Which of the Following Defines Risk Avoidance

question 38

Multiple Choice

Which of the following defines risk avoidance?

• A) It refers to the practice of refusing to undertake an activity when the risk seems too costly.
• B) It refers to the practice of using various methods to reduce the possibility of a loss occurring.
• C) It refers to the shifting of risks to someone outside the company.
• D) It refers to the strategy of setting aside funds to meet losses.

---

Definitions:

Forward Currency

A contract to exchange a specific amount of one currency for another at a future date and at a predetermined rate, used to hedge against currency risk.

Premium

An amount paid in addition to the standard or nominal cost, often associated with insurance, bonds, or the difference above a product's nominal value.

Spot Rate

The current market price at which a particular asset, such as currency, commodity, or security can be bought or sold for immediate delivery.

Direct Quote

A currency exchange rate quoted as the domestic currency per unit of the foreign currency.