re insurance is used by insurance companies faced with:
A. the problem of moral hazard.
B. the prospects of a large but diversified risk.
C. inadequate capital to handle a potential loss.
D. insolvency.
Answer: C
You might also like to view...
In a two-period model, holding everything else constant, an increase in government spending
A) unambiguously increases the current account surplus. B) unambiguously decreases the current account surplus. C) has an uncertain effect on the current account surplus. D) has no effect on the current account surplus.
A farmer discovers a natural gas reserve on his property. He can extract the natural gas for a profit of $40 per unit now, $55 per unit in one year, $57 per unit in two years, and $60 in three years. The current market rate of interest is 6 percent. When should the farmer extract the natural gas to obtain the most profit per unit in present value terms?
A. Today B. One year C. Two years D. Three years