RMIN 4000 UGA Test 1 Questions and Answers 100% Verified!
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Course
RMIN 4000 UGA
Institution
RMIN 4000 UGA
RMIN 4000 UGA Test 1 Questions and Answers 100% VeWhat is risk? - ANSWER-a calculated possibility of a negative outcome
What is calculated possibility? - ANSWER-a probabilistic outcome that is known or estimated (ranges from 0% to 100%)
What is a negative outcome? - ANSWER-a loss that must be...
RMIN 4000 UGA Test 1 Questions and Answers 100% Verified!
What is risk? - ANSWER-a calculated possibility of a negative outcome
What is calculated possibility? - ANSWER-a probabilistic outcome that is known or estimated (ranges from 0% to 100%)
What is a negative outcome? - ANSWER-a loss that must be quantifiable
What is frequency? - ANSWER-how often a loss occurs (frequency= number of losses / number of exposures)
What is severity? - ANSWER-How much a loss costs when it occurs (severity = total losses ($) / number of losses)
What is a peril? - ANSWER-a cause of a loss (fire, tornado, collision)
What is a hazard? - ANSWER-a condition that creates to increases the frequency and/or severity of a loss but does not cause the loss
What are the four types of hazards? - ANSWER-- physical - moral
- morale
- legal
What is a physical hazard? - ANSWER-a physical condition that increases the frequency and/or severity of a loss (corrosion on pipes, too many wires plugged in to an outlet)
what is a moral hazard? - ANSWER-dishonesty in an individual that increases the frequency or severity of a loss. the presence of insurance changes the behavior of the insured (causing "hail" damage with a hammer)
What is a morale hazard? - ANSWER-carelessness or indifference to a loss, which increases the frequency and/or severity of a loss (leaving the car keys in your unlocked car)
What is a legal hazard? - ANSWER-characteristics of the legal systems or regulatory environment that increase the frequency and/or severity of a loss (juries being more sympathetic in some areas) What is a pure risk? - ANSWER-a risk in which there is no gain. the outcomes are either
loss or no loss
what is speculative risk? - ANSWER-a risk in which there is a possibility for gain. the outcomes are either loss, no change, or gain.
What is the difference between pure and speculative risk? - ANSWER-with speculative risk, there is a chance of gain, whereas there is no chance for gain with pure risk
can you buy insurance for pure risks? - ANSWER-yes
can you buy insurance for speculative risks? - ANSWER-No
What is diversifiable risk? - ANSWER-a risk that affects only individuals or small groups,
not the entire economy. risk is not correlated
How do you reduce/eliminate diversifiable risk? - ANSWER-diversification
What is nondiversifiable risk? - ANSWER-a risk that affects the entire economy or a large group of people. this cannot be reduced/eliminated through diversification. this risk
is correlated.
What is enterprise risk? - ANSWER-encompasses all major risks faced by a business firm: - pure risk
- speculative risk
- strategic risk
- operational risk
- financial risk
What is systemic risk? - ANSWER-the risk of collapse of an entire system or market due
to failure of a single entity or group of entities that can result in the breakdown of the entire financial system. this is due to the interdependency between the players in the system
What are the major types of pure risk? - ANSWER-- personal risk
- property risk
- liability risk
- loss of business income - cyber security
What is personal risk? - ANSWER-a risk that directly affects an individual or family; involves the possibility of loss of income, extra expenses, or depletion of financial assets (death, unemployment, disability, injury, inadequate retirement income)
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