What Should You Do If the Severity of a Risk

question 103

Multiple Choice

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

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

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Definitions:

Risk-free Rate

The return on an investment with zero risk, indicating the interest an investor would expect from an absolutely risk-free investment over a specified period.

Dividend Yield

The dividend per share divided by the price per share, indicating how much cash flow you are getting for each dollar invested in an equity position.

Futures Price

The set price at which an asset will be bought or sold in the future as per the terms of a futures contract.

Arbitrage Profits

Profits earned with no risk by simultaneously buying and selling the same asset in different markets to exploit price discrepancies.