Portfolio Management Q180

180The risks that individuals face based on mortality create which of the following problems?

A
Covariance risk associated with their human capital and their investment portfolios.
B
The risk of loss of income to their families.
C
The interacting effects of solvency risk and the risk of being taken advantage of by an unscrupulous financial adviser.

Option : B
Explanation : The uncertainty about death creates two risks: mortality risk and longevity risk. The mortality risk (risk of dying relatively young) is manifested by a termination of the income stream generated by the person. In contrast, longevity risk is the risk of outliving one’s financial resources.

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