Exam 1: Risk and Its Treatment

Following good health habits can be categorized as

Which of the following statements about a priori probabilities is correct?

Five years ago,Shannon decided to start investing monthly in the common stock of ABC Telecom Company.Her financial well-being will be harmed if the price of ABC Telecom stock drops significantly.The risk of investment loss can be reduced if she invests in other companies and other types of financial assets.The risk Shannon faces with regard to her investments is a(n)

From the insured's perspective,the use of deductibles in insurance contracts is an example of

Dense fog that increases the chance of an automobile accident is an example of a

The production facility for ABC Manufacturing is located in a flood plain.Although the risk of flood is low,ABC's risk manager is concerned that a flood could damage the plant and equipment.He received bids on flood insurance from two insurance agents,but decided the cost of coverage was too high relative to the risk.So he did not purchase flood insurance.Which risk management technique is ABC using with respect to the risk of flood?

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)

An individual's personal estimate of the chance of loss is a(n)

Brad started a pest control business.To protect his personal assets against liability arising out of the business,Brad incorporated the business.Brad's use of the corporate form of organization to shield against personal liability claims illustrates

Carelessness or indifference to a loss is an example of

ABC Insurance Company plans to sell homeowners insurance in five Western states.ABC expects that 8 homeowners out of every 100,on average,will report claims each year.The variation between the rate of loss that ABC expects to occur and the rate of loss that actually occurs is called

A student who has skipped many classes and not studied the course material was surprised to learn there was a test when he showed-up for class.The student's mental uncertainty about whether or not he will pass the test is called

Rather than storing all of its finished goods in a single location,Davis Company divides the finished goods between two warehouses.This simple risk control technique which is designed to limit losses should a warehouse fire occur is called

Which of the following is an example of a commercial risk?

Some members of Congress are concerned that if one or two large U.S.banks fail,it could lead to the collapse of the entire U.S.financial sector.This risk is called

Which of the following statements about liability risks is (are)true? I.Future income and assets can be attached to pay judgments if inadequate insurance is carried. II.There is an upper limit on the amount of loss.

Cathy's car hit a patch of ice on the road.The car skidded off the road and hit a tree.The presence of ice on the road is best described as a(n)

Objective risk is defined as

Which of the following statements about chance of loss and risk is (are)true? I.If the chance of loss is identical for two groups,the objective risk must be the same. II.Two individuals may perceive differently the risk inherent in a given activity.

Faking an accident to collect insurance proceeds is an example of