Which of the following statements is most correct?
A. Financial instruments are created to transfer risks that are relatively easy to predict.
B. When a risk is difficult to predict, financial instruments are created to transfer these risks.
C. Financial instruments require certainty of an event to be able to transfer risk.
D. Financial instruments eliminate the risk from uncertainty, they do not transfer it.
Answer: A
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Many residents of the city of Adelphia drive without automobile insurance. Assuming that Adelphia is just like any other city and these are risk averse individuals, which of the following is most likely TRUE?
A) Economic models do not work. B) These people maximize wealth. C) The price of automobile insurance exceeds their maximum value of insurance. D) There are no automobile accidents or thefts in the city of Adelphia.
A player chooses a maximin strategy to ________ gain the player can earn.
A. maximize the maximum B. minimize the maximum C. maximize the minimum D. minimize the minimum