A) A high-risk person is more likely to apply for insurance than a low-risk person because a high-risk person would benefit more from insurance protection.
B) A low-risk person is more likely to apply for insurance than a high-risk person because a low-risk person would benefit more from insurance protection.
C) Insurance companies can fully guard against the problem of adverse selection, but they cannot fully guard against the problem of moral hazard.
D) Insurance companies can fully guard against the problem of moral hazard, but they cannot fully guard against the problem of adverse selection.
F) A) and D)
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A) $485.44.
B) $496.50.
C) $509.28.
D) $515.00.
F) B) and D)
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An increase in the interest rate reduces...View Answer
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A) of high unemployment rates.
B) high inflation rates.
C) that has become known as the "Great Moderation."
D) that has become known as the "Great Recession."
F) B) and C)
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A) an interest rate of 5 percent, with the bank charging you a $50 processing fee at the time you open your account
B) an interest rate of 4 percent, with the bank giving you a $65 bonus at the time you open your account
C) an interest rate of 3.5 percent, with the bank giving you a $100 bonus to open your account
D) an interest rate of 4.5 percent, with no processing fee and no bonus
F) C) and D)
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The utility Lisa receives from...View Answer
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A) 6 percent
B) 7 percent
C) 8 percent
D) 10 percent
F) All of the above
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A) This reduces risk's standard deviation and firm-specific risk.
B) This reduces risk's standard deviation and market risk.
C) This raises market risk, but lowers firm-specific risk. What happens to overall risk is unclear.
D) This raises firm-specific risk, but lowers market risk. What happens to overall risk is unclear.
F) B) and C)
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A) utility and the associated assumption of diminishing marginal utility.
B) utility and the associated assumption of increasing marginal utility.
C) income and the associated assumption of diminishing marginal wealth.
D) income and the associated assumption of increasing marginal wealth.
F) A) and C)
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A) $2,0001.06)
B) $1,000 + $1.06) 2
C) $1,0001.06) 2
D) None of the above are correct.
F) B) and D)
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A) 4
B) 5
C) 6
D) 7
F) All of the above
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A) often go hand in hand with fluctuations in the economy more broadly.
B) rarely have anything to do with fluctuations in the economy more broadly.
C) have few, if any, macroeconomic implications.
D) are attributable to the widespread belief that the efficient markets hypothesis is correct.
F) A) and D)
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A) You receive the payment 3 years from now and the interest rate is 8 percent.
B) You receive the payment 3 years from now and the interest rate is 6 percent.
C) You receive the payment 2 years from now and the interest rate is 8 percent.
D) You receive the payment 2 years from now and the interest rate is 6 percent.
F) None of the above
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A) increasing marginal utility of wealth and is risk averse.
B) increasing marginal utility of wealth but is not risk averse.
C) decreasing marginal utility of wealth and is risk averse.
D) decreasing marginal utility of wealth but is not risk averse.
F) A) and D)
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A) $725.62. It would be higher if the interest rate were higher.
B) $727.28. It would be higher if the interest rate were higher.
C) $725.62. It would be lower if the interest rate were higher.
D) $727.28. It would be lower if the interest rate were higher.
F) None of the above
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A) $3,494.40
B) $3,585.85
C) $3,601.89
D) $3,676.14
F) A) and D)
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A) 8
B) 10
C) 12
D) 14
F) None of the above
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A) has a better chance of outperforming the market if stock prices follow a random walk than if they do not follow a random walk.
B) almost always chooses to hold index funds in his or her portfolio rather than actively-managed funds.
C) is spending his or her time wisely if the efficient markets hypothesis is correct.
D) is interested in the likely ability of a corporation to pay dividends in the future.
F) A) and C)
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A) Britney's subjective measure of her wellbeing would increase by less than 5 units.
B) Britney's subjective measure of her wellbeing would increase by more than 5 units.
C) Britney would change from being a risk-averse person into a person who is not risk averse.
D) Britney would change from being a person who is not risk averse into a risk-averse person.
F) None of the above
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A) adherence to the old adage, "Don't put all your eggs in one basket."
B) insurance.
C) the risk-return trade-off.
D) All of the above are correct.
F) A) and D)
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