Question

Which of the following statements is​ false?

A.Not all insurable risks have a beta of zero. Some​ risks, such as hurricanes and​ earthquakes, create losses of tens of billions of dollars and may be difficult to diversify completely.

B.When a firm buys​ insurance, it transfers the risk of the loss to an insurance company. The insurance company charges an upfront premium to take on that risk.

C.By its very​ nature, insurance for non−diversifiable hazards is generally a positive beta​ asset; the insurance payment to the firm tends to be larger when total losses are low and the market portfolio is high.

D.Because insurance provides cash to the firm to offset​ losses, it can reduce the​ firm's need for external capital and thus reduce issuance costs.

Answer 1

C.By its very​ nature, insurance for non−diversifiable hazards is generally a positive beta​ asset; the insurance payment to the firm tends to be larger when total losses are low and the market portfolio is high.

the above is answer..

because insurance payment should be low when total losses are low