Which of the Following Statements Regarding Risk Avoidance Is True

question 18

Multiple Choice

Which of the following statements regarding risk avoidance is true?

• A)Risk avoidance is any activity that helps evade an act that creates a risk.
• B)Risk avoidance is any activity that increases the chance that a loss will occur.
• C)Risk avoidance is any activity that lessens the severity of loss once it occurs.
• D)Risk avoidance is an act that reduces the probability that a loss will occur.
• E)Risk avoidance is an effective way to handle small exposures to loss when insurance is too expensive.

---

Definitions:

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing.

Inflation Rate

The rate that reflects how the overall prices of services and goods escalate, causing a reduction in the capacity to purchase.

Treasury Bill

A short-term government security with a maturity of less than one year, sold at a discount to face value to provide a return to the holder upon maturity.

Coupon Bonds

Debt securities that pay periodic interest payments based on a fixed interest rate (coupon) until maturity, at which point the principal is repaid.