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RMIN 4000 Exam 1 Brown Study Guide Solutions

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RMIN 4000 Exam 1 Brown Study Guide Solutions Textbook definition of RISK - ANSWER-Uncertainty concerning the occurrence of a loss Better definition of RISK - ANSWER-A calculated possibility of a negative outcome Calculated Possibility - ANSWER-0 = Impossible event (NO RISK) 0.5 = Highest Risk...

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  • November 13, 2024
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EmilyCharlene
RMIN 4000 Exam 1 Brown Study
Guide Solutions

Textbook definition of RISK - ANSWER✔✔-Uncertainty concerning the occurrence of a

loss


Better definition of RISK - ANSWER✔✔-A calculated possibility of a negative outcome


Calculated Possibility - ANSWER✔✔-0 = Impossible event (NO RISK)




0.5 = Highest Risk (Most Uncertainty)




1 = 100% Certain Event (NO RISK


Negative Outcome - ANSWER✔✔-Loss


Losses must be __________? - ANSWER✔✔-Quantifiable


Pure Risk States - ANSWER✔✔-Loss




or


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,No Loss


Examples of Pure Risks - ANSWER✔✔-Fire, Cancer, Dog bites a visitor


Speculative Risk States - ANSWER✔✔-Loss




No Loss/No Gain




Gain


Examples of speculative risks - ANSWER✔✔-Investment, Gambling, Drinking


Frequency answers what question? - ANSWER✔✔-How often does a loss occur




The number of losses that occur in a specified time period


Probability of a loss - ANSWER✔✔-Frequency


Severity answers what question? - ANSWER✔✔-How much does it cost when a loss

does occur?




The dollar amount for a loss of a specific peril

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, Peril - ANSWER✔✔-Cause of a loss


Hazard - ANSWER✔✔-Condition that creates or increases the frequency and/or

severity of a loss




DOES NOT CAUSE A LOSS


Examples of Peril - ANSWER✔✔-Fire, Tornado, Collision, Burglary


Types of Hazard - ANSWER✔✔-Physical


Moral


Morale (Attitudinal)


Legal


Physical Hazard - ANSWER✔✔-A physical condition that increases the frequency

and/or severity of a loss


Book Definition of Moral Hazard - ANSWER✔✔-Dishonesty or character defects in an

individual that increase the frequency and/or severity of a loss


Better Definition of Moral Hazard - ANSWER✔✔-The presence of insurance changes

the behavior of the insured


Examples of Moral Hazard - ANSWER✔✔-Using a hammer to create "hail" damage to a

roof
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