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RMIN 4000 uga test 1 Questions and Correct Answers | Latest Update
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types of risk -:- -pure risk -speculative risk -diversifiable risk -nondiversifiable risk -enterprise risk -systemic risk risk -:- uncertainty concerning the occurrence of a loss uncertainty -:- probabilities cannot be estimated loss exposure 2 | P a g e | G r a d e A + | 2 0 2 ...

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  • September 20, 2024
  • 31
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • rmin 4000 uga test 1 questions and correct answers
  • types of risk pure risk speculative risk

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2024 /2025 | © copyright | This work may not be copied for profit gain Excel!




RMIN 4000 uga test 1 Questions and Correct
Answers | Latest Update
types of risk


✓ -:- -pure risk

✓ -speculative risk

✓ -diversifiable risk

✓ -nondiversifiable risk

✓ -enterprise risk

✓ -systemic risk




risk


✓ -:- uncertainty concerning the occurrence of a loss




uncertainty


✓ -:- probabilities cannot be estimated




loss exposure




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,2024 /2025 | © copyright | This work may not be copied for profit gain Excel!



✓ -:- any situation or circumstance in which a loss is possible, regardless

of whether a loss actually occurs

example: earthquake or flood causing damage to a manufacturing plant




objective risk (degree of risk)


✓ -:- the relative variation of actual loss from expected loss

example:10,000 houses insured of a long period of time and on average 100 houses burn

each year, however it would be rare for exactly 100 to burn each year




law of large numbers


✓ -:- as the number of exposure units increases, the more closely the

actual loss experience will approach the expected loss experience




example: as the number of homes under observation increases, the greater is the degree of

accuracy in predicting the proportion of homes that will burn




subjective risk (perceived risk)


✓ -:- uncertainty based on a person's mental condition or state of mind



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,2024 /2025 | © copyright | This work may not be copied for profit gain Excel!




example: driver with previous convictions for drunk driving tries to drive home and

wonders if he will get arrested by the police or not




chance of loss


✓ -:- the probability that an event will occur




objective probability


✓ -:- the long run relative frequency of an event based on the assumptions

of an infinite number of observations and of no change in the un derlying

conditions




two ways objective probability can be determined


✓ -:- 1) deductive reasoning (priori probabilities): probability of getting a

head from the toss of a perfectly balanced coin is 1/2 bc there are two

sides

2) inductive reasoning: the probability that a person age 21 will die before age 26 cannot be

logically deduced, life insurers can estimate the probability of death and sell a 5 year life

insurance policy for a 21 yr old


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, 2024 /2025 | © copyright | This work may not be copied for profit gain Excel!




subjective probability


✓ -:- the individual's personal estimate of the chance of loss

example: people who buy a lottery ticket on their birthday may believe it is their lucky day

and overestimate the small chance of winning




objective risk


✓ -:- the relative variation of actual loss from expected loss




peril


✓ -:- the cause of loss

example: house burns down, peril is the fire




hazard


✓ -:- condition that creates or increases the frequency or severity of loss




4 types of hazards




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