RMI 211 MSU Exam 1 STUDY GUIDE WITH COMPLETE SOLUTIONS
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Course
RMI 211
Institution
RMI 211
RMI 211 MSU Exam 1 STUDY GUIDE
WITH COMPLETE SOLUTIONS
Peril - Answer️️ -Cause of a lost
Hazard - Answer️️ -Condition that creates frequency or severity of loss
Chance of Loss - Answer️️ -the probability that an event will occur
Pure Risk - Answer️️ -A situation in which there ...
RMI 211 MSU Exam 1 STUDY GUIDE
WITH COMPLETE SOLUTIONS
Peril - Answer✔️✔️-Cause of a lost
Hazard - Answer✔️✔️-Condition that creates frequency or severity of loss
Chance of Loss - Answer✔️✔️-the probability that an event will occur
Pure Risk - Answer✔️✔️-A situation in which there are only the possibilities
of loss or no loss
Objective Probability - Answer✔️✔️-the long-run relative frequency of an
event based on the assumptions of an infinite number of observations and
of no change in the underlying conditions
Subjective Probability - Answer✔️✔️-the individual's personal estimate of
the chance of loss
Speculative Risk - Answer✔️✔️-a situation in which either profit or loss is
possible
Objective Risk (Degree of Risk) - Answer✔️✔️-The relative variation of
actual loss from expected loss
Subjective Risk - Answer✔️✔️-uncertainty based on a person's mental
condition or state of mind
Diversifiable Risk - Answer✔️✔️-affects only individuals or small groups
(car theft). It is also called nonsystematic or particular risk.
Enterprise Risk - Answer✔️✔️-encompasses all major risks faced by a
business firm, which include: pure risk, speculative risk, strategic risk,
operational risk, and financial risk
Nondiversifiable Risk - Answer✔️✔️-Affects a large number of people or
whole economy
Direct Loss - Answer✔️✔️-financial loss that results from physical damage,
destruction, or theft of property
Indirect Loss - Answer✔️✔️-financial loss that results indirectly from the
occurence of a direct physical damange
Retention - Answer✔️✔️-an individual or business firm retains part or all of
the losses that can result from a given risk
-Active means they are aware of the risk
-Passive means they are unaware
Risk Control - Answer✔️✔️-
Risk Transfer - Answer✔️✔️-A pure risk is transferred from the insured to
the insurer, who typically is in a stronger financial position
Law of Large Numbers - Answer✔️✔️-states that as the number of exposure
units increases, the more closely the actual loss experience will approach
the expected loss experience
Fortuitous Loss - Answer✔️✔️-Unforeseen and unexpected loss that occurs
as a result of chance.
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