RMI 2101 Quiz 1 UPDATED ACTUAL Questions And Correct Answers
Terms in this set (17)
Pure Risk -A chance of loss or no loss, no chance of gain (fire, flood, death, sickness)
Speculative Risk a chance of loss, no loss, or gain (gambling, buying stocks or homes)
--BASIS FOR ENTERPRISE RISK MANAGEMENT
Pure and Speculative Risk both involve uncertainty
Pure and Speculative Risk have different outcomes
Static Risks Does not change much over time. EX) natural disasters, people getting sick, fires
Dynamic Risk Arises out of change in circumstances, new risks. EX) cyber hacking, terrorism,
driver less cars
Diversifiable Risk Impacts only some individuals, businesses, or groups. ex) fires
Non-Diversifable Risk Impacts large segments of society at once.
EX) Natural Disasters, Unemployment, Inflation
Subjective Risk An individuals view of uncertaniny or the situation involving risk.
-Depends on the individuals attitude toward risk.
Not easy to measure or compare with others.
Influences a firm how to handy risky situations
---EX) One professor reads English paper and gives a B when another professor
fives you an A.
Factors affecting risk Given that a loss has occurred, How much $$$ did it cost.
Severity is conditional depending on frequency being positive.
If frequency is zero, severity is not an issue
Peril The immediate cause of the loss.
EX) fire,flood, death, sickness
Hazard Underlying condition lying behind a loss occurrence which either:
-Increased frequency of the loss
-Increase severity of the loss
-or increases both
EX) slippery floor, speeding
Moral Hazard Act (behavior) different because of existence of insurance
-Frequency or Serenity increases because of the existence of insurance ... Lower
price Increases the demand........*******(carelessness concerning loss)
EX) insurance fraud, arson (burn your own building), husband kills wife to collect
insurance
Terms in this set (17)
Pure Risk -A chance of loss or no loss, no chance of gain (fire, flood, death, sickness)
Speculative Risk a chance of loss, no loss, or gain (gambling, buying stocks or homes)
--BASIS FOR ENTERPRISE RISK MANAGEMENT
Pure and Speculative Risk both involve uncertainty
Pure and Speculative Risk have different outcomes
Static Risks Does not change much over time. EX) natural disasters, people getting sick, fires
Dynamic Risk Arises out of change in circumstances, new risks. EX) cyber hacking, terrorism,
driver less cars
Diversifiable Risk Impacts only some individuals, businesses, or groups. ex) fires
Non-Diversifable Risk Impacts large segments of society at once.
EX) Natural Disasters, Unemployment, Inflation
Subjective Risk An individuals view of uncertaniny or the situation involving risk.
-Depends on the individuals attitude toward risk.
Not easy to measure or compare with others.
Influences a firm how to handy risky situations
---EX) One professor reads English paper and gives a B when another professor
fives you an A.
Factors affecting risk Given that a loss has occurred, How much $$$ did it cost.
Severity is conditional depending on frequency being positive.
If frequency is zero, severity is not an issue
Peril The immediate cause of the loss.
EX) fire,flood, death, sickness
Hazard Underlying condition lying behind a loss occurrence which either:
-Increased frequency of the loss
-Increase severity of the loss
-or increases both
EX) slippery floor, speeding
Moral Hazard Act (behavior) different because of existence of insurance
-Frequency or Serenity increases because of the existence of insurance ... Lower
price Increases the demand........*******(carelessness concerning loss)
EX) insurance fraud, arson (burn your own building), husband kills wife to collect
insurance
