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:

Eclectic Approach

A methodological approach that combines theories, principles, and strategies from multiple theoretical frameworks to address psychological issues.

Free Association

A psychoanalytic technique in which a patient says whatever comes to mind without filtering thoughts, aimed at uncovering unconscious thoughts and feelings.

Group Setting

A social context or environment where individuals gather together, often for a specific purpose or activity, influencing interactions and behavior within the group.

Drugs

Substances that alter the physiological or psychological state of an individual, which can include medications, narcotics, and psychoactive compounds.