What Should You Do If the Severity of Risk Is

question 59

Multiple Choice

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

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

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Definitions:

Present Value

The valuation of an expected income stream determined by discounting the future income to the present using a discount rate.

Income Stream

A regular flow of money from an investment, property, or other financial assets.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the real cost of borrowing or the real yield on savings.

Perfect Substitute

Two or more goods that can be used interchangeably with no loss of utility by the consumer.