1、D) the cause of loss. B3) An insurance company estimates its objective risk for 10,000 exposures to be 10 percent. Assuming the probability of loss remains the same, what would happen to the objective risk if the number of exposures were to increase to 1 million?A) It would decrease to 1 percent.B)
2、It would decrease to 5 percent.C) It would remain the same.D) It would increase to 20 percent. A4) Uncertainty based on a persons mental condition or state of mind is known asA) objective risk.B) subjective risk.C) objective probability.D) subjective probability.5) The long-run relative frequency of
3、 an event based on the assumption of an infinite number of observations with no change in the underlying conditions is calledA) objective probability.B) objective risk.C) subjective probability.D) subjective risk.6) Which of the following statements about a priori probabilities is correct?A) They ar
4、e subjective probabilities based on ambiguity in the way probability is perceived.B) They are subjective probabilities that may vary among individuals because of factors such as age, gender, education, and the use of alcohol.C) They are objective probabilities that can be determined by deductive rea
5、soning.D) They are objective probabilities that can be determined by subjective reasoning.7) An individuals personal estimate of the chance of loss isA) an objective probability.B) an objective risk.C) a subjective probability.D) an a priori probability.8) A peril isA) a moral hazard.B) the cause of
6、 a loss.C) a condition which increases the chance of a loss.D) the probability that a loss will occur.9) An earthquake is an example of aA) moral hazard.B) peril.C) physical hazard.D) objective risk.10) Dense fog that increases the chance of an automobile accident is an example of aA) speculative ri
7、sk.D) moral hazard.11) Faking an accident to collect insurance proceeds is an example of aA) physical hazard.C) moral hazard.D) attitudinal hazard. Revised12) Carelessness or indifference to a loss is an example of B) objective probability. D13) Some characteristics of the judicial system and regula
8、tory environment increase the frequency and severity of loss. This hazard is calledB) physical hazard.C) attitudinal hazard.D) legal hazard.14) Taylor Tobacco Company is concerned that the company may be held liable in a court of law and ordered to pay a large damage award. The characteristics of th
9、e judicial system that increase the frequency and severity of losses are known asB) particular risk.C) speculative risk.15) A phrase that encompasses all of the major risks faced by a business firm isA) financial risk.B) speculative risk.C) enterprise risk.D) pure risk.16) Which of the following sta
10、tements about financial risk is (are) true?I. Enterprise risk does not include financial risk. II. Financial risk is easily addressed through the purchase of insurance.A) I onlyB) II onlyC) both I and IID) neither I nor II17) All of the following are considered financial risks EXCEPTA) the decline i
11、n the value of a bond portfolio because of rising interest rates.B) increased cost of production because of rising commodity prices.C) loss of money because of adverse movements in currency exchange rates.D) destruction of a production facility caused by an explosion. 18) Katelyn was just named Risk
12、 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)A) financial risk management program.B) enterprise risk managemen
13、t program.C) fundamental risk management program.D) consequential risk management program.19) A pure risk is defined as a situation in which there isA) only the possibility of loss or no loss.B) only the possibility of profit.C) a possibility of neither profit nor loss.D) a possibility of either pro
14、fit or loss.20) The premature death of an individual is an example of aA) pure risk.C) fundamental risk.D) physical hazard.21) Which of the following statements about speculative risks is true?A) They are almost always insurable by private insurers.B) They are more easily predictable than pure risks
15、.C) They may benefit society even though a loss occurs.D) They involve only a chance of loss.22) An automobile that is a total loss as a result of a collision is an example of which of the following types of risk?I. Speculative riskII. Diversifiable risk23) All of the following are programs to insur
16、e fundamental risks EXCEPTA) federally subsidized flood insurance.B) auto physical damage insurance.C) Social Security.D) unemployment insurance.24) All of the following are examples of personal risks EXCEPTA) poor health.B) unemployment.C) premature death.D) flood.25) Which of the following is a re
17、ason why premature death may result in economic insecurity?I. Additional expenses associated with death may be incurred.II. The income of the deceased persons family may be inadequate to meet its basic needs.26) Which of the following are often consequences of long-term disability?I. Continuing medi
18、cal expensesII. Loss or reduction of employee benefits27) All of the following are examples of direct property losses EXCEPTA) the theft of a persons jewelry.B) the destruction of a firms manufacturing plant by an earthquake.C) the cost of renting a substitute vehicle while a collision-damaged car i
19、s being repaired.D) the vandalism of a persons automobile.28) The extra expense incurred by a business to stay in operation following a fire is an example of a(n)A) fundamental risk.C) direct loss.D) indirect loss.29) Which of the following statements about liability risks is (are) true?I. Future in
20、come and assets can be attached to pay judgments if inadequate insurance is carried.II. There is an upper limit on the amount of loss.30) All of the following are burdens to society because of the presence of risk EXCEPTA) The size of an emergency fund must be increased.B) Individuals may profit fro
21、m accepting a speculative risk. C) Society is deprived of certain goods and services.D) Mental fear and worry are present.31) Loss control includes which of the following?I. Loss reductionII. Loss prevention32) Following good health habits can be categorized asA) loss prevention.B) risk retention.C)
22、 noninsurance transfer.D) personal insurance.33) From the insureds perspective, the use of deductibles in insurance contracts is an example ofA) risk transfer.B) loss control.C) risk avoidance.D) risk retention.34) The use of fire-resistive materials when constructing a building is an example of35)
23、All of the following statements about risk retention are true EXCEPTA) It may be used intentionally if commercial insurance is unavailable.B) It may be used passively because of ignorance.C) Its use is most appropriate for low-frequency, high-severity types of risks.D) Its use results in cost savings if losses are less than the cost of insurance.36) All of the following are methods of nonins
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