Which of the following is an example of pure risk? A) Clayton purchas

QUESTION

Which of the following is an example of pure risk?

A) Clayton purchased $200,000 worth of flood insurance for his fencing club that is located on the banks of a river.
B) Rory went to a vanity publisher and paid for 5,000 copies of her novel to be printed. The books are in her garage, and now she has to sell them.
C) Audrey rented a small storefront, bought thousands of dollars worth of baking equipment and supplies, and started making cupcakes from her mother’s recipes. She is hoping the customers will find her.
D) Linus spent $10 on Power Ball lottery tickets.
E) Liam spent his savings to open a cat hospital in his urban community.

ANSWER

Answer: A
Explanation: A) Pure risk involves a chance for either loss or no loss; there is no possibility of gain. There is nothing for Clayton to gain if the river overflows its banks and floods his fencing club.