Principles of Risk Management and Insurance 13th edition by George Rejda test bank

 

16) 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.
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer:  D
Question Status:  Previous Edition
17) One of the speculative financial risks considered in an enterprise risk management program is the risk of loss because of adverse changes in commodity prices, interest rates, foreign exchange rates, and the value of money. This risk is called
A) property risk.
B) financial risk.
C) strategic risk.
D) operational risk.
Answer:  B
Question Status:  Previous Edition
 
18) 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)
A) financial risk management program.
B) enterprise risk management program.
C) fundamental risk management program.
D) consequential risk management program.
Answer:  B
Question Status:  Previous Edition
 
19) A pure risk is defined as a situation in which there is
A) only the possibility of loss or no loss.
B) only the possibility of profit.
C) a possibility of neither profit nor loss.
D) a possibility of either profit or loss.
Answer:  A
Question Status:  Previous Edition
 
20) The premature death of an individual is an example of a
A) pure risk.
B) speculative risk.
C) nondiversifiable 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:  Previous Edition
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:  Previous Edition
 
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) loss of business income.
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
D) neither I nor II
Answer:  C
Question Status:  Previous Edition
 

26) Which of the following is (are) often consequences of long-term disability?
I.    Continuing medical expenses
II.   Loss or reduction of employee benefits
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer:  C
Question Status:  Previous Edition
27) Which of the following is an example of consequential (indirect) loss?
A) the theft of a person's jewelry
B) the destruction of a firm's manufacturing plant by an earthquake
C) the cost of renting a substitute vehicle while a collision-damaged car is being repaired
D) the vandalism of a person's automobile
Answer:  C
Question Status:  Previous Edition
 
28) The extra expense incurred by a business to stay in operation following a fire is an example of a(n)
A) fundamental risk.
B) speculative risk.
C) direct loss.
D) indirect loss.
Answer:  D
Question Status:  Previous Edition
 
29) Which of the following statements about liability risks is (are) true?
I.    Future income and assets can be attached to pay judgments if inadequate insurance is carried.
II.   There is an upper limit on the amount of loss.