Which of the following is described by the definition given below?
“It is the expected guaranteed value of taking a risk.”

A.
Certainty equivalent value

B.
Risk premium

C.
Risk value guarantee

D.
Certain value assurance

Explanation:

The Certainty equivalent value is the expected guaranteed value of taking a risk. It is derived by
the uncertainty of the situation and the potential value of the situation’s outcome.
Answer B is incorrect. The risk premium is the difference between the larger expected value of
the risk and the smaller certainty equivalent value.