FIN 341 EXAM 2 MOCK EXAM WITH ANSWER RATIONALES 2026

FIN 341 EXAM 2 MOCK EXAM WITH ANSWER
RATIONALES 2026


◉ Objectives of pre-loss RM (before the loss happens).
Answer: -prepare for potential losses in the most economical way
- reduce anxiety
- meet any legal obligations


◉ Objectives of post-loss RM (post loss goals).
Answer: -survival of the firm
- continue operating
- stability of earnings
- continued growth of the firm
- minimize effect of loss on others


◉ Steps in the RM process.
Answer: 1. identify loss exposures
2. measure and analyze the loss exposures (risk evaluation)
3. select the appropreiate combination of techniques for treating the
loss exposures (technique selection)
4. implement and monitor the RM program

, ◉ Risk evaluation techniques.
Answer: - loss frequency
-loss severity
- max possible loss
-probable max loss


◉ Loss Frequency.
Answer: probable number of losses


◉ Loss Severity.
Answer: the probable size of the losses that may occur


◉ Which is more important- loss fequency or loss severity?.
Answer: loss severity


◉ maximum possible loss.
Answer: the worst loss that could happen to the firm during its
lifetime


◉ probable maximum loss.
Answer: worst loss that is LIKELY to happen