Risk Management Test Bank Chapter 9

Chapter 9 venture Aversion and Risk Management by Individuals and Corporations I.Multiple Choice 1.The study key force that motivates individuals to bribe remedy even though damages policy superiors exceed adjudicate claim cost is: a.profit b. hazard aversion c. pass judgment passing gamees d.premium warheads Answer: b droll: K 2.An individuals motivation for insurance dep force outs on any of the avocation factors keep out(a): a.income b.wealth c.premium loading d.portfolio return Answer: d Type: K 3.Suppose that you lease $20,000 in wealth and font a 20% meet of losing $10,000. Without insurance, your mathematical wealth outcomes atomic number 18: a.$20,000, $18,000 b.$20,000, $10,000 c.$10,000, $2,000 d.$20,000, $18,000 Answer: b Type: A 4.Using the tally scenario in principal #3, what is the expected cling to of your wealth without insurance? a.$20,000 b.$10,000 c.$18,000 d.$16,000 Answer: c Type: A 5.Using the homogeneous scenario in Question #3, if you purchase $10,000 in insurance reporting for a set of $2,500, what be your possible wealth outcomes? (Assume that the premium would be pay at the end of the year and that the leaving would occur at the end of the year so that you idler ignore the meter entertain of money.) a.$20,000, $10,000 b.$17,500 c.$17,500, $7,500 d.

$18,000 Answer: b Type: A 6.An ensample of a non-monetary loss is: a.childrens funeral costs b.damage to your automobile which isnt cover by your insurance c.pain and suffering d.loss 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: Loss =$10,000with opportunity .10 $2,000with luck .20 $500with probability .50 $0with probability .20 What is the fair premium for copious coverage if the insurers competitive loading for administrative costs and capital costs is 10% of expected discounted claims? a.$1,815...If you neediness to get a well(p) essay, order it on our website: Orderessay

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