Choose ONE(1) of the following options.(5 marks)

Option 1: "Moral hazard ocours when the potential insurance buyers who are the most likely to experience the insured events are the ones who mostly actively seek out and buy an insurance policy." Is this statement correct? Explain.

Option 2:"Problems in one financial institution trigger crises in other fundamentally sound financial institutions. This is systematic risk." Is the statement correct? Explain. Option 3: "A takeover is more likely to be equity-funded when the acquiring firm's stock is overvalued."Is this statement correct?Explain.

Option 4: Using data in the past year, your assistant's calculation shows that the average yield on AA-rated corporate bonds was higher than that on A-rated corporate bonds. Do you that the calculation is wrong? Explain.