Exam (elaborations)
RMI 211 EXAM 1 - Meek
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RMI 211 EXAM 1 - Meek RMI 211 EXAM 1 - Meek RMI 211 EXAM 1 - Meek
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RMI 211 EXAM 1 - Meekuncertainty concerning the occurrence of a loss - ANS Risk
the property or life that is being considered for insurance - ANS Insurance form of risk
any situation or circumstance in which a loss is possible, regardless of whether a loss occurs - ANS Loss
exposure
the relative variation of actual loss from expected loss - ANS Objective risk
uncertainty based on a person's mental condition or state of mind - ANS Subjective (perceived) risk
the probability that an event will occur; can be same for two outcomes but may have different objective
risks - ANS Chance of loss
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 - ANS Objective probability
the individual's personal estimate of a chance of loss - ANS Subjective probability
the cause of a loss - ANS Peril
a condition that increases the chance of loss - ANS Hazard
a physical condition that increases the frequency or severity of a loss - ANS Physical hazard
, dishonesty or character defects in an individual that increases the frequency or severity of a loss - ANS
Moral hazard
carelessness or indifference to a loss, which increases the frequency or severity of a loss - ANS
Attitudinal hazard
refers to characteristics of the legal system or regulatory environment that increase the frequency or
severity of losses - ANS Legal hazard
a situation in which there are only the possibilities of loss or no loss (earthquake) - ANS Pure risk
a situation in which either profit or loss is possible (gambling) - ANS Speculative risk
affects only individuals or small groups; can be reduced or eliminated by diversification (car theft) - ANS
Diversifiable risk
affects the entire economy or large numbers of persons or groups within an economy; also called a
fundamental risk (hurricane) - ANS Non-diversifiable risk
encompasses all major risks faced by a business firm, which include: pure, speculative, strategic,
operational, and financial risk - ANS Enterprise risk
refers to uncertainty regarding the firm's financial goals and objectives - ANS Strategic risk
results from the firm's business operations - ANS Operational risk
refers to the uncertainty of loss because of adverse changes in commodity prices, interest rates, foreign
exchange rates, and the value of money - ANS Financial risk
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