RMIN 4000 UGA- Brown- exam 1 Questions and Answers | 100% Pass!!

RMIN 4000 UGA- Brown- exam 1 Questions and Answers | 100% Pass!! definition of risk -Answer-A calculated possibility of a negative outcome calculated possibility -Answer-probabilistic outcome, ranges from 0-1 (0-100%) negative outcome -Answer-loss, must be quantifiable ($) frequency -Answer--"how often does a loss occur?" -number of losses in a certain time period -probability of a loss Severity -Answer--"how much does it cost when a loss occurs?" - dollar amount how to calculate frequency -Answer-# of losses/# of exposures how to calculate severity -Answer-total losses ($)/# number of losses peril -Answer-cause of loss (ex: fire) hazard -Answer-condition that creates or increases frequency of a loss. 4 types: physical, moral, morale (attitudinal), legal physical hazard -Answer-a physical condition that increases the frequency or severity of loss moral hazard -Answer-the presence of insurance changes the behavior of the insured (ex: faking damages or exaggerating value of insured property) Morale (attitudinal) hazard -Answer-carelessness or indifference to a loss because of the existence of insurance, increases frequency and severity (ex: leaving keys in car, ignoring limbs) legal hazard -Answer-characteristics of the legal system or regulatory environment that increase the frequency or severity of losses (ex: different juries in different areas, diminution in value laws) pure risk -Answer-loss or no loss (no gain), insurable (ex: fire or cancer) speculative risk -Answer-A chance of loss, no loss, or gain. (ex: gambling or investing), not always insurable diversifiable risk -Answer--affects only small groups not whole economy -can be reduced/eliminated thru diversification -risks aren't correlated (fire, theft, collision) nondiversifiable risk -Answer--affects entire economy -cannot be reduced thru diversififcation -gov. assistance may be needed to insure -risks are correlated (inflation, unemployment) -ex: flood, earthquake enterprise risk -Answer-encompasses all major risks faced by a business: pure, speculative, operational, and financial systemic risk -Answer--risk collapse of an entire system or entire market due to a failure of a single entity or group of entities that can result in a breakdown of the entire financial system