PrinciplesofRiskManagementandInsurance,11e(Rejda)
Chapter1RiskinOurSociety
1)Traditionally,riskhasbeendefinedas
A)anysituationinwhichtheprobabilityoflossisone.
B)anysituationinwhichtheprobabilityoflossiszero.
C)uncertaintyconcerningtheoccurrenceofloss.
D)theprobabilityofalossoccurring.
Answer:C
QuestionStatus:PreviousEdition
2)Objectiveriskisdefinedas
A)theprobabilityofloss.
B)therelativevariationofactuallossfromexpectedloss.
C)uncertaintybasedonaperson'smentalconditionorstateofmind.
D)thecauseofloss.
Answer:B
QuestionStatus:PreviousEdition
3)Aninsurancecompanyestimatesitsobjectiveriskfor10,000exposurestobe10percent.Assumingtheprobabilityoflossremainsthesame,whatwouldhappentotheobjectiveriskifthenumberofexposuresweretoincreaseto1million?
A)Itwoulddecreaseto1percent.
B)Itwoulddecreaseto5percent.
C)Itwouldremainthesame.
D)Itwouldincreaseto20percent.
Answer:A
QuestionStatus:PreviousEdition
4)Uncertaintybasedonaperson'smentalconditionorstateofmindisknownas
A)objectiverisk.
B)subjectiverisk.
C)objectiveprobability.
D)subjectiveprobability.
Answer:B
QuestionStatus:PreviousEdition
5)Thelong-runrelativefrequencyofaneventbasedontheassumptionofaninfinitenumberofobservationswithnochangeintheunderlyingconditionsiscalled
A)objectiveprobability.
B)objectiverisk.
C)subjectiveprobability.
D)subjectiverisk.
Answer:A
QuestionStatus:PreviousEdition
6)Whichofthefollowingstatementsaboutaprioriprobabilitiesiscorrect?
A)Theyaresubjectiveprobabilitiesbasedonambiguityinthewayprobabilityisperceived.
B)Theyaresubjectiveprobabilitiesthatmayvaryamongindividualsbecauseoffactorssuchasage,gender,education,andtheuseofalcohol.
C)Theyareobjectiveprobabilitiesthatcanbedeterminedbydeductivereasoning.
D)Theyareobjectiveprobabilitiesthatcanbedeterminedbysubjectivereasoning.
Answer:C
QuestionStatus:PreviousEdition
7)Anindividual'spersonalestimateofthechanceoflossis
A)anobjectiveprobability.
B)anobjectiverisk.
C)asubjectiveprobability.
D)anaprioriprobability.
Answer:C
QuestionStatus:PreviousEdition
8)Aperilis
A)amoralhazard.
B)thecauseofaloss.
C)aconditionwhichincreasesthechanceofaloss.
D)theprobabilitythatalosswilloccur.
Answer:B
QuestionStatus:PreviousEdition
9)Anearthquakeisanexampleofa
A)moralhazard.
B)peril.
C)physicalhazard.
D)objectiverisk.
Answer:B
QuestionStatus:PreviousEdition
10)Densefogthatincreasesthechanceofanautomobileaccidentisanexampleofa
A)speculativerisk.
B)peril.
C)physicalhazard.
D)moralhazard.
Answer:C
QuestionStatus:PreviousEdition
11)Fakinganaccidenttocollectinsuranceproceedsisanexampleofa
A)physicalhazard.
B)objectiverisk.
C)moralhazard.
D)attitudinalhazard.
Answer:C
QuestionStatus:Revised
12)Carelessnessorindifferencetoalossisanexampleof
A)physicalhazard.
B)objectiveprobability.
C)moralhazard.
D)attitudinalhazard.
Answer:D
QuestionStatus:Revised
13)Somecharacteristicsofthejudicialsystemandregulatoryenvironmentincreasethefrequencyandseverityofloss.Thishazardiscalled
A)moralhazard.
B)physicalhazard.
C)attitudinalhazard.
D)legalhazard.
Answer:D
QuestionStatus:Revised
14)TaylorTobaccoCompanyisconcernedthatthecompanymaybeheldliableinacourtoflawandorderedtopayalargedamageaward.Thecharacteristicsofthejudicialsystemthatincreasethefrequencyandseverityoflossesareknownas
A)moralhazard.
B)particularrisk.
C)speculativerisk.
D)legalhazard.
Answer:D
QuestionStatus:PreviousEdition
15)Aphrasethatencompassesallofthemajorrisksfacedbyabusinessfirmis
A)financialrisk.
B)speculativerisk.
C)enterpriserisk.
D)purerisk.
Answer:C
QuestionStatus:PreviousEdition
16)Whichofthefollowingstatementsaboutfinancialriskis(are)true?
I.    Enterpriseriskdoesnotincludefinancialrisk.
deductible
II.    Financialriskiseasilyaddressedthroughthepurchaseofinsurance.
A)Ionly
B)IIonly
C)bothIandII
D)neitherInorII
Answer:D
QuestionStatus:PreviousEdition
17)AllofthefollowingareconsideredfinancialrisksEXCEPT
A)thedeclineinthevalueofabondportfoliobecauseofrisinginterestrates.
B)increasedcostofproductionbecauseofrisingcommodityprices.
C)lossofmoneybecauseofadversemovementsincurrencyexchangerates.
D)destructionofaproductionfacilitycausedbyanexplosion.
Answer:D
QuestionStatus:PreviousEdition
18)KatelynwasjustnamedRiskManagerofABCCompany.ShehasdecidedtocreateariskmanagementprogramwhichconsidersalloftherisksfacedbyABC-pure,speculative,operational,andstrategic-inasingleriskmanagementprogram.Suchaprogramiscalleda(n)