RMI 211 Exam 1 Study Guide with Complete Solutions
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Course
RMI 211
Institution
RMI 211
RMI 211 Exam 1 Study Guide with
Complete Solutions
Uncertainty concerning the occurrence of an event (usually a loss) -
Answer️️ -risk
used in situations where such probabilities cannot be estimated -
Answer️️ -uncertainty
Any situation or circumstance in which a loss is possible, reg...
RMI 211 Exam 1 Study Guide with
Complete Solutions
Uncertainty concerning the occurrence of an event (usually a loss) -
Answer✔️✔️-risk
used in situations where such probabilities cannot be estimated -
Answer✔️✔️-uncertainty
Any situation or circumstance in which a loss is possible, regardless of
whether a loss occurs - Answer✔️✔️-Loss Exposure
- defined as the relative variation of actual loss from expected loss
- It can be statistically calculated by some measure of dispersion, such as
the standard deviation - Answer✔️✔️-Objective Risk
defined as uncertainty based on a person's mental condition or state of
mind - Answer✔️✔️-Subjective (perceived) risk
The probability that an event will occur - Answer✔️✔️-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 - Answer✔️✔️-Objective Probability
the individual's personal estimate of the chance of loss - Answer✔️✔️-
subjective probability
defined as the cause of the loss. - Answer✔️✔️-peril
a condition that increases the chance of loss - Answer✔️✔️-Hazard
a physical condition that increases the frequency or severity of loss -
Answer✔️✔️-Physical hazard
dishonesty or character defects in an individual that increase the frequency
or severity of loss - Answer✔️✔️-Moral hazard
carelessness or indifference to a loss, which increases the frequency or
severity of a loss - Answer✔️✔️-Attitudinal Hazard (Morale Hazard)
refers to characteristics of the legal system or regulatory environment that
increase the frequency or severity of losses - Answer✔️✔️-Legal Hazards
a situation in which there are only the possibilities of loss or no loss
(earthquake) - Answer✔️✔️-Pure Risk
a situation in which either profit or loss is possible (gambling) -
Answer✔️✔️-Speculative Risk
affects only individuals or small groups (car theft). It can be reduced or
eliminated by diversification. - Answer✔️✔️-diversifiable risk
affects the entire economy or large numbers of persons or groups within
the economy (hurricane). It is also called fundamental risk. - Answer✔️✔️-
nondiversifiable risk
encompasses all major risks faced by a business firm, which include: pure
risk, speculative risk, strategic risk, operational risk, and financial risk. -
Answer✔️✔️-Enterprise Risk
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