BusFin 3300 Midterm I Questions with Correct
Answers
Risk Management Correct Answer-a process that identifies loss
exposures faced by an organization and selects the most appropriate
techniques for treating such exposures
Loss Exposure Correct Answer-any situation or circumstance in which a
loss is possible, regardless of whether a loss occurs
T/f: Possibility is NOT the same thing as possibility Correct Answer-
True
Chance of Loss Correct Answer-the probability that an event will occur
Objective Probability Correct Answer-refers to the long-run relative
frequency of an event based on the assumptions of an infinite number of
observations (uses data and past actions)
subjective probability Correct Answer-the individual's personal estimate
of the chance of loss
Objective Risk Correct Answer-the relative variation of actual loss from
expected loss
peril Correct Answer-cause of loss
,hazard Correct Answer-Increases the chance of loss
Physical Hazard Correct Answer-a physical condition that increases the
frequency or severity of loss
Moral Hazard Correct Answer-dishonesty or character defects in an
individual that increase the frequency or severity of loss
Legal Hazard Correct Answer-A condition of the legal environment that
increases loss frequency or severity.
Pure Risk Correct Answer-only possibility is loss or no loss
(catastrophies/insurance)
Speculative Risk Correct Answer-Profit or loss is possible (gambling)
diversifiable risk Correct Answer-A risk that affects only some
individuals, businesses, or small groups.
nondiversifiable risk Correct Answer-A risk that affects a large segment
of society at the same time.
, Enterprise Risk Management Correct Answer-combines into a single
unified treatment program all major risks faced by the firm; pure, spec,
strategic, operational, financial
Systematic Risk Correct Answer-a risk that influences a large number of
assets; collapse of entire system/market
Direct Loss Correct Answer-a financial loss that results from the
physical damage, destruction, or theft of the property
Indirect Loss Correct Answer-Loss that is a result or consequence of a
direct loss
Liability Risk Correct Answer-relates to harm or injury to other people
or their property because of your actions
Risk Avoidance Correct Answer-how to reduce the severity of a loss
Avoidance Correct Answer-Avoiding a loss
Loss Prevention Correct Answer-any activity that reduces the
probability that a loss will occur
Loss Reduction Correct Answer-A risk control technique that reduces
the severity of a particular loss.
Answers
Risk Management Correct Answer-a process that identifies loss
exposures faced by an organization and selects the most appropriate
techniques for treating such exposures
Loss Exposure Correct Answer-any situation or circumstance in which a
loss is possible, regardless of whether a loss occurs
T/f: Possibility is NOT the same thing as possibility Correct Answer-
True
Chance of Loss Correct Answer-the probability that an event will occur
Objective Probability Correct Answer-refers to the long-run relative
frequency of an event based on the assumptions of an infinite number of
observations (uses data and past actions)
subjective probability Correct Answer-the individual's personal estimate
of the chance of loss
Objective Risk Correct Answer-the relative variation of actual loss from
expected loss
peril Correct Answer-cause of loss
,hazard Correct Answer-Increases the chance of loss
Physical Hazard Correct Answer-a physical condition that increases the
frequency or severity of loss
Moral Hazard Correct Answer-dishonesty or character defects in an
individual that increase the frequency or severity of loss
Legal Hazard Correct Answer-A condition of the legal environment that
increases loss frequency or severity.
Pure Risk Correct Answer-only possibility is loss or no loss
(catastrophies/insurance)
Speculative Risk Correct Answer-Profit or loss is possible (gambling)
diversifiable risk Correct Answer-A risk that affects only some
individuals, businesses, or small groups.
nondiversifiable risk Correct Answer-A risk that affects a large segment
of society at the same time.
, Enterprise Risk Management Correct Answer-combines into a single
unified treatment program all major risks faced by the firm; pure, spec,
strategic, operational, financial
Systematic Risk Correct Answer-a risk that influences a large number of
assets; collapse of entire system/market
Direct Loss Correct Answer-a financial loss that results from the
physical damage, destruction, or theft of the property
Indirect Loss Correct Answer-Loss that is a result or consequence of a
direct loss
Liability Risk Correct Answer-relates to harm or injury to other people
or their property because of your actions
Risk Avoidance Correct Answer-how to reduce the severity of a loss
Avoidance Correct Answer-Avoiding a loss
Loss Prevention Correct Answer-any activity that reduces the
probability that a loss will occur
Loss Reduction Correct Answer-A risk control technique that reduces
the severity of a particular loss.
