Which of the following statements are true?
I. Catastrophe bonds may be used as a form of reinsurance.
II. Catastrophe bonds are structured so that if an insured event results in large losses for an insurer,the bond's required payments increase.
III. Buyers of catastrophe bonds benefit if the adverse event occurs.
IV. When issued,catastrophe bonds will have promised yields above the risk-free rate.

Question

Quizplus · Accepted Answer

I. Catastrophe bonds indeed serve as a form of reinsurance, providing insurers with coverage against major disasters by transferring some of the risk to investors. IV. Catastrophe bonds typically offer yields higher than the risk-free rate to compensate investors for the risk of losing their principal if a triggering event occurs.

Which of the Following Statements Are True