Financial markets enable individuals to transfer risk by
A)effectively prohibiting investments in common stock by unsophisticated investors.
B)leading conservative investors to put their money in government bonds.
C)ensuring that increased risk is offset by increased liquidity.
D)creating instruments that transfer risk from those less willing to bear risk to those more willing to bear risk.

Question

Quizplus · Accepted Answer

Financial markets create instruments such as insurance, options, and derivatives that transfer risk from those less willing to bear it to those more willing to bear it. This allows for a more efficient allocation of risk in the market, benefiting both parties involved.

Financial Markets Enable Individuals to Transfer Risk by