Finance 310 Final Ferguson ULL || All Answers Are Correct 100%.
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Course
Finance 310
Institution
Finance 310
Risk correct answers Any uncertainty regarding financial loss
Pure Risk correct answers situation in which there is only the possibility of loss and no loss
speculative risk correct answers situation where profit, loss, or no loss is possible
static risk correct answers risk that does not ...
Finance 310 Final Ferguson ULL || All Answers Are Correct
100%.
Risk correct answers Any uncertainty regarding financial loss
Pure Risk correct answers situation in which there is only the possibility of loss and no loss
speculative risk correct answers situation where profit, loss, or no loss is possible
static risk correct answers risk that does not change over time
dynamic risk correct answers risk that changes over time; especially with technology
objective risk correct answers relative variation of actual loss from expected loss
subjective risk correct answers uncertainty based on a person mental condition or state of mind
primary burdens of risk? correct answers 1)actual costs of loss
2)opportunity costs
3)mental anguish
exposure correct answers thing of value subject to being lost
peril correct answers the cause of loss
hazard correct answers condition that increases or creates the severity of loss
frequency correct answers how often loss happens
severity correct answers how bad loss is
physical hazard correct answers physical condition that increases that frequency or severity of
loss
moral hazard correct answers dishonesty or character defects in an individual that increases the
frequency or severity of loss- conscious desire for loss
morale hazard correct answers subconscious/facilitation of loss - carelessness or indifference to a
loss
diversibile risk correct answers affects only individuals or small groups and not entire economy
nondiversifiable risk correct answers affects entire economy or large numbers of people or
groups within the economy
,finantual risk correct answers uncertainty of loss because of adverse changes in commodity
prices, interest rates, foreign exchange rates, and the value of money
personal risks correct answers risks that directly affect an individual
4 major personal risks correct answers premature death, insufficient retirement income, risk or
poor health and risk of unemployment
property risk correct answers risk of property damaged or lost from numerous circumstances
direct loss correct answers financial loss that results from the physical damage, destruction, or
theft of property
indirect loss correct answers financial loss that indirectly results from the occurrence of a direct
physical damage or loss
techniques for managing risk correct answers avoidance, loss control, and retention
avoidance correct answers try not to have the risk
loss control correct answers activities that reduce frequency or severity of loss
loss prevention correct answers reducing frequency of loss
loss reduction correct answers reduce severity of loss
retention correct answers individual/business retaining part or all of the financial consequences
of a given risk
active retention correct answers individual is consciously aware of the risk and deliberately plans
to retain all or part of it
passive retention correct answers very dangerous if risk is obtained has potential to destroy your
financially
loss exposure correct answers any situation or circumstance in which a loss is possible,
regardless whether a loss occurs
insurance correct answers pooling of fortuitous losses by transfer of such risks to insurers, who
agree to indemnify insureds their occurrence, or to render services connected with the risk
pooling correct answers spreading of losses incurred by the few over the entire group, so that in
the process, average loss is substituted for actual loss
fortuitous losses correct answers loss that is unforeseen and unexpected by the insured and
occurs as a result of chance
, risk transfer correct answers pure risk is transferred from the insured to the insurer, who typically
is in a stronger financial position to pay the loss to the insured
indemnification correct answers the insured is restored to his/her approximate financial position
prior to the occurrence of loss
basic characteristics of insurance correct answers pooling, law of large numbers, payment of
fortuitous losses, risk transfer, and indemnification
reinsurance correct answers arrangement by which the primary insurer that initially writes the
insurance transfers to another insurer part or all of the potential losses associated with such
insurance
characteristics of an insurable risk correct answers large number of exposure units,
accidental/unintentional loss, determinable and measurable loss, no catastrophic loss, calculable
chance or loss, and economically feasible premium
adverse selection correct answers tendency of person with a higher than average chance of loss
to seek insurance at a standard rate, which if not controlled by underwriting, results in a higher
than expected loss levels
underwriting correct answers process of selecting and classifying applicants for insurance
three rules of risk management (+2) correct answers 1) don't risk more than you can afford to
lose
2) don't risk a lot for a little
3) consider the odds (both frequency and severity)
4) insurance is not substitute for loss control
5) having more money is not a substitute for a good risk management
premature death correct answers death of family head with unfulfilled financial obligation
insufficient retirement income correct answers not saving enough for a good retirement
risk of poor health correct answers payment of catastrophic medical bills and loss of earned
income
risk of unemployment correct answers loss of earned income and employee benefits, worker only
able to work part time, savings may be exhausted
life insurance correct answers pays death benefits to designated beneficiaries when insured dies
property insurance correct answers indemnifies property owners against the loss or damage of
real or personal property caused by various perils
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