You must choose one question from Topic 1 (A or B) and one question from Topic 2 (C or D). You will be answering a total of two questions .
- Topic 1: Choose to answer either question 1 or 2
- Topic 2: Choose to answer either question 3 or 4
TOPIC 1 Questions:
- Assume that the chance of loss is 3 percent for two different fleets of trucks. Explain how it is possible that objective risk for both fleets can be different even though the chance of loss is identical.
- Several types of risk are present in the American economy. For each of the following, identify the type of risk that is present. (non-diversifiable risk; pure risk; speculative risk); Explain your answer.
- The Department of Homeland Security alerts the nation of a possible attack by terrorists.
- A house may be severely damaged in a fire.
- A family head may be totally disabled in a plant explosion.
- An investor purchases 100 shares of Microsoft stock.
- A river that periodically overflows may cause substantial property damage to thousands of homes in the floodplain.
- Home buyers may be faced with higher mortgage payments if the Federal Reserve raises interest rates at its next meeting.
- A worker on vacation plays the slot machines in a casino.
TOPIC 2 Questions:
- Private insurance provides numerous coverages that can be used to meet specific loss situations. For each of the following situations, identify a private insurance coverage that would provide the desired protection.
- Emily, age 28, is a single parent with two dependent children. She wants to make certain that funds are available for her childrens education if she dies before her youngest child finishes college.
- Danielle, age 16, recently obtained her drivers license. Her parents want to make certain they are protected if Danielle negligently injures another motorist while driving a family car.
- Jacob, age 30, is married with two dependents. He wants his income to continue if he becomes totally disabled and unable to work.
- Tyler, age 35, recently purchased a house for $200,000 that is located in an area where tornadoes frequently occur. He wants to make certain that funds are available if the house is damaged or destroyed by a tornado.
- Nathan, age 40, owns an upscale furniture store. Nathan wants to be protected if a customer is injured while shopping in the store and sues him for the bodily injury.
- Buildings in flood zones are difficult to insure by private insurers because the ideal requirements of an insurable risk are difficult to meet
- Identify the ideal requirements of an insurable risk.
- Which of the requirements of an insurable risk are not met by the flood peril?