FIN 341 EXAM 1 FINAL STUDY GUIDE 2026
TESTED QUESTIONS WITH FULL SOLUTION
◉ Top 3 Global Risks for 2025 Answer: 1. Cyber
2. Business interruptions
3. Natural catastrophes
◉ Risk is a burden on society in 3 ways: Answer: 1. The size of an
emergency fund must be increased
2. Society may be deprived of needed goods and services
3. Worry and fear are present
◉ Cost of Risk = sum of: Answer: 1. Outlays to reduce risk
2. Opportunity costs
3. Expenses from financing potential losses
4. Cost of reimbursed losses
◉ Risk Control Answer: Refers to techniques that reduce the
frequency or severity of losses
◉ Risk control techniques Answer: 1. Avoidance
2. Loss prevention
,3. Loss reduction
4. Duplication
5. Separation
6. Diversification
◉ Avoidance Answer: Eliminating risk entirely (not doing it)
◉ Loss Prevention Answer: Refers to activities to reduce the
frequency of losses
◉ Installing fire alarms is an example of Answer: Loss prevention
◉ Loss Reduction Answer: Refers to activities to reduce the severity
of losses
◉ Installing sprinklers is an example of Answer: Loss reduction
◉ Duplication Answer: Refers to having a backup or duplicate copies
of documents or property in the event a loss occurs
◉ Separation Answer: The assets exposed to loss are separated or
divided to minimize the financial loss from a single event (spreading
resources out)
, ◉ Diversification Answer: Reduces the chance of loss by spreading
the loss exposure across different parties (spreading risk across
different investments, products, markets)
◉ Risk Financing Answer: Techniques that provide for the funding of
losses
◉ Risk financing techniques include Answer: 1. Retention
2. Active retention
3. Passive retention
◉ Retention Answer: This means that an individual or business firm
retains part or all of the losses that can result from a given loss
exposure
◉ A business decides not to insure against minor property damage
and pays for small repairs out-of-pocket. Answer: Retention
◉ Active Retention Answer: The firm (or individual) is aware of the
risk and makes a conscious decision to retain it.
◉ A homeowner sets aside a fund to cover minor home repairs
instead of buying extra insurance coverage Answer: Active retention
TESTED QUESTIONS WITH FULL SOLUTION
◉ Top 3 Global Risks for 2025 Answer: 1. Cyber
2. Business interruptions
3. Natural catastrophes
◉ Risk is a burden on society in 3 ways: Answer: 1. The size of an
emergency fund must be increased
2. Society may be deprived of needed goods and services
3. Worry and fear are present
◉ Cost of Risk = sum of: Answer: 1. Outlays to reduce risk
2. Opportunity costs
3. Expenses from financing potential losses
4. Cost of reimbursed losses
◉ Risk Control Answer: Refers to techniques that reduce the
frequency or severity of losses
◉ Risk control techniques Answer: 1. Avoidance
2. Loss prevention
,3. Loss reduction
4. Duplication
5. Separation
6. Diversification
◉ Avoidance Answer: Eliminating risk entirely (not doing it)
◉ Loss Prevention Answer: Refers to activities to reduce the
frequency of losses
◉ Installing fire alarms is an example of Answer: Loss prevention
◉ Loss Reduction Answer: Refers to activities to reduce the severity
of losses
◉ Installing sprinklers is an example of Answer: Loss reduction
◉ Duplication Answer: Refers to having a backup or duplicate copies
of documents or property in the event a loss occurs
◉ Separation Answer: The assets exposed to loss are separated or
divided to minimize the financial loss from a single event (spreading
resources out)
, ◉ Diversification Answer: Reduces the chance of loss by spreading
the loss exposure across different parties (spreading risk across
different investments, products, markets)
◉ Risk Financing Answer: Techniques that provide for the funding of
losses
◉ Risk financing techniques include Answer: 1. Retention
2. Active retention
3. Passive retention
◉ Retention Answer: This means that an individual or business firm
retains part or all of the losses that can result from a given loss
exposure
◉ A business decides not to insure against minor property damage
and pays for small repairs out-of-pocket. Answer: Retention
◉ Active Retention Answer: The firm (or individual) is aware of the
risk and makes a conscious decision to retain it.
◉ A homeowner sets aside a fund to cover minor home repairs
instead of buying extra insurance coverage Answer: Active retention
