The demand for insurance depends on the level of A. risk aversion. B. risk smoothing. C....

The demand for insurance depends on the level of

A. risk aversion.

B. risk smoothing.

C. risk pooling.

D. risk premium.

Expert Solution

Risk aversion

If risk aversion is high, then demand for insurance will be higher, and if risk aversion is lower then demand for insurance is lowe

jeff jeffy answered 2 years ago

a. Attitude toward risk. What are risk aversion, risk neutrality and Risk loving behavior? b. Difference...

a. Attitude toward risk. What are risk aversion, risk neutrality and Risk loving behavior? b. Difference between Expected value and Expected Utility. c. Determine when a risk adverse consumer will buy insurance and when it will not buy insurance. d. The benefits of diversifying a portfolio. e. How to calculate expected return and variance of a portfolio.

What is the difference between risk aversion and loss aversion?

buying insurance is similar to a - selling risk b -irrationally avoiding life risk c- buying...

buying insurance is similar to a - selling risk b -irrationally avoiding life risk c- buying risk d-being a free rider e- eliminating risk

For an investor with risk aversion index A=4, which portfolio is preferable? A. Portfolio B with...

For an investor with risk aversion index A=4, which portfolio is preferable? A. Portfolio B with an expected return of 10% and standard deviation of 17% B. Risk-free asset with an expected return of 4% C. Portfolio C with an expected return of 12% and standard deviation of 20% D. Portfolio A with an expected return of 8% and a standard deviation of 13%

Explain why risk aversion might result in a voluntary insurance contract when individuals are behind the...

Explain why risk aversion might result in a voluntary insurance contract when individuals are behind the veil of ignorance. Why might voluntary insurance not work in practice?

Most people buy insurance because they a. are risk lovers b. enjoy the gamble c. are...

Most people buy insurance because they a. are risk lovers b. enjoy the gamble c. are risk neutral d. are risk averse

Hedger is risk-aversion; speculator is risk-taking. True False

Demand for health care insurance shows the level of health insurance that an individual obtain to...

Demand for health care insurance shows the level of health insurance that an individual obtain to be used in case of facing illness. The level of insurance could vary in accordance with changes in the demand factors. Of the factors we studied that influence the demand for health insurance, which do you believe have the greatest impact on the purchase of health insurance? Make sure you discuss all the factors and then explain in depth your reasoning for the factors...

Answer questions 10-14 following this information. Mean -variance investor risk aversion (RA) level is 2. The...

Answer questions 10-14 following this information. Mean -variance investor risk aversion (RA) level is 2. The expected return and standard deviation of three assets classes are as bellow, Assets Class Expected Return Standard deviation of return A 10% 25% B 8% 15% C 6% 12% risk- free rate of return is 3% and the short fall level is 5% select the investors. (12) Risk adjusted rate of return (Expected utility) is, A. 7.98%, 5.97% and 9.94% B. 5.97%, 9.94% and...

Catastrophic medical expenses are large, infrequent and unpredictable. Risk aversion explains why people buy insurance which...

Catastrophic medical expenses are large, infrequent and unpredictable. Risk aversion explains why people buy insurance which covers such catastrophic events.( true or false) The primary funding source for the expenses of current Medicare beneficiaries is the fund current beneficiaries contributed to throughout their lifetime. True False

Question