FBLA MODULE 1 EXAM 2025/2026 (QUESTIONS WITH
100% CORRECT ANSWERS)
GRADED A+
Risk - Uncertainty of something, concerns a loss
Risk refers to ___ and ___ being injured - Property & Life
Objective Risk - Defined as relative variation of actual loss from expected loss
Objective Risk varies inversely with - square root of # of cases under observation
EX: 10,000 houses were insured
Objective Risk is 10/100 or 10%
The Law of Large Numbers - states that if the # of exposure units increases, the more closely the
actual loss experience will approach the expected loss experience
Subjective Risk - defined as uncertainty based on a person's mental condition or state of mind
Chance of Loss - probability that an event will occur
Probability has both ___ and ___ aspects - objective and subjective
Objective Probability - refers to the long-run relative frequency of an event based on the
assumptions of an infinite number of observations and of no change in underlying conditions
Peril - defined as the cause of loss
Hazard - condition that creates or increases chance of loss
Four Types of Hazards - physical, legal, moral, morale
, Subjective Probability - A probability derived from an individual's personal judgment about whether
a specific outcome is likely to occur. Subjective probabilities contain no formal calculations and only
reflect the subject's opinions and past experience.
Physical Hazard - a physical condition that increases the chance of loss
EX: icy roads, chance of fire, defective lock on a door
Moral Hazard - dishonesty or character defects in an individual that increases severity of loss
EX: faking an accident to collect money from insurer, fraudulent claims, murdering insured to collect
life insurance
Morale Hazard - carelessness or indifference to a loss because of the existence of insurance
EX: leaving doors unlocked, leaving car keys in unlocked car
Legal Hazard - refers to the characteristics of the legal system or regulatory environment that
increase the frequency or severity of losses
EX: large jury verdicts, large damage awards in liability lawsuits, coverage for alcoholism, etc.
Risk Categories - Pure and Speculative
Fundamental Risk and Partial Risk
Enterprise Risk
Pure Risk - situation where there are only possiblities of loss or no loss
EX: premature death, job accidents, medical expenses, damage to property from fire, lightning,
flood, or earthquake
Speculative Risk - only profit or loss possible
Fundamental Risk - affects entire economy or large numbers of people
EX: war, inflation, terrorist attack
Particular Risk - affects only individuals and not entire community
EX: car theft, bank robbery, house fire
100% CORRECT ANSWERS)
GRADED A+
Risk - Uncertainty of something, concerns a loss
Risk refers to ___ and ___ being injured - Property & Life
Objective Risk - Defined as relative variation of actual loss from expected loss
Objective Risk varies inversely with - square root of # of cases under observation
EX: 10,000 houses were insured
Objective Risk is 10/100 or 10%
The Law of Large Numbers - states that if the # of exposure units increases, the more closely the
actual loss experience will approach the expected loss experience
Subjective Risk - defined as uncertainty based on a person's mental condition or state of mind
Chance of Loss - probability that an event will occur
Probability has both ___ and ___ aspects - objective and subjective
Objective Probability - refers to the long-run relative frequency of an event based on the
assumptions of an infinite number of observations and of no change in underlying conditions
Peril - defined as the cause of loss
Hazard - condition that creates or increases chance of loss
Four Types of Hazards - physical, legal, moral, morale
, Subjective Probability - A probability derived from an individual's personal judgment about whether
a specific outcome is likely to occur. Subjective probabilities contain no formal calculations and only
reflect the subject's opinions and past experience.
Physical Hazard - a physical condition that increases the chance of loss
EX: icy roads, chance of fire, defective lock on a door
Moral Hazard - dishonesty or character defects in an individual that increases severity of loss
EX: faking an accident to collect money from insurer, fraudulent claims, murdering insured to collect
life insurance
Morale Hazard - carelessness or indifference to a loss because of the existence of insurance
EX: leaving doors unlocked, leaving car keys in unlocked car
Legal Hazard - refers to the characteristics of the legal system or regulatory environment that
increase the frequency or severity of losses
EX: large jury verdicts, large damage awards in liability lawsuits, coverage for alcoholism, etc.
Risk Categories - Pure and Speculative
Fundamental Risk and Partial Risk
Enterprise Risk
Pure Risk - situation where there are only possiblities of loss or no loss
EX: premature death, job accidents, medical expenses, damage to property from fire, lightning,
flood, or earthquake
Speculative Risk - only profit or loss possible
Fundamental Risk - affects entire economy or large numbers of people
EX: war, inflation, terrorist attack
Particular Risk - affects only individuals and not entire community
EX: car theft, bank robbery, house fire
