Insurance
* Explain why auto and life insurance are two types of risk that are well suited to diversification by insurers through the use of risk pooling.
*Explain why damage from floods and wars are two types of risk that are not well suited to diversifica- tion by insurers through the use of risk pooling.
*Financial advisors encourage investors to hold a well- diversified portfolio of investments. Explain whether this level of diversification can protect an investor if a. one of her stock holdings is a firm with an unsuc- cessful new product launch, or b. the global economy falls into a recession.
