Indicate whether the statement is true or false, and justify your answer.In the model of insurance and uncertainty discussed in the chapter, an individual exhibits declining marginal utility of income if and only if she is risk-averse.

Indicate whether the statement is true or false, and justify your answer.In the model of insurance and uncertainty discussed in the chapter, an individual exhibits declining marginal utility of income if and only if she is risk-averse.

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter3: Ethical Behaviour- Philosophers Contributions

Section: Chapter Questions

Problem 5.1EC

See similar textbooks

Related questions

Q: - explain what would you take to compare the worthness of two different fianancial investments? how…

A: Solution- Meaning of economic Investment A Financial Investment is AN plus or instrument purchased…

Q: in your own words please discuss the following statement.in investment decision making process,an…

A: An investment decision making process comprises of various steps that are followed by an investor…

Q: What probable emotional reactions will have to an adverse financial outcome?

A: Emotions in stock market:- Money motivates stock market investors, and it's not uncommon for people…

Q: Is self-insurance the same as going without insurance? Why or why not?

A: The advantages of being self-insured area unit value savings and management of the insurance…

Q: What is a satisfiable investment? When the present value of benefits surpasses the cost of an…

A: This question explains about the present value of benefits surpasses and the cost of an investment…

Q: Most life insurance riders are expensive. O True False

A: An insurance policy is purchased in order to receive coverage for damages or losses that might occur…

Q: What is a satisfactory investment? When the present value of benefits exceeds the cost of an…

A: Satisfactory investment refers to an investment wherein the present value of benefits after…

Q: to advice a relative or a close friend in terms of investment, what is the best suggest to invest in…

A: There are two types of instruments- one is the money market instrument and other is capital market…

Q: What is risk? Although many risks (e.g., career risk, risk of how many children to have and whether…

A: The risk may be defined as the possibility of uncertain events that can be harmful to the…

Q: Choose one answer and briefly explain your answer based on behavioural economics. The existence of…

A: The expected utility theory is a popular hypothesis theory in financial economics which serves as a…

Q: Differentiate the follo

A: Retirement Personal Investment Plan Advantages Government decides interest…

Q: Indicate why you agree with justifications to the following statements: “An investor should be…

A: Risk are of systematic and unsystematic.

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 real risks of an adverse financial outcome, especially in the short run?

A: Risk is the important factor of investment decisions to explain the capability of an investor to…

Q: why a company would prefer to hedge over taking an insurance to minimize on risk

A: Company faces many kinds of risks during the operating of the company so company has to manage all…

Q: Explain the differences between actual cash value (ACV) and replacement cost for homeowner’s…

A: The difference between actual cash value coverage and replacement cost coverage is the depreciation.…

Q: Indicate why you agree or disagree with justifications to the following statements: - “An investor…

A: Diversified portfolio- It refers to a portfolio of investments in which unsystematic risk or firm…

Q: evaluating economic progress in reducing poverty, which is the better measure – growth in income or…

A: The deduction in mortality is associated with the people living longer and have healthier life…

Q: Explain the middle-income trap issue and elaborate the possible solutions to address the…

A: Traps: There are various traps in finance and the economy, where individuals and countries can get…

Q: What is the relationship between risk management and insurance buying and why do some argue that…

A: The question is based on the concept of risk management and the use of insurance as a tool of risk…

Q: will you suggest to a relative, to invest in a low risk outlet such as the money market or to a high…

A: In this we have to choose between the debt and equity and choose the proper based on our risk…

Q: Which of the following statements is true for compensation of risk? a. Higher the risk, lower is the…

A: The Statement for compensation of risk is as under-

Q: Which of the following is the main objective of P2P insurance O a. Less Fraudulent Claims O…

A: The acronym P2P insurance stands for peer to peer insurance. It is formed by a group of people who…

Q: Do you believe on the principle-higher risk provides higher return? Can we achieve high return with…

A: Return is the reward which an investor will get by investing money in return and risk is the chance…

Q: iation of a security’s historical returns increases an investor’s underst

A: A standard deviation is a tool used in finance to measure the volatility and risk associated with a…

Q: Jill Davis tells her broker that she does not want to sell her stocks that are below the price she…

A: There are numerous kinds of behavioral characteristics of savers such as representativeness,…

Q: In general, what is true of people's risk aversion for changes in income that are marginal (i.e.,…

A: Risk Aversion: It is the propensity of individuals to favor results with low vulnerability to those…

Q: What is investor overreaction? Which behavioral bias is primarily responsible for this effect, and…

A: Before going to give solution we need to know about some basic terms like investors. Investor is the…

Q: Both investors and gamblers take on risk. The difference between an investor and a gambler is that…

Q: steps that you would take to mitigate the risk of interest rate risk

A: The important steps in mitigating interest rate risks are as follows: Diversification: One of the…

Q: Which of the following statements correctly describe characteristics of a risk averse investor?…

A: Introduction: A risk-seeking investor is the one which always focuses on getting exposed to a higher…

Q: of investor prefer fixed income

A: Risk-Averse-: Some investor who is a Risk-Averse has the trait of inclining toward preventing loss…

Q: If there is a small probability of a risk occurring, a business may choose to assume the risk rather…

A: Risk management is the process through which companies detect, analyse, and address risks that may…

Q: Disadvantages of Whole Life insurance include... Group of answer choices -More expensive than Term…

A: Whole life insurance guarantees payment of a stated benefit for the life of the insured person. It…

Q: As an investor, would you rather be in a situation that involves no risk at all? Formulate your…

A: Ordinarily, with generally low risk , there is less in question either as far as the measuring the…

Q: Differentiate among the three basic risk preferences: risk-indifferent, risk-averse, and…

A: Risk: It refers to uncertainty arises in the event of doing any transaction. The outcome of your…

Q: Which one is better in order to reach saving goals for retirement: Is it better to focus on stocks,…

A: When saving for retirement one has to focus on the end objective of building a required corpus that…

Q: What financial risk should Alexis focus on first in her review with Tomas? a) Debt. b) Inflation.…

A: As understood by the name, financial risks are the type of risks that tag along with any investment…

Q: Why are people often willing to pay more for insurance than the expected valueof the coverage?

A: Insurance coverage is the amount of risk covered for an individual which are assured by insurance…

Q: Which is not a factor that will usually affect your auto insurance premium?

A: The amount of money paid for the insurance policy taken is called the insurance premium. It is the…

Question

Indicate whether the statement is true or false, and justify your answer.
In the model of insurance and uncertainty discussed in the chapter, an individual exhibits declining marginal utility of income if and only if she is risk-averse.

Definition Definition Satisfaction derived from the consumption of an additional unit of any commodity.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Justification:

VIEW

Answer:

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Other things being equal, expected income can be used as direct measure of well-being (Choose the best answer) Group of answer choices a) if and only if individuals are risk averse. b) always. c) if and only if individuals are risk neutral. d) if and only if individuals are not risk-loving. e) no matter what a person’s preference to risk.
How can moral hazard lead to more costly insurance premiums than one was expected?
Do risk influence people to go for insurance? What is the relationship between risk and insurance?
Indicate whether the statement is true, false, or unclear, and justify your answer.On average, observed mortality rates are higher for people who buy life insurance than for people who do not. This is best taken as evidence in favor of adverse selection in life insurance markets.
The transfer the risk from an insured individual to a group to minimize the possibility of losses is a concept known as? a. Underwriting risk b. Adverse selection c. Loss risk exposure d. Risks pooling
Suppose Mylan could write an insurance contract whereby it is insured against all penalties resulting from misclassification. Would this affect their need to disclose? Group of answer choices No, because if they are fully covered, investors would find the loss contingency misleading since there is no receivable for the insurance Yes, because they would offset the loss contingency with a receivable which would net to zero No, because purchasing insurance does not relieve the purchaser of its obligation to make payments related to losses that result from risk. Yes, because it is impossible to insure loss contingencies
Practitioners sometimes consider the financial distress costs in their APV applications. What are these costs? Why are they relevant? Briefly describe the empirical evidence on distress costs, including studies on their magnitude relative to firm value.
What are the problems with return on premium life insurance? What type of individual would purchase decreasing term insurance?
In the context of the factors that can affect the tolerance for risk and investment choices, match each investor to the correct type of investment. * Conservative investments with less risk Speculative investments with higher risk Lower-income investors Younger investors People with no financial training or investment background Employees with secure employment positions Families with children Lower-income investors Younger investors People with no financial training or investment background Employees with secure employment positions Families with children
Risk is the uncertainty that matters because it affects people’s welfare. Briefly define and give examples of each of the following components of total risk (Diversifiable risk and undiversifiable risk. Which type of risk matters, and why?
How does the imperfect information in insurance markets cause an increase in health care costs? Explain with great detail.
Indicate whether the statement is true or false, and justify your answer.Economists agree that any intervention at time t which improves the utility of people at time t is necessarily a good intervention.