In an Efficient Allocation of Risk

question 176

Multiple Choice

In an efficient allocation of risk:

• A)all risk is eliminated.
• B)those who are most willing to bear risk,bear it.
• C)all risk is diversified.
• D)all insurance premiums are equal to the expected value of the claims.

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Definitions:

BAT Model

A behavioral approach to understanding and modeling how consumers make purchasing decisions, considering factors such as beliefs, attitudes, and traditions.

Disbursements

Money paid out by a business or organization for various purposes, including operating expenses, investments, and dividends.

Fixed Cost

Costs that do not fluctuate with changes in production level or sales volume, such as rent or salaries.

Miller-Orr Model

A financial model used to manage cash flows and determine optimal cash reserves for a company.