INSR 310 Final - Ferguson [ULL] Questions and Answers Latest
2026
1. According to Professor Ferguson's lectures, what is the definition of risk?
- A) The probability of a loss occurring
- B) Any uncertainty regarding financial loss
- C) The severity of a potential loss
- D) The cost of insurance premiums
Correct Answer: B – Risk is defined as any uncertainty regarding financial loss. This foundational concept
applies to individuals, entities, and companies alike.
2. Which of the following are the three risk classifications covered in INSR 310?
- A) High, medium, low
- B) Individual, group, societal
- C) Pure vs. speculative, static vs. dynamic, objective vs. subjective
- D) Financial, operational, strategic
Correct Answer: C – The three primary risk classifications are pure vs. speculative, static vs. dynamic,
and objective vs. subjective.
3. A risk that involves only the possibility of loss or no loss (no chance of gain) is called:
- A) Speculative risk
- B) Dynamic risk
- C) Subjective risk
- D) Pure risk
Correct Answer: D – Pure risk presents only the outcomes of loss or no loss, making it the primary type
of risk for which insurance is well-suited. Insurance works well for pure risk situations.
,4. Buying a stock in the stock market is an example of which type of risk?
- A) Pure risk
- B) Static risk
- C) Speculative risk
- D) Objective risk
Correct Answer: C – Speculative risk offers the possibility of loss, no loss, or gain. Investment activities
like stock trading involve the chance for profit, making them speculative rather than pure risks.
5. Which type of risk remains relatively constant over time with little change?
- A) Dynamic risk
- B) Static risk
- C) Subjective risk
- D) Speculative risk
Correct Answer: B – Static risks are those that do not change substantially over time. Examples include
death (a timeless certainty), earthquakes (geological constants), and meteor impacts.
6. Risks that change, especially with advancements in technology, are known as:
- A) Static risks
- B) Pure risks
- C) Dynamic risks
- D) Objective risks
Correct Answer: C – Dynamic risks evolve with societal and technological changes. Car accidents became
common after the invention of automobiles, and space debris is a modern dynamic risk that didn't exist
generations ago.
7. Objective risk is characterized by:
,- A) Individual perception of danger
- B) Statistical variation from expected outcomes
- C) Emotional response to potential loss
- D) Degree of risk aversion
Correct Answer: B – Objective risk is measurable and quantifiable through statistics, representing the
mathematical variation of actual losses from expected losses. It's the "math you can put on it."
8. A person's fear of flying despite statistics showing it is safer than driving is an example of:
- A) Objective risk
- B) Static risk
- C) Subjective risk
- D) Pure risk
Correct Answer: C – Subjective risk is based on individual perception and psychology, not statistical
reality. The fear of flying, although safer statistically than driving, exemplifies this psychological
component of risk perception.
9. What is the relationship between risk and probability according to Ferguson's lectures?
- A) They are the same concept
- B) Probability is an objective risk measurement tool
- C) Risk is more precise than probability
- D) Probability only applies to speculative risk
Correct Answer: B – Risk and probability are not identical; probability serves as an objective
measurement tool used to quantify risk. Risk encompasses uncertainty, while probability provides a
mathematical measure of that uncertainty.
10. Which of the following is NOT one of the three primary burdens of risk?
- A) Actual costs of losses
, - B) Transaction costs of insurance policies
- C) Opportunity costs
- D) Mental anguish
Correct Answer: B – The three primary burdens of risk are actual costs of losses, opportunity costs, and
mental anguish. Transaction costs of insurance policies are not listed as one of the primary burdens.
11. Current and future insurance premiums, loss control expenses, and compliance costs are examples
of:
- A) Opportunity costs
- B) Mental anguish
- C) Actual costs of losses
- D) Speculative costs
Correct Answer: C – Actual costs of losses include direct financial burdens such as premiums paid (both
current and future), loss control measures, and compliance-related expenses that individuals and society
bear.
12. The concept that scarce resources (time and money) allocated to risk management create trade-offs
with potential returns is known as:
- A) Actual costs of losses
- B) Mental anguish
- C) Opportunity costs
- D) Risk transfer
Correct Answer: C – Opportunity costs represent the trade-offs inherent in allocating limited resources
to risk management activities rather than potentially lucrative alternatives. This includes both time and
money considerations.
13. Losing sleep, general aggravation, and behavior modification due to worry about potential losses are
examples of:
- A) Actual costs of losses
2026
1. According to Professor Ferguson's lectures, what is the definition of risk?
- A) The probability of a loss occurring
- B) Any uncertainty regarding financial loss
- C) The severity of a potential loss
- D) The cost of insurance premiums
Correct Answer: B – Risk is defined as any uncertainty regarding financial loss. This foundational concept
applies to individuals, entities, and companies alike.
2. Which of the following are the three risk classifications covered in INSR 310?
- A) High, medium, low
- B) Individual, group, societal
- C) Pure vs. speculative, static vs. dynamic, objective vs. subjective
- D) Financial, operational, strategic
Correct Answer: C – The three primary risk classifications are pure vs. speculative, static vs. dynamic,
and objective vs. subjective.
3. A risk that involves only the possibility of loss or no loss (no chance of gain) is called:
- A) Speculative risk
- B) Dynamic risk
- C) Subjective risk
- D) Pure risk
Correct Answer: D – Pure risk presents only the outcomes of loss or no loss, making it the primary type
of risk for which insurance is well-suited. Insurance works well for pure risk situations.
,4. Buying a stock in the stock market is an example of which type of risk?
- A) Pure risk
- B) Static risk
- C) Speculative risk
- D) Objective risk
Correct Answer: C – Speculative risk offers the possibility of loss, no loss, or gain. Investment activities
like stock trading involve the chance for profit, making them speculative rather than pure risks.
5. Which type of risk remains relatively constant over time with little change?
- A) Dynamic risk
- B) Static risk
- C) Subjective risk
- D) Speculative risk
Correct Answer: B – Static risks are those that do not change substantially over time. Examples include
death (a timeless certainty), earthquakes (geological constants), and meteor impacts.
6. Risks that change, especially with advancements in technology, are known as:
- A) Static risks
- B) Pure risks
- C) Dynamic risks
- D) Objective risks
Correct Answer: C – Dynamic risks evolve with societal and technological changes. Car accidents became
common after the invention of automobiles, and space debris is a modern dynamic risk that didn't exist
generations ago.
7. Objective risk is characterized by:
,- A) Individual perception of danger
- B) Statistical variation from expected outcomes
- C) Emotional response to potential loss
- D) Degree of risk aversion
Correct Answer: B – Objective risk is measurable and quantifiable through statistics, representing the
mathematical variation of actual losses from expected losses. It's the "math you can put on it."
8. A person's fear of flying despite statistics showing it is safer than driving is an example of:
- A) Objective risk
- B) Static risk
- C) Subjective risk
- D) Pure risk
Correct Answer: C – Subjective risk is based on individual perception and psychology, not statistical
reality. The fear of flying, although safer statistically than driving, exemplifies this psychological
component of risk perception.
9. What is the relationship between risk and probability according to Ferguson's lectures?
- A) They are the same concept
- B) Probability is an objective risk measurement tool
- C) Risk is more precise than probability
- D) Probability only applies to speculative risk
Correct Answer: B – Risk and probability are not identical; probability serves as an objective
measurement tool used to quantify risk. Risk encompasses uncertainty, while probability provides a
mathematical measure of that uncertainty.
10. Which of the following is NOT one of the three primary burdens of risk?
- A) Actual costs of losses
, - B) Transaction costs of insurance policies
- C) Opportunity costs
- D) Mental anguish
Correct Answer: B – The three primary burdens of risk are actual costs of losses, opportunity costs, and
mental anguish. Transaction costs of insurance policies are not listed as one of the primary burdens.
11. Current and future insurance premiums, loss control expenses, and compliance costs are examples
of:
- A) Opportunity costs
- B) Mental anguish
- C) Actual costs of losses
- D) Speculative costs
Correct Answer: C – Actual costs of losses include direct financial burdens such as premiums paid (both
current and future), loss control measures, and compliance-related expenses that individuals and society
bear.
12. The concept that scarce resources (time and money) allocated to risk management create trade-offs
with potential returns is known as:
- A) Actual costs of losses
- B) Mental anguish
- C) Opportunity costs
- D) Risk transfer
Correct Answer: C – Opportunity costs represent the trade-offs inherent in allocating limited resources
to risk management activities rather than potentially lucrative alternatives. This includes both time and
money considerations.
13. Losing sleep, general aggravation, and behavior modification due to worry about potential losses are
examples of:
- A) Actual costs of losses
