Test Bank Essay

2551 Words Dec 28th, 2012 11 Pages
Principles of Risk Management and Insurance, 11e (Rejda)
Chapter 1 Risk in Our Society

1) Traditionally, risk has been defined as
A) any situation in which the probability of loss is one.
B) any situation in which the probability of loss is zero.
C) uncertainty concerning the occurrence of loss.
D) the probability of a loss occurring.
Answer: C
Question Status: Previous Edition

2) Objective risk is defined as
A) the probability of loss.
B) the relative variation of actual loss from expected loss.
C) uncertainty based on a person's mental condition or state of mind.
D) the cause of loss.
Answer: B
Question Status: Previous Edition

3) An insurance company estimates its objective risk for 10,000 exposures to be 10
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B) speculative risk.
C) fundamental risk.
D) physical hazard.
Answer: A
Question Status: Previous Edition

21) Which of the following statements about speculative risks is true?
A) They are almost always insurable by private insurers.
B) They are more easily predictable than pure risks.
C) They may benefit society even though a loss occurs.
D) They involve only a chance of loss.
Answer: C
Question Status: Revised

22) An automobile that is a total loss as a result of a collision is an example of which of the following types of risk?
I. Speculative risk
II. Diversifiable risk
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: B
Question Status: Revised

23) All of the following are programs to insure fundamental risks EXCEPT
A) federally subsidized flood insurance.
B) auto physical damage insurance.
C) Social Security.
D) unemployment insurance.
Answer: B
Question Status: Previous Edition

24) All of the following are examples of personal risks EXCEPT
A) poor health.
B) unemployment.
C) premature death.
D) flood.
Answer: D
Question Status: Previous Edition

25) Which of the following is a reason why premature death may result in economic insecurity?
I. Additional expenses associated with death may be incurred.
II. The income of the deceased person's family may be inadequate to meet its basic needs.
A) I only
B) II only
C) both I and II

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