Risk Management Test Bank Chapter 9

Chapter 9 Risk Aversion and Risk Management by Individuals and Corporations I.Multiple Choice 1.The study underlying force that motivates individuals to purchase am dyings even though insurance insurance agios exceed measure claim costs is: a.profit b. danger aversion c. anticipate passing gamees d.premium warheads repartee: b eccentric: K 2.An individuals take away for insurance depends on all of the following factors keep let on: a.income b.wealth c.premium despatch d.portfolio return resolution: d fictitious character: K 3.Suppose that you have $20,000 in wealth and face a 20% chance of losing $10,000. Without insurance, your mathematical wealth outcomes are: a.$20,000, $18,000 b.$20,000, $10,000 c.$10,000, $2,000 d.$20,000, $18,000 dissolving agent: b Type: A 4.Using the corresponding scenario in principal #3, what is the anticipate value of your wealth without insurance? a.$20,000 b.$10,000 c.$18,0 00 d.$16,000 Answer: c Type: A 5.Using the same scenario in Question #3, if you purchase $10,000 in insurance coverage for a set of $2,500, what are your practicable wealth outcomes? (Assume that the premium would be pay at the end of the course of instruction and that the red ink would occur at the end of the year so that you can ignore the meter value of money.) a.$20,000, $10,000 b.$17,500 c.$17,500, $7,500 d.

$18,000 Answer: b Type: A 6.An example of a non-monetary loss is: a.childrens funeral costs b.damage to your automobile which isnt covered by your insurance c.pain and suffering d.l oss of time at work Answer: c Type: A ! 7.Suppose that an insurance company views Jennifer as having the following diffusion for the present value of losses: personnel casualty =$10,000with opportunity .10 $2,000with probability .20 $500with probability .50 $0with probability .20 What is the fair premium for full coverage if the insurers competitive loading for administrative costs and capital costs is 10% of expected discounted claims? a.$1,815...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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