MATH1280 MIDTERM UPDATED
ACTUAL Questions and CORRECT
Answers
Risk - CORRECT ANSWER - An uncertainty in regards to the occurrence of a loss
Loss Exposure - CORRECT ANSWER - A situation where a loss is possible, regardless of
whether a loss occurs
Objective Risk - CORRECT ANSWER - The relative variation (measurable difference) of
actual loss from expected loss. A way to quantify risk based on real data
Subjective Risk - CORRECT ANSWER - uncertainty based on an individual's mental
condition or state of mind. Varies from person to person on what can be viewed as a risk.
Chance of loss - CORRECT ANSWER - the probability that an event will occur
Peril - CORRECT ANSWER - the cause of loss
Hazard - CORRECT ANSWER - something that increases the chances of a loss occurring
4 types of hazards - CORRECT ANSWER - Physical, Moral, Attitudinal,Legal
Physical hazard - CORRECT ANSWER - a physical condition that increases the frequency
or severity of loss
Moral hazard - CORRECT ANSWER - dishonesty or character defects in a person that
increase the chance of loss
, Attitudinal Hazard - CORRECT ANSWER - carelessness or indifference to a loss, which
increases the frequency or severity of a loss
Legal Hazard - CORRECT ANSWER - characteristics of the legal system or regulatory
environment that increase the frequency or severity of losses
Pure risk - CORRECT ANSWER - a risk that presents the chance of loss but no
opportunity for gain
Speculative risk - CORRECT ANSWER - a situation where either profit or loss is possible
Diversifiable risk - CORRECT ANSWER - A risk that affects only some individuals or
small groups. Can be reduced/eliminated by diversification
Non-diversifiable risk - CORRECT ANSWER - A risk that affects a large segment of
society (inflation, war, recession). Cannot be eliminated or reduced by diversification
Enterprise risk - CORRECT ANSWER - encompasses all major risks faced by a business
firm, which include: pure risk, speculative risk, strategic risk, operational risk, and financial risk
Financial risk - CORRECT ANSWER - the uncertainty of loss due to adverse changes in
commodity prices, interest rates, foreign exchange rates or the value of money
Systemic risk - CORRECT ANSWER - the risk of collapse of an entire system/market in
which the failure of one entity/group can result in a breakdown of the entire financial system
Types of pure risks - CORRECT ANSWER - personal, property, liability
Personal risks - CORRECT ANSWER - risks that directly affect an individual; premature
death, poor health, unemployment, addictions
ACTUAL Questions and CORRECT
Answers
Risk - CORRECT ANSWER - An uncertainty in regards to the occurrence of a loss
Loss Exposure - CORRECT ANSWER - A situation where a loss is possible, regardless of
whether a loss occurs
Objective Risk - CORRECT ANSWER - The relative variation (measurable difference) of
actual loss from expected loss. A way to quantify risk based on real data
Subjective Risk - CORRECT ANSWER - uncertainty based on an individual's mental
condition or state of mind. Varies from person to person on what can be viewed as a risk.
Chance of loss - CORRECT ANSWER - the probability that an event will occur
Peril - CORRECT ANSWER - the cause of loss
Hazard - CORRECT ANSWER - something that increases the chances of a loss occurring
4 types of hazards - CORRECT ANSWER - Physical, Moral, Attitudinal,Legal
Physical hazard - CORRECT ANSWER - a physical condition that increases the frequency
or severity of loss
Moral hazard - CORRECT ANSWER - dishonesty or character defects in a person that
increase the chance of loss
, Attitudinal Hazard - CORRECT ANSWER - carelessness or indifference to a loss, which
increases the frequency or severity of a loss
Legal Hazard - CORRECT ANSWER - characteristics of the legal system or regulatory
environment that increase the frequency or severity of losses
Pure risk - CORRECT ANSWER - a risk that presents the chance of loss but no
opportunity for gain
Speculative risk - CORRECT ANSWER - a situation where either profit or loss is possible
Diversifiable risk - CORRECT ANSWER - A risk that affects only some individuals or
small groups. Can be reduced/eliminated by diversification
Non-diversifiable risk - CORRECT ANSWER - A risk that affects a large segment of
society (inflation, war, recession). Cannot be eliminated or reduced by diversification
Enterprise risk - CORRECT ANSWER - encompasses all major risks faced by a business
firm, which include: pure risk, speculative risk, strategic risk, operational risk, and financial risk
Financial risk - CORRECT ANSWER - the uncertainty of loss due to adverse changes in
commodity prices, interest rates, foreign exchange rates or the value of money
Systemic risk - CORRECT ANSWER - the risk of collapse of an entire system/market in
which the failure of one entity/group can result in a breakdown of the entire financial system
Types of pure risks - CORRECT ANSWER - personal, property, liability
Personal risks - CORRECT ANSWER - risks that directly affect an individual; premature
death, poor health, unemployment, addictions
