Reading 20: Human Capital, Asset Allocation, and Life Insur style, white, demand, insurance, capital

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Q1. The volatility of human capital and the demand for life insurance are:

A)   positively correlated.

B)   negatively correlated.

C)   uncorrelated.

Q2. Factors that are positively related to the demand for life insurance include:

A)   human capital volatility and risk aversion.

B)   risk aversion and probability of death.

C)   financial wealth and probability of death.

Q3. Which of the following statements regarding human capital volatility is most accurate? When human-capital is bond-like, an investor’s financial assets should be:

A)   allocated towards low risk assets and their demand for life insurance will increase.

B)   more aggressively allocated and their demand for life insurance will increase.

C)   more aggressively allocated and their demand for life insurance will decrease.

Q4. Financial wealth and the demand for life insurance have:

A)   a positive relationship.

B)   either a positive or a negative relationship depending upon the individual’s level of wealth.

C)   a negative relationship.

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