Which of the following statement is incorrect? The expected cost of risk per participant will stay the same through pooling arrangements as the number of participants increases, all other factors equal. A pooling arrangement result in reduced risk (standard deviation) to the participants in the pool when losses are negatively correlated. In the special case where losses are perfectly positively correlated across participants, risk can be virtually eliminated with a very large number of participants in a pooling arrangement. All the answers are correct. Insurance distribution costs may include mailing costs.
Which of the following statement is incorrect? The expected cost of risk per participant will stay the same through pooling arrangements as the number of participants increases, all other factors equal. A pooling arrangement result in reduced risk (standard deviation) to the participants in the pool when losses are negatively correlated. In the special case where losses are perfectly positively correlated across participants, risk can be virtually eliminated with a very large number of participants in a pooling arrangement. All the answers are correct. Insurance distribution costs may include mailing costs.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter13: Emerging Topics In Managerial Accounting
Section: Chapter Questions
Problem 3DQ: Why should the incremental cost of a risk response alternative be considered when deciding how best...
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Which of the following statement is incorrect?
The expected cost of risk per participant will stay the same through pooling arrangements as the number of participants increases, all other factors equal.
A pooling arrangement result in reduced risk (standard deviation) to the participants in the pool when losses are negatively correlated.
In the special case where losses are perfectly positively correlated across participants, risk can be virtually eliminated with a very large number of participants in a pooling arrangement.
All the answers are correct.
Insurance distribution costs may include mailing costs.
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