RMI 2101 LATEST 2026 EXAM TEST QUESTIONS AND
ANSWERS RATED A+
✔✔Pure Risk - ✔✔has two outcomes: 1) No Loss 2) Loss
no winning ex. fire, flood, sickness, death
-uncertainty
✔✔Sources of Pure Risk: Personal - ✔✔-Human capital: personal pure risk
-ability to generate income
-subject to life and health exposures: injury, death
-loss in income
-medical expenses
-retirement/unemployment: reduction in income, medical expenses
✔✔Sources of Pure Risk: Property + Liability - ✔✔-theft or damage
-ownership of physical assets
-getting sued
-legal fees
✔✔Speculative Risk - ✔✔3 Future outcomes: 1) Loss 2) No loss 3)Breakeven
ex. gambling, buying home, stock market
✔✔Probability of a loss:
1-
0-1
0- - ✔✔risk doesn't equal probability of a loss
1: certain
0-1 uncertain
0: impossible
✔✔Pure vs. Speculative Risk - ✔✔both involve future states, have different outcomes
✔✔Static Risk - ✔✔risk that hasn't changed over time, always present
ex. fire, death, sickness, flood
✔✔Dynamic Risk - ✔✔risk that has changed over time
ex. cyber, airport security, car accidents
✔✔Static vs. Dynamic - ✔✔no change in risk vs. change in risk
✔✔Subjective risk - ✔✔measures an individual's view of uncertainty or situation
involving risk
-influences how decision makers handle risk
-not easily measured
, ✔✔Objective risk - ✔✔variation of expected outcomes compared to actual outcomes
-risk is uncertain
problem is timing: what don't know what will happen when
✔✔Diversifiable Risk - ✔✔impacts a small/specific group of individuals
ex. fire
✔✔Non-diversifiable Risk - ✔✔event that causes exponential losses
ex. market crash, natural disaster
✔✔Expected Losses - ✔✔losses based on experience and data
-what we expect to happen
✔✔Actual Losses - ✔✔the losses that actually occur
✔✔Variation of a Loss - ✔✔(Actual Loss-Expected Loss)/Expected Loss
✔✔Direct Losses vs. Indirect Losses - ✔✔Direct: cost of replacing/repairing an asset
Indirect: extra expenses/loss of income
✔✔Peril - ✔✔the immediate cause of a loss
ex. Why did I lose this? --> fire, flood, theft, death
ex. House burns down from candle peril=fire
✔✔Severity/Frequency of Loss - ✔✔Severity: How bad in terms of $
Frequency: How often the loss occurs
If frequency=0, severity is not an issue
higher frequency= higher severity
✔✔Hazard - ✔✔underlying condition behind an a loss that increases severity or
frequency of loss
ex. house burns down because of candle
candle=hazard
ex. drunk driving crash
drinking=hazard
✔✔Types of Hazards:
Physical hazard - ✔✔ex. location: if flood living at beach increases freq
1)Construction: the materials used to construct contribute to severity/frequency
2)Use: classroom vs church: candles are more physical hazard
ANSWERS RATED A+
✔✔Pure Risk - ✔✔has two outcomes: 1) No Loss 2) Loss
no winning ex. fire, flood, sickness, death
-uncertainty
✔✔Sources of Pure Risk: Personal - ✔✔-Human capital: personal pure risk
-ability to generate income
-subject to life and health exposures: injury, death
-loss in income
-medical expenses
-retirement/unemployment: reduction in income, medical expenses
✔✔Sources of Pure Risk: Property + Liability - ✔✔-theft or damage
-ownership of physical assets
-getting sued
-legal fees
✔✔Speculative Risk - ✔✔3 Future outcomes: 1) Loss 2) No loss 3)Breakeven
ex. gambling, buying home, stock market
✔✔Probability of a loss:
1-
0-1
0- - ✔✔risk doesn't equal probability of a loss
1: certain
0-1 uncertain
0: impossible
✔✔Pure vs. Speculative Risk - ✔✔both involve future states, have different outcomes
✔✔Static Risk - ✔✔risk that hasn't changed over time, always present
ex. fire, death, sickness, flood
✔✔Dynamic Risk - ✔✔risk that has changed over time
ex. cyber, airport security, car accidents
✔✔Static vs. Dynamic - ✔✔no change in risk vs. change in risk
✔✔Subjective risk - ✔✔measures an individual's view of uncertainty or situation
involving risk
-influences how decision makers handle risk
-not easily measured
, ✔✔Objective risk - ✔✔variation of expected outcomes compared to actual outcomes
-risk is uncertain
problem is timing: what don't know what will happen when
✔✔Diversifiable Risk - ✔✔impacts a small/specific group of individuals
ex. fire
✔✔Non-diversifiable Risk - ✔✔event that causes exponential losses
ex. market crash, natural disaster
✔✔Expected Losses - ✔✔losses based on experience and data
-what we expect to happen
✔✔Actual Losses - ✔✔the losses that actually occur
✔✔Variation of a Loss - ✔✔(Actual Loss-Expected Loss)/Expected Loss
✔✔Direct Losses vs. Indirect Losses - ✔✔Direct: cost of replacing/repairing an asset
Indirect: extra expenses/loss of income
✔✔Peril - ✔✔the immediate cause of a loss
ex. Why did I lose this? --> fire, flood, theft, death
ex. House burns down from candle peril=fire
✔✔Severity/Frequency of Loss - ✔✔Severity: How bad in terms of $
Frequency: How often the loss occurs
If frequency=0, severity is not an issue
higher frequency= higher severity
✔✔Hazard - ✔✔underlying condition behind an a loss that increases severity or
frequency of loss
ex. house burns down because of candle
candle=hazard
ex. drunk driving crash
drinking=hazard
✔✔Types of Hazards:
Physical hazard - ✔✔ex. location: if flood living at beach increases freq
1)Construction: the materials used to construct contribute to severity/frequency
2)Use: classroom vs church: candles are more physical hazard
