Answer Happy

5. Adjusted for risk, the discount rate generally equals the a. rate of inflation b. rate of return on the marginal) project. c. present value on the marginal) project. d. time rate 6. Diminishing marginal utility of income implies a. Risk neutral b. Risk seeking c. Risk inversion d. Risk aversion 7. 8. Actuarially fair insurance is one in which a. All insured are offered the same rates. b. There is no fraud involved. c. Expected income (or wealth) is the same with and without insurance. d. The premium equals the expected loss plus overhead costs. A risk premium is a. The amount (or percentage) one would need to be paid in order to move from a risky situation to a certain situation b. The difference between an insurance premium and the actuarially fair premium c. The amount (or percentage) one would be willing to give up in order to move from a risky situation to a certain situation d. Results because those with greater expected losses are more likely to seek out insurance.