RMIN 4000 Exam 1 Brown Questions and
Answers Graded A+
Textbook definition of RISK - Correct answer-Uncertainty concerning the
occurrence of a loss
Better definition of RISK - Correct answer-A calculated possibility of a negative
outcome
Calculated Possibility - Correct answer-0 = Impossible event (NO RISK)
0.5 = Highest Risk (Most Uncertainty)
1 = 100% Certain Event (NO RISK
Negative Outcome - Correct answer-Loss
Losses must be __________? - Correct answer-Quantifiable
Pure Risk States - Correct answer-Loss
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,or
No Loss
Examples of Pure Risks - Correct answer-Fire, Cancer, Dog bites a visitor
Speculative Risk States - Correct answer-Loss
No Loss/No Gain
Gain
Examples of speculative risks - Correct answer-Investment, Gambling, Drinking
Frequency answers what question? - Correct answer-How often does a loss occur
The number of losses that occur in a specified time period
Probability of a loss - Correct answer-Frequency
Severity answers what question? - Correct answer-How much does it cost when a
loss does occur?
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, The dollar amount for a loss of a specific peril
Peril - Correct answer-Cause of a loss
Hazard - Correct answer-Condition that creates or increases the frequency and/or
severity of a loss
DOES NOT CAUSE A LOSS
Examples of Peril - Correct answer-Fire, Tornado, Collision, Burglary
Types of Hazard - Correct answer-Physical
Moral
Morale (Attitudinal)
Legal
Physical Hazard - Correct answer-A physical condition that increases the frequency
and/or severity of a loss
Book Definition of Moral Hazard - Correct answer-Dishonesty or character defects
in an individual that increase the frequency and/or severity of a loss
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Answers Graded A+
Textbook definition of RISK - Correct answer-Uncertainty concerning the
occurrence of a loss
Better definition of RISK - Correct answer-A calculated possibility of a negative
outcome
Calculated Possibility - Correct answer-0 = Impossible event (NO RISK)
0.5 = Highest Risk (Most Uncertainty)
1 = 100% Certain Event (NO RISK
Negative Outcome - Correct answer-Loss
Losses must be __________? - Correct answer-Quantifiable
Pure Risk States - Correct answer-Loss
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,or
No Loss
Examples of Pure Risks - Correct answer-Fire, Cancer, Dog bites a visitor
Speculative Risk States - Correct answer-Loss
No Loss/No Gain
Gain
Examples of speculative risks - Correct answer-Investment, Gambling, Drinking
Frequency answers what question? - Correct answer-How often does a loss occur
The number of losses that occur in a specified time period
Probability of a loss - Correct answer-Frequency
Severity answers what question? - Correct answer-How much does it cost when a
loss does occur?
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, The dollar amount for a loss of a specific peril
Peril - Correct answer-Cause of a loss
Hazard - Correct answer-Condition that creates or increases the frequency and/or
severity of a loss
DOES NOT CAUSE A LOSS
Examples of Peril - Correct answer-Fire, Tornado, Collision, Burglary
Types of Hazard - Correct answer-Physical
Moral
Morale (Attitudinal)
Legal
Physical Hazard - Correct answer-A physical condition that increases the frequency
and/or severity of a loss
Book Definition of Moral Hazard - Correct answer-Dishonesty or character defects
in an individual that increase the frequency and/or severity of a loss
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