rmin 2005 exam 1 Questions and Answers
Graded A+
Which of the following would be an example of a pure risk? - Correct answer-The
risk of fire damage to a restaurant
Pure risk - Correct answer-Involves uncertainty as to whether loss will occur
Speculative Risk - Correct answer-Involves uncertainty about an event that could
produce either a profit or loss
Static Risk - Correct answer-Risks that would exist that would exist in an
unchanging society that is in stable equilibrium
Dynamic Risk - Correct answer-Risks caused by societal changes
Subjective Risk - Correct answer-Risks that arise from psychological uncertainty
that is based on an individual's mental attitude or state of mind
Objective Risk - Correct answer-Risk that is precisely observable and measurable
Amber has insurance on her women's boutique in downtown Monroe. She is
considering opening up a second location in West Monroe but decides not to
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, because of the risks that would be involved in having a second location. What
components of risk do the insurance Amber buys and her decision to not open a
second location fall into (respectively)? - Correct answer-Expenses to finance loss
and opportunity costs
Liability risk - Correct answer-A company getting sued for discrimination
Property risk - Correct answer-A warehouse being destroyed by a tornado
Financial risk - Correct answer-A rise in borrowing costs
Loss of income risk - Correct answer-A person becoming unemployed
Peril - Correct answer-Collision
Physical hazard - Correct answer-Malfunctioning traffic light
Moral hazard - Correct answer-Burning down your own building to collect
insurance money
Morale hazard - Correct answer-Not using a phone case because you know that
you have insurance to cover your phone if it breaks
What are the 4 steps of the risk management process in the proper order - Correct
answer-1. Identify risks
2. Evaluate risks
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Graded A+
Which of the following would be an example of a pure risk? - Correct answer-The
risk of fire damage to a restaurant
Pure risk - Correct answer-Involves uncertainty as to whether loss will occur
Speculative Risk - Correct answer-Involves uncertainty about an event that could
produce either a profit or loss
Static Risk - Correct answer-Risks that would exist that would exist in an
unchanging society that is in stable equilibrium
Dynamic Risk - Correct answer-Risks caused by societal changes
Subjective Risk - Correct answer-Risks that arise from psychological uncertainty
that is based on an individual's mental attitude or state of mind
Objective Risk - Correct answer-Risk that is precisely observable and measurable
Amber has insurance on her women's boutique in downtown Monroe. She is
considering opening up a second location in West Monroe but decides not to
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, because of the risks that would be involved in having a second location. What
components of risk do the insurance Amber buys and her decision to not open a
second location fall into (respectively)? - Correct answer-Expenses to finance loss
and opportunity costs
Liability risk - Correct answer-A company getting sued for discrimination
Property risk - Correct answer-A warehouse being destroyed by a tornado
Financial risk - Correct answer-A rise in borrowing costs
Loss of income risk - Correct answer-A person becoming unemployed
Peril - Correct answer-Collision
Physical hazard - Correct answer-Malfunctioning traffic light
Moral hazard - Correct answer-Burning down your own building to collect
insurance money
Morale hazard - Correct answer-Not using a phone case because you know that
you have insurance to cover your phone if it breaks
What are the 4 steps of the risk management process in the proper order - Correct
answer-1. Identify risks
2. Evaluate risks
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