Can moral hazard in the market for insurance exist without adverse selection? Explain

Q: What are the other alternatives eliminated by the method of payback screening method?

A: Following are the other alternatives eliminated by the method of payback screening method: The…

Q: What are the benefits and Flaws of Payback Screening?

A: The payback period alludes to what extent it takes for a speculator to hit breakeven to recoup the…

Q: Which of the following would not result in exposure to nonsampling risk?a. Measuring the…

A: Sampling: Sampling allows an individual to obtain information about the population of interest in a…

Q: How tools are used in insurance risk management

A: Risk Management Techniques  Techniques for coping with dangers are known as risk management…

Q: nsurance is a way to decrease the ffinancial risk from unexpected events, like an illness, car…

A: Insurance is a very important tool in finance which helps us to mitigate risks and reduce risks due…

Q: What is the risk of Incorrect Rejection?

A: Risk of incorrect acceptance of internal control reliability and risk of incorrect acceptance of…

Q: Is a method of screening out in certain situations an unacceptable investment alternative?

A: Capital budgeting is the technique that is used in business to determine the best investment…

Q: What is risk? What is the difference between systematic and unsystematic risk?

A: Risk: Risk can be defined as upcoming uncertainty about variation from anticipated earnings or…

Q: Why can’t legal considerations resolve every ethicalquestion?

A: Legal standards are those standards that are set forth in governmental laws. Ethical standards are…

Q: The process of determining which risks to insure and which applicants to reject is known as

A: Given information The process of determining which risks to insure and which applicants to reject…

Q: If the chance that a risk will occur cannot be reasonably predicted or the possible financial loss…

A: An uninsurable risk is one that presents an unknown or unacceptable risk of loss for an insurance…

Q: what are the conditions for classical immunization to be not effective?

A: Classical Immunization:- Classical immunization can be characterized as the formation of a fixed-pay…

Q: definition of political risk and how mitigate it?

A: Political risk are risk arising due to political parties of countries with change in government…

Q: What rules or policies should be developed to avoid the ethical problem?

A: Ethical problems: These kinds of problems arise when while making decisions neither of the options…

Q: What is a reasonableness test?

A: Reasonableness tests is an analytical procedure used to examine the validity of the accounting…

Q: When might the rule “Let your conscience be your guide” not be a sufficient basis for (a) your…

A:

Q: Which of the following is not a category of risk response strategies? A. Acceptance. B.…

A: Risk mean the situations or circumstances which can lead to unfavourable or potential losses to the…

Q: What are the Flaws of Payback Screening?

A: The payback period alludes to what extent it takes for a speculator to hit breakeven to recoup the…

Q: The ability to purchase and immediately assign life insurance policies increases the problems caused…

A: The problem of asymmetric information is common to all insurance markets. Adverse selection means…

Q: Can both moral hazard and adverse selection occur in the insurance market s the difference between…

A: The insurance industry is an important part of the overall financial industry. Insurance is bought…

Q: ce risk management tools?

A: Risk Management Techniques  Techniques for coping with dangers are known as risk management…

Q: What is Overt Discrimination?

A: Overt discrimination is an explicit display of unequal treatment given to a certain individual or…

Q: Is funding a type of risk?

A: Funding means providing the funds to the party and charging interest rates from them. Firms need…

Q: averse

A: Risk is involved in everything. Risks will be there right from the task that we do till the…

Q: How does/can a financial intermediary reduce the risk facing them due to Adverse Selection?

A: The question is based on one of the key issue in financial market, banking industry,  about the…

Q: What is the risk of Incorrect Acceptance?

A: Risk of incorrect acceptance: The risk that the sample selected by the auditor may show that there…

Q: What are the root cause of conservatism bias?

A: The root cause of Conservatism bias is a strong belief system. As investors, it is difficult to…

Q: How do the passive losses rules and the at risk rules work in conjunction to limit losses?

A: Passive losses: These are the losses that take place when expenses exceed the income in the passive…

Q: An implied condition of pooling risks with insurance is that the event being insured against is…

A: Insurance: An arrangement between the two parties( Insurer & Insured) where the insurer company…

Q: what is one example of a risk management strategy used by insurance companies to mitigate…

A: An underwriter's potential loss is known as underwriting risk. Underwriting risk in insurance can…

Q: What is a fortuitous event? Is there any difference between a fortuitous event and a force majeure?

A: In Chile, a chance occasion is an idea characterized by law in which mitigates the obligor from…

Q: What are self-interest threat, self-review, and advocacy threats? Give an example of each threat.

A: The integrity of the financial statements depends upon the independence of the auditor. It means…

Q: Describe moral hazard.

A: Moral hazard refers to circumstances in which an individual chooses to apply little or no effort, or…

Q: What is the Allowable Risk of Over-reliance?

A: Auditor has to test the account balances and classes of transactions and has to do both control…

Q: What does a deficiency judgment mean?

A: Deficiency judgement refers as if borrower takes money from a lender and he is  fails to return back…

Q: How can moral hazard lead to more costly insurance premiums than one was expected?

A: Definition : Moral hazard : The risk of a person not entering into an agreement in good conscience…

Q: Risk is the uncertainty that matters because it affects people’s welfare. Briefly define and give…

A: Diversifiable Risk: Unsystematic Risk is also known as Diversifiable Risk and can be defined as a…

Q: _________ factors are conditions and other variables that in their present, or absence, as the case…

A: Less start with basic understanding. For auditing being made, audit needs to make plan for…

Q: Are you able to differentiate between risks that are inherent and those that can be controlled?

A: Inherent risk- A material mis-statement that occurs due to error or due to omission  in the…

Q: For the child-care company, do you see any speculative or opportunity risks? Explain.

A: Child day care is the a place multiple children are handled and managed at a time. Children play and…

Q: Why is it important to remember that payback screening is not an end in itself?

A: The payback period is defined as a number of years takes by a project to recover the initial cost of…

Q: How does title insurance work? Why is it not absolute (fool-proof

A: Title insurance is that insurance product that is related to the world of real estate. It is an…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.