What Should You Do If the Severity of Risk Is

question 95

Multiple Choice

What should you do if the severity of risk is high and the frequency of the risk event occurring is medium?

• A) Purchase insurance.
• B) Accept the risk.
• C) Avoid the risk.
• D) Manage the risk.

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Definitions:

Basis Points

One basis point is equal to 1/100th of 1%, used primarily to denote the change in interest rates, equity indexes, and the yield of fixed-income securities.

Price Decline

A decrease in the market price of an asset or security.

Duration

A measure of the sensitivity of the price of a bond or other fixed-income investment to a change in interest rates, often expressed in years.

Price Volatility

The rate at which the price of an asset increases or decreases for a given set of returns, indicative of the risk or stability.