Which of the Following Is a Consequence of Transferring Risk

question 125

Multiple Choice

Which of the following is a consequence of transferring risk to an insurance company?

• A) An increase in stock value because risk has been reduced.
• B) A guaranteed small loss in exchange for protection against large losses.
• C) Higher rates of return because the firm is now free to pursue high-risk projects.
• D) Protection against losses at no significant cost to the firm.

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Definitions:

Third-Party Beneficiary

A person or group that benefits from a contract made between two other parties, despite not being a direct party to the contract.

Obligor's Approval

The consent or agreement of the individual or entity (obligor) responsible for performing an obligation, especially in contexts requiring their assent to changes or actions affecting their duties.

Assignment of Rights

The transfer of rights, properties, or obligations from one party to another.

Third-Party Beneficiary

A person or entity that benefits from a contract made between two other parties, despite not being a party to that contract themselves.