FIN 341 EXAM 1 ACTUAL PAPER 2026
QUESTIONS WITH SOLUTIONS GRADED A+
◉ A risk that can only result in loss or no loss. Answer: Pure risk
◉ A risk involving the possibility of gain or loss. Answer: Speculative
risk
◉ Risk that arises from changes in the economy. Answer: Dynamic
risk
◉ Risk that exists even in a stable economy. Answer: Static risk
◉ Risk that can be reduced through diversification. Answer:
Diversifiable risk
◉ Risk that cannot be diversified away. Answer: Non-diversifiable
risk
◉ Perception of risk based on personal opinion. Answer: Subjective
risk
, ◉ Risk based on measurable facts. Answer: Objective risk
◉ Frequency of loss. Answer: How often a loss occurs
◉ Severity of loss. Answer: The size or magnitude of a loss
◉ Peril. Answer: The cause of loss
◉ Hazard. Answer: A condition that increases the chance or severity
of loss
◉ Physical hazard. Answer: Physical condition that increases loss
(e.g., icy roads)
◉ Morale hazard. Answer: Carelessness due to insurance protection
◉ Moral hazard. Answer: Dishonesty or intentional wrongdoing
◉ Legal hazard. Answer: Laws or regulations that increase loss
exposure
◉ First step in the risk management process. Answer: Risk
identification
QUESTIONS WITH SOLUTIONS GRADED A+
◉ A risk that can only result in loss or no loss. Answer: Pure risk
◉ A risk involving the possibility of gain or loss. Answer: Speculative
risk
◉ Risk that arises from changes in the economy. Answer: Dynamic
risk
◉ Risk that exists even in a stable economy. Answer: Static risk
◉ Risk that can be reduced through diversification. Answer:
Diversifiable risk
◉ Risk that cannot be diversified away. Answer: Non-diversifiable
risk
◉ Perception of risk based on personal opinion. Answer: Subjective
risk
, ◉ Risk based on measurable facts. Answer: Objective risk
◉ Frequency of loss. Answer: How often a loss occurs
◉ Severity of loss. Answer: The size or magnitude of a loss
◉ Peril. Answer: The cause of loss
◉ Hazard. Answer: A condition that increases the chance or severity
of loss
◉ Physical hazard. Answer: Physical condition that increases loss
(e.g., icy roads)
◉ Morale hazard. Answer: Carelessness due to insurance protection
◉ Moral hazard. Answer: Dishonesty or intentional wrongdoing
◉ Legal hazard. Answer: Laws or regulations that increase loss
exposure
◉ First step in the risk management process. Answer: Risk
identification