CFA Practice Question

There are 221 practice questions for this study session.

CFA Practice Question

Which form is an example of risk transfer?
A. A life insurance company rewards non-smokers with lower rates.
B. A bank issues a surety bond to a project owner.
C. An investment manager creates a well-diversified portfolio.
Explanation: A: risk prevention. C: risk acceptance (diversification).

B: risk transfer. A surety bond is a promise by a surety or guarantor to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract.

User Contributed Comments 1

User Comment
nmech1984 Is B true?? I think a surety bond is risk prevention while life insurance is risk transfer. please any idea anyone?
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