Desi owns a car and needs $10,000 of auto coverage. The cost per $100 of coverage is $2/year. Calculate Desis premium.

• A. $150/year
• B. $200/year
• C. $1,500/year
• D. $2,000/year

Which of the following risks can be managed with capital market instruments?

• A. Financial risks
• B. Non-diversifiable risks
• C. Purely insurable risks
• D. Systemic risks

As the number of exposure units increases, the more closely the actual loss experience will approach the expected loss experience and therefore predictability of losses increases. This mathematical foundation of insurance is best described by _________________________.

• A. Indemnification
• B. Adverse selection
• C. Law of large numbers
• D. Underwriting

Which of the following is not a disadvantage of the purchase of insurance?

• A. Time and effort used to select coverage
• B. Indemnification
• C. Opportunity costs
• D. Less incentive to reduce risk