Which of the Following Statements Are True

question 37

Multiple Choice

Which of the following statements are true?
I. Catastrophe bonds may be used as a form of reinsurance.
II. Catastrophe bonds are structured so that if an insured event results in large losses for an insurer,the bond's required payments increase.
III. Buyers of catastrophe bonds benefit if the adverse event occurs.
IV. When issued,catastrophe bonds will have promised yields above the risk-free rate.

• A)I and II only
• B)I and IV only
• C)II and III only
• D)II and IV only
• E)III and IV only

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Definitions:

Total Surplus

The sum of consumer and producer surplus, representing the total net benefit to society from the production and consumption of goods or services.

Consumer Surplus

The discrepancy between the total price consumers are ready to pay for a good or service and what they actually pay for it.

Producer Surplus

The disparity between the price at which sellers are prepared to offer a product and the actual selling price they get.

Consumer Surplus

The difference between the highest amount a consumer is willing to pay and the actual price paid.