How does insurance-linked securities increasean investors return, without increasing risk ?Adding insurance-linked securities to a portfolio can increase an investor's return without increasing its risk becausea) The investor takes pnly a specifically defined insurable riskb) The investor receives a premium rate of returnc)A secondary market exists for the securitiesd) Insurable risk does not correlate with other types of investment risk

Insurance linked securities are financial instruments whose value is primarily based on insurance…

Adding insurance-linked securities to a portfolio can increase an investor's return without increasing its risk becaus a) The investor takes pnly a specifically defined insurable risk b) The investor receives a premium rate of return c)A secondary market exists for the securities d) Insurable risk does not correlate with other types of investment risk

Adding insurance-linked securities to a portfolio can increase an investor's return without increasing its risk becaus a) The investor takes pnly a specifically defined insurable risk b) The investor receives a premium rate of return c)A secondary market exists for the securities d) Insurable risk does not correlate with other types of investment risk

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 9MC

See similar textbooks

Similar questions

Avallable-for-sale securities are securities that management expects to sell in the future, but not in the near term. © True O False
Why is it important that underwriting the investment banker does not overvalue (over price) or undervalued (under price) the securities? If the securities are overpriced or underpriced, who suffers the lost? Discuss with illustrations.
Which is correct about financial securities?a. Financial securities guarantees return to investors.b. Financial securities eliminate risk that most financial managers are facing.c. Diversification spreads risk and improves expected total return.d. Financial securities protect investors against risk shocks brought by social, economic, and politicalevents.e. All of the abovef. None of the above
When you have a fixed investment horizon, it is important to maximize your earnings. You must understand the risks and returns of the security and the risk factors that can affect the price of the bond. If an investor has a fixed investment horizon, what type of security can be used to minimize both the price risk and the reinvestment risk? Does this security protect the real payoff? Explain.
What does it mean to say that an investor is risk-averse? Select one: a. The greater the return from an investment, the greater the risk demanded by the investor. b. The investor would invest in government bonds but would never invest in the share market. c. The investor will avoid risk at all costs. d. None of the above. Clear my choice
The calculation of an investor's Risk Aversion (A) requires us to look at that individual investor's historic behavior in his/her investing history. Why is Risk Aversion also called "price of risk"? Group of answer choices Risk Aversion measures the risk premium that the investor has required for the Capital Market Line Risk Aversion is determined by the excess return over the risk-free asset, as required by the investor Risk Aversion measures the difference in returns required by the investor in the Capital Allocation Line versus the Capital Market Line Risk Aversion measures the amount of return that the investor has required for each unit of risk taken None of the above
Which of the following about Treasuy inflation protected securities is NOT true: O Treasury security that is indexed to inflationO Protect investors from the negative effects of inflationO Considered a low-risk investmentO Traded in money market
Which of the following statements is correct? (explain your answer) Shorter term securities have less reinvestment risk Higher coupon securities have less reinvestment risk Both B and C Longer term securities have less reinvestment risk
Given that higher-risk investments, such as small-company stocks, have outperformed other investments over time, why don’t all investors choose to invest only in these high-risk securities? (Answer the question correctly and in-depth.)
Which is correct about security valuation? A. In an efficient market, several factors would affect the market and value is not necessarily equals the price. B. The value of the security is determined to compare it with the current market price and usually investor would buy when the value equals the price. C. Sellers would prefer the accept lower bid price than higher bid price to realize gains. D. Investors buy securities when securities are underpriced and sell them when it is overpriced. E. All of the above F. None of the above
When market rates of interest rise after a fixed-rate security is purchased, the value of the now-below-market, fixed-interest payments declines, so the market value of the investment falls. How would that drop in fair value be reflected in the investment account for a security classified as HTM? Would your answer change if the drop in fair value was due to worsened financial conditions at the investee?
Which of the following is NOT an assumption used in deriving the Capital Asset Pricing Model (CAPM)? Investors can buy and sell all securities at competitive market prices without incurring taxes or transactions cost and can borrow and lend at the risk-free interest rate Investors hold only efficient portfolios of traded securities. Investors have homogeneous expectations regarding the volatilities, correlation, and expected returns of securities. Investors have homogeneous risk averse preferences toward taking on risk.