Which of the Following Is the Best Explains the Moral

question 62

Multiple Choice

Which of the following is the best explains the moral hazard problem?

• A)Chronically ill people are more likely to purchase health care insurance.
• B)Only owners of poor quality used cares put them up for sale.
• C)People who are highly risk-averse are less likely to invest in the stock market.
• D)Drivers with airbags in their cars drive a little more recklessly.

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Definitions:

Forward Rate

An agreed upon rate for a financial transaction that will occur at a future date, used in forward contracts.

Zero-coupon Bond

A debt security that does not pay interest but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its face value.

Semi-annually

Occurring twice a year.

Effective Annual Yield

Annualized interest rate on a security computed using compound interest techniques.