Moral hazard is the tendency for an insured person to overuse health services because he has insurance.
<h3>
What is Moral hazard?</h3>
- If an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk is known as a moral hazard
- For example, when an organization is insured, it's going to take on higher risk knowing that its insurance will pay the associated costs
- When the actions of the risk-taking party change to the detriment of the cost-bearing party after a financial transaction has taken place, a moral hazard may occur.
- Moral hazard can be considered as a type of information asymmetry, where the risk-taking party to a transaction knows more about its intentions than the party paying the consequences of the risk and has a tendency or incentive to take on too much risk from the perspective of the party with less information.
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<u>Answer:</u> The capitalization rate is 12.5 %
<u>Explanation:</u>
To calculate the capitalization rate, we use the formula:
We are given:
Net operating income = $ 43,750
Value of property = $ 350,000
Putting values in above equation, we get:
Hence, the capitalization rate is 12.5 %
Answer:
2205
Explanation:
annual compound interest formula
PV(1+i)ⁿ
we have
2000(1+.05)²
=2205
