a)
To explain: The expected return on a life insurance policy.
The Expected return:
The expected return on an investment refers to the weighted average of estimated returns and estimation of occurrence of those returns.
Life Insurance Policy:
Life insurance policy is an agreement between two parties, the two parties are the insurance company and the policy buyer. The insurance company depicts to pay a predetermined amount to the policy holder in case of specified future events.
b.
To explain: The correlation coefficient between the return on the insurance policy and the return on the human capital.
Correlation Coefficient:
A correlation coefficient is a tool of statistical measure. This tool measures the relation between the two variables. It measures how the change in one value of variable affects the other.
c.
To explain: The reason for buying the life insurance in spite of low expected returns.
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Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
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