RMI 211 EXAM 1 – Meek Study Guide with Complete Solutions
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Course
RMI 211
Institution
RMI 211
RMI 211 EXAM 1 – Meek Study Guide
with Complete Solutions
Risk - Answer️️ -uncertainty concerning the occurrence of a loss
Insurance form of risk - Answer️️ -the property or life that is being
considered for insurance
Loss exposure - Answer️️ -any situation or circumstance in whi...
RMI 211 EXAM 1 – Meek Study Guide
with Complete Solutions
Risk - Answer✔️✔️-uncertainty concerning the occurrence of a loss
Insurance form of risk - Answer✔️✔️-the property or life that is being
considered for insurance
Loss exposure - Answer✔️✔️-any situation or circumstance in which a loss is
possible, regardless of whether a loss occurs
Objective risk - Answer✔️✔️-the relative variation of actual loss from
expected loss
Subjective (perceived) risk - Answer✔️✔️-uncertainty based on a person's
mental condition or state of mind
Chance of loss - Answer✔️✔️-the probability that an event will occur; can be
same for two outcomes but may have different objective risks
Objective probability - Answer✔️✔️-refers to the long-run relative frequency
of an event based on the assumptions of an infinite number of observations
and of no change in the underlying conditions
Subjective probability - Answer✔️✔️-the individual's personal estimate of a
chance of loss
Hazard - Answer✔️✔️-a condition that increases the chance of loss
Physical hazard - Answer✔️✔️-a physical condition that increases the
frequency or severity of a loss
Moral hazard - Answer✔️✔️-dishonesty or character defects in an individual
that increases the frequency or severity of a loss
Attitudinal hazard - Answer✔️✔️-carelessness or indifference to a loss,
which increases the frequency or severity of a loss
Legal hazard - Answer✔️✔️-refers to characteristics of the legal system or
regulatory environment that increase the frequency or severity of losses
Pure risk - Answer✔️✔️-a situation in which there are only the possibilities
of loss or no loss (earthquake)
Speculative risk - Answer✔️✔️-a situation in which either profit or loss is
possible (gambling)
Diversifiable risk - Answer✔️✔️-affects only individuals or small groups;
can be reduced or eliminated by diversification (car theft)
Non-diversifiable risk - Answer✔️✔️-affects the entire economy or large
numbers of persons or groups within an economy; also called a
fundamental risk (hurricane)
Enterprise risk - Answer✔️✔️-encompasses all major risks faced by a
business firm, which include: pure, speculative, strategic, operational, and
financial risk
Strategic risk - Answer✔️✔️-refers to uncertainty regarding the firm's
financial goals and objectives
Operational risk - Answer✔️✔️-results from the firm's business operations
Financial risk - Answer✔️✔️-refers to the uncertainty of loss because of
adverse changes in commodity prices, interest rates, foreign exchange
rates, and the value of money
Systemic risk - Answer✔️✔️-the risk of collapse of an entire system or
market due to the failure of a single entity or group of entities that can
result in the breakdown of the entire financial system
Personal risks - Answer✔️✔️-risks that directly affect an individual or
family; involve the possibility of a loss or reduction in income, extra
expenses or depletion of financial assets due to premature death,
inadequate retirement income, poor health, or unemployment
Property risks - Answer✔️✔️-involve the possibility of losses associated with
the destruction or theft of property
Direct loss - Answer✔️✔️-a financial loss that results from the physical
damage, destruction, or theft of the property, such as fire damage to a
home
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