Which Type of Insurance Would Protect a Business Firm When

question 177

Multiple Choice

Which type of insurance would protect a business firm when a fire in its manufacturing facility spreads and destroys a nearby home?

• A) Health insurance
• B) Life insurance
• C) Property insurance
• D) Liability insurance
• E) Automobile insurance

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Definitions:

CAPM

The Capital Asset Pricing Model, a theory used to determine the expected return on investment based on its inherent risk and the cost of capital.

Expected Return

The anticipated profit or loss from an investment based on its potential risks and rewards.

SML

The Security Market Line (SML) represents the relationship between the expected return of a market security and its risk, measured by beta, within the Capital Asset Pricing Model (CAPM).

Market Portfolio

A theoretical bundle of investments that includes every type of asset available in the market, with each asset weighted by its total market capitalization.