FI 380 Exam 1 questions with complete
solutions passed
Williams Company installed smoke detectors, a sprinkler system, and fire extinguishers in its new
manufacturing facility. These devices are all examples of
risk retention
risk control
risk avoidance
non-insurance transfer - correct answer ✔✔risk control
A pure risk is defined as a situation in which there is
only the possibility of loss or no loss.
only the possibility of profit.
a possibility of either profit or loss.
a possibility of neither profit nor loss. - correct answer ✔✔only the possibility of loss or no loss.
A name that encompasses all of the major risks faced by a business firm is
enterprise risk
speculative risk
financial risk
pure risk - correct answer ✔✔enterprise risk
Katelyn was just named Risk Manager of ABC Company. She has decided to create a risk management
program which considers all of the risks faced by ABC-pure, speculative, operational, and strategic-in a
single risk management program. Such a program is called a(n)
,financial risk management program.
enterprise risk management program.
fundamental risk management program.
consequential risk management program. - correct answer ✔✔enterprise risk management program.
Traditionally, risk has been defined as
any situation in which the probability of loss is zero.
uncertainty concerning the occurrence of loss.
the probability of a loss occurring.
any situation in which the probability of loss is one. - correct answer ✔✔uncertainty concerning the
occurrence of loss.
Following good health habits can be categorized as
loss prevention
noninsurance transfer
personal insurance
risk retention - correct answer ✔✔loss prevention
A peril is
a moral hazard.
the cause of a loss.
a condition that increase the chance of a loss.
probability that a loss will occur. - correct answer ✔✔the cause of a loss.
,Cathy's car hit a patch of ice on the road. The car skidded off the road and hit a tree. The presence of ice
on the road is best described as a(n)
subjective risk
physical hazard
peril
indirect loss - correct answer ✔✔physical hazard
Rapid inflation, cyclical unemployment, war, hurricanes, and floods are all examples of
physical hazards
diversifiable risks
non-diversifiable risks
speculative risks - correct answer ✔✔non-diversifiable risks
Five years ago, Shannon decided to start investing monthly in the common stock of ABC Telecom
Company. Her financial well-being will be harmed if the price of ABC Telecom stock drops significantly.
The risk of investment loss can be reduced if she invests in other companies and other types of financial
assets. The risk Shannon faces with regard to her investments is a(n)
enterprise risk
pure risk
diversifiable risk
non-diversifiable risk - correct answer ✔✔diversifiable risk
Faking an accident to collect insurance proceeds is an example of
moral hazard
physical hazard
attitudinal hazard
, objective risk - correct answer ✔✔moral hazard
The use of fire-resistive materials when constructing a building is an example of
risk retention
risk transfer
risk control
risk avoidance - correct answer ✔✔risk control
Frazier Electric keeps a paper copy of business records at the company's headquarters. The company
also has two back-up copies of business records stored in electronic files. The electronic files are kept in
the event the paper records are damaged or destroyed. The back-up files illustrate which of the following
risk control techniques?
duplication
loss reduction
diversification
loss prevention - correct answer ✔✔duplication
Some members of Congress are concerned that if one or two large U.S. banks fail, it could lead to the
collapse of the entire U.S. financial sector. This risk is called
objective risk
systemic risk
subjective risk
enterprise risk - correct answer ✔✔systemic risk
Loss control includes which of the following?
I. Loss reduction
II. Loss prevention
solutions passed
Williams Company installed smoke detectors, a sprinkler system, and fire extinguishers in its new
manufacturing facility. These devices are all examples of
risk retention
risk control
risk avoidance
non-insurance transfer - correct answer ✔✔risk control
A pure risk is defined as a situation in which there is
only the possibility of loss or no loss.
only the possibility of profit.
a possibility of either profit or loss.
a possibility of neither profit nor loss. - correct answer ✔✔only the possibility of loss or no loss.
A name that encompasses all of the major risks faced by a business firm is
enterprise risk
speculative risk
financial risk
pure risk - correct answer ✔✔enterprise risk
Katelyn was just named Risk Manager of ABC Company. She has decided to create a risk management
program which considers all of the risks faced by ABC-pure, speculative, operational, and strategic-in a
single risk management program. Such a program is called a(n)
,financial risk management program.
enterprise risk management program.
fundamental risk management program.
consequential risk management program. - correct answer ✔✔enterprise risk management program.
Traditionally, risk has been defined as
any situation in which the probability of loss is zero.
uncertainty concerning the occurrence of loss.
the probability of a loss occurring.
any situation in which the probability of loss is one. - correct answer ✔✔uncertainty concerning the
occurrence of loss.
Following good health habits can be categorized as
loss prevention
noninsurance transfer
personal insurance
risk retention - correct answer ✔✔loss prevention
A peril is
a moral hazard.
the cause of a loss.
a condition that increase the chance of a loss.
probability that a loss will occur. - correct answer ✔✔the cause of a loss.
,Cathy's car hit a patch of ice on the road. The car skidded off the road and hit a tree. The presence of ice
on the road is best described as a(n)
subjective risk
physical hazard
peril
indirect loss - correct answer ✔✔physical hazard
Rapid inflation, cyclical unemployment, war, hurricanes, and floods are all examples of
physical hazards
diversifiable risks
non-diversifiable risks
speculative risks - correct answer ✔✔non-diversifiable risks
Five years ago, Shannon decided to start investing monthly in the common stock of ABC Telecom
Company. Her financial well-being will be harmed if the price of ABC Telecom stock drops significantly.
The risk of investment loss can be reduced if she invests in other companies and other types of financial
assets. The risk Shannon faces with regard to her investments is a(n)
enterprise risk
pure risk
diversifiable risk
non-diversifiable risk - correct answer ✔✔diversifiable risk
Faking an accident to collect insurance proceeds is an example of
moral hazard
physical hazard
attitudinal hazard
, objective risk - correct answer ✔✔moral hazard
The use of fire-resistive materials when constructing a building is an example of
risk retention
risk transfer
risk control
risk avoidance - correct answer ✔✔risk control
Frazier Electric keeps a paper copy of business records at the company's headquarters. The company
also has two back-up copies of business records stored in electronic files. The electronic files are kept in
the event the paper records are damaged or destroyed. The back-up files illustrate which of the following
risk control techniques?
duplication
loss reduction
diversification
loss prevention - correct answer ✔✔duplication
Some members of Congress are concerned that if one or two large U.S. banks fail, it could lead to the
collapse of the entire U.S. financial sector. This risk is called
objective risk
systemic risk
subjective risk
enterprise risk - correct answer ✔✔systemic risk
Loss control includes which of the following?
I. Loss reduction
II. Loss prevention
