ACT 301 midterm ASU EXAM QUESTIONS
WITH DETAILED VERIFIED ANSWERS
A name that encompasses all of the major risks faced by a business
firm is
financial risk.
speculative risk.
enterprise risk.
pure risk. - ANSWER>>Enterprise risk
A student who has skipped many classes and not studied the course
material was surprised to learn there was a test when he showed-up
for class. The student's mental uncertainty about whether or not he
will pass the test is called
objective risk.
objective probability.
subjective probability.
subjective risk. - ANSWER>>subjective risk
All of the following are programs to insure fundamental risks EXCEPT
federally subsidized flood insurance.
auto physical damage insurance.
Social Security.
,unemployment insurance. - ANSWER>>auto physical damage
insurance
Ben is concerned that if he injures someone or damages someone's
property he could be held legally responsible and required to pay
damages. This type of risk is called a
speculative risk.
liability risk.
nondiversifiable risk.
property risk. - ANSWER>>liability risk
Faking an accident to collect insurance proceeds is an example of
physical hazard.
objective risk.
moral hazard.
attitudinal hazard. - ANSWER>>moral hazard
Jim and Paula Franklin started a dry cleaning business. The business
may be successful or it may fail. The type of risk that is present when
either a profit or loss could occur is called
pure risk.
subjective risk.
nondiversifiable risk.
speculative risk. - ANSWER>>speculative risk
,Rapid inflation, cyclical unemployment, war, hurricanes, and floods
are all examples of
diversifiable risks.
physical hazards.
non diversifiable risks.
speculative risks. - ANSWER>>non diversifiable risks
he long-run relative frequency of an event based on the assumption
of an infinite number of observations with no change in the
underlying conditions is called
objective probability.
objective risk.
subjective probability.
subjective risk. - ANSWER>>objective probability
Which of the following is (are) often consequences of long-term
disability?
I. Continuing medical expenses
II. Loss or reduction of employee benefits
I only
II only
both I and II
neither I nor II - ANSWER>>both I and II
, Which of the following statements about financial risk is (are) true? I.
Enterprise risk does not include financial risk. II. Financial risk is easily
addressed through the purchase of insurance
I only
II only
both I and II
neither I nor II - ANSWER>>neither I nor II
A peril is
a moral hazard.
the cause of a loss.
a condition that increases the chance of a loss.
the probability that a loss will occur. - ANSWER>>the cause of a loss
ABC Insurance Company plans to sell homeowners insurance in five
Western states. ABC expects that 8 homeowners out of every 100, on
average, will report claims each year. The variation between the rate
of loss that ABC expects to occur and the rate of loss that actually
occurs is called
objective probability.
subjective probability.
objective risk.
subjective risk. - ANSWER>>objective risk
All of the following statements about risk retention are true EXCEPT
WITH DETAILED VERIFIED ANSWERS
A name that encompasses all of the major risks faced by a business
firm is
financial risk.
speculative risk.
enterprise risk.
pure risk. - ANSWER>>Enterprise risk
A student who has skipped many classes and not studied the course
material was surprised to learn there was a test when he showed-up
for class. The student's mental uncertainty about whether or not he
will pass the test is called
objective risk.
objective probability.
subjective probability.
subjective risk. - ANSWER>>subjective risk
All of the following are programs to insure fundamental risks EXCEPT
federally subsidized flood insurance.
auto physical damage insurance.
Social Security.
,unemployment insurance. - ANSWER>>auto physical damage
insurance
Ben is concerned that if he injures someone or damages someone's
property he could be held legally responsible and required to pay
damages. This type of risk is called a
speculative risk.
liability risk.
nondiversifiable risk.
property risk. - ANSWER>>liability risk
Faking an accident to collect insurance proceeds is an example of
physical hazard.
objective risk.
moral hazard.
attitudinal hazard. - ANSWER>>moral hazard
Jim and Paula Franklin started a dry cleaning business. The business
may be successful or it may fail. The type of risk that is present when
either a profit or loss could occur is called
pure risk.
subjective risk.
nondiversifiable risk.
speculative risk. - ANSWER>>speculative risk
,Rapid inflation, cyclical unemployment, war, hurricanes, and floods
are all examples of
diversifiable risks.
physical hazards.
non diversifiable risks.
speculative risks. - ANSWER>>non diversifiable risks
he long-run relative frequency of an event based on the assumption
of an infinite number of observations with no change in the
underlying conditions is called
objective probability.
objective risk.
subjective probability.
subjective risk. - ANSWER>>objective probability
Which of the following is (are) often consequences of long-term
disability?
I. Continuing medical expenses
II. Loss or reduction of employee benefits
I only
II only
both I and II
neither I nor II - ANSWER>>both I and II
, Which of the following statements about financial risk is (are) true? I.
Enterprise risk does not include financial risk. II. Financial risk is easily
addressed through the purchase of insurance
I only
II only
both I and II
neither I nor II - ANSWER>>neither I nor II
A peril is
a moral hazard.
the cause of a loss.
a condition that increases the chance of a loss.
the probability that a loss will occur. - ANSWER>>the cause of a loss
ABC Insurance Company plans to sell homeowners insurance in five
Western states. ABC expects that 8 homeowners out of every 100, on
average, will report claims each year. The variation between the rate
of loss that ABC expects to occur and the rate of loss that actually
occurs is called
objective probability.
subjective probability.
objective risk.
subjective risk. - ANSWER>>objective risk
All of the following statements about risk retention are true EXCEPT
