A Certain Risk Has a 1% Likelihood of Occurrence in the Coming

question 6

Multiple Choice

A certain risk has a 1% likelihood of occurrence in the coming year. If the risk is observed, the organization estimates a loss of $1million. A second risk has a 15% likelihood of occurrence in the coming year. If the second risk is observed, the organization estimates a loss of $100,000. Comparing the two risks

• A) Risk 2 is greater than risk 1
• B) Risk 1 is greater than risk 2
• C) Risk 2 is equal to risk 1
• D) Risk 2 is negligible

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Definitions:

Interest Rates

The cost of borrowing or the reward for saving, often expressed as a percentage of the principal amount per annum.

Factories

Large buildings or complexes where goods are manufactured or assembled predominantly by machines and workers.

Equipment

The set of tools, machinery, and other apparatus necessary for the manufacture of goods or the provision of services, often considered as part of capital investment in economic analyses.

Trade Deficit

A situation where a country's imports of goods and services exceed its exports, resulting in a negative balance of trade.