation by the researcher.

Quantitative

Referring to research focused on numerical data and statistical analysis to understand patterns and relationships.

Naturalistic Observation

A research method involving the systematic observation of subjects in their natural environment without any intervention by the observer.