BMCH10TB.docVIP

Chapter Ten Principles of Risk Management This chapter contains 30 multiple choice questions, 10 short problems, and 5 longer problems. Multiple Choice ________ that “matters” because if affects peoples welfare. ________ exists whenever one does not know for sure what will occur in the future. Uncertainty is risk; Uncertainty Risk is uncertainty; Uncertainty Risk is uncertainty; Risk Uncertainty is risk; Risk Answer: (b) ________ is a measure of willingness to pay to reduce ones exposure to risk. Risk aversion Risk avariciousness Risk predilection Risk inflation Answer: (a) When choosing among investment alternatives with the same expected rate of return, a risk averse individual chooses the one with the ________ risk. surest most uncertain lowest highest Answer: (c) ________ is a particular type of risk people face because of the nature of their business or pattern of consumption. Operational efficiency exposure Opportunity exposure Risk exposure Risk reduction Answer: (c) ________ are investors who take positions that increase their exposure to certain risks in the hope of increasing their wealth. Operations insurers Foreign exporters Hedgers Speculators Answer: (d) The riskiness of an asset or a transaction ________ be assessed in isolation or in the abstract. can cannot must it varies according to the situation Answer: (b) By definition, ________ are investors who take positions to reduce their exposures. operations insurers foreign exporters hedgers speculators Answer: (c) The risk of loss arising from obsolescence due to technological change or changes in consumer taste is an example of ________. unemployment risk liability risk financial-asset risk d consumer-durable asset risk Answer: (d) The risk arising from holding different kinds of financial assets such as equities or fixed income securities denominated in one or more currencies is an example of ________. unemployment risk lia