An insurance company estimates its objective risk for 10,000 exposures to be 10 percent. Assuming the probability of loss remains the same, what would happen to the objective risk if the number of exposures were to increase to 1 million? A) It would decrease to 1 percent. B) It would decrease to 5 percent. C) […]
Date: September 19th, 2020
The premature death of an individual is an example of a A) pure risk. B) speculative risk. C) nondiversifiable risk. D) physical hazard. ANSWER Answer: A
Date: September 19th, 2020
Objective risk is defined as A) the probability of loss. B) the relative variation of actual loss from expected loss. C) uncertainty based on a person’s mental condition or state of mind. D) the cause of loss. ANSWER Answer: B
Date: September 19th, 2020
Katelyn was just named Risk Manager of ABC Company. She has decided to create a risk management program which considers all of the risks faced by ABC—pure, speculative, operational, and strategic—in a single risk management program. Such a program is called a(n) A) financial risk management program. B) enterprise risk management program. C) fundamental risk […]
Date: September 19th, 2020
An individual’s personal estimate of the chance of loss is a(n) A) objective probability. B) objective risk. C) subjective probability. D) a priori probability. ANSWER Answer: C
Date: September 19th, 2020
A peril is A) a moral hazard. B) the cause of a loss. C) a condition that increases the chance of a loss. D) the probability that a loss will occur. ANSWER Answer: B
Date: September 19th, 2020
The long-run relative frequency of an event based on the assumption of an infinite number of observations with no change in the underlying conditions is called A) objective probability. B) objective risk. C) subjective probability. D) subjective risk. ANSWER Answer: A
Date: September 19th, 2020
Which of the following statements about a priori probabilities is correct? A) They are subjective probabilities based on ambiguity in the way probability is perceived. B) They are subjective probabilities that may vary among individuals because of factors such as age, gender, education, and the use of alcohol. C) They are objective probabilities that can […]
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
