ABC Insurance Company plans to sell homeowners insurance in five Western states. ABC expects that 8 homeowners out of every 100, on average, will report claims each year. The variation between the rate of loss that ABC expects to occur and the rate of loss that actually occurs is called A) objective probability. B) subjective […]
Carelessness or indifference to a loss is an example of A) physical hazard. B) objective probability. C) moral hazard. D) attitudinal hazard. ANSWER Answer: D
Faking an accident to collect insurance proceeds is an example of A) physical hazard. B) objective risk. C) moral hazard. D) attitudinal hazard. ANSWER Answer: C
Dense fog that increases the chance of an automobile accident is an example of a A) speculative risk. B) peril. C) physical hazard. D) moral hazard. ANSWER Answer: C
An earthquake is an example of a(n) A) moral hazard. B) peril. C) physical hazard. D) objective risk. ANSWER Answer: B
Taylor Tobacco Company is concerned that the company may be held liable in a court of law and ordered to pay a large damage award to a smoker harmed by the company’s cigarettes. The characteristics of the judicial system that increase the frequency and severity of loss are known as A) moral hazard. B) particular […]
Some characteristics of the judicial system and regulatory environment increase the frequency and severity of loss. This hazard is called A) moral hazard. B) physical hazard. C) attitudinal hazard. D) legal hazard. ANSWER Answer: D
A name that encompasses all of the major risks faced by a business firm is A) financial risk. B) speculative risk. C) enterprise risk. D) pure risk. ANSWER Answer: C
One of the speculative financial risks considered in an enterprise risk management program is the risk of loss because of adverse changes in commodity prices, interest rates, foreign exchange rates, and the value of money. This risk is called A) property risk. B) financial risk. C) strategic risk. D) operational risk. ANSWER Answer: […]
Traditionally, risk has been defined as A) any situation in which the probability of loss is one. B) any situation in which the probability of loss is zero. C) uncertainty concerning the occurrence of loss. D) the probability of a loss occurring. ANSWER Answer: C
