[amp_mcq option1=”pure risk” option2=”non-diversifiable risk” option3=”speculative risk” option4=”physical hazard” correct=”option1″]
The correct answer is: A. pure risk
A pure risk is a risk that can only result in a loss, with no possibility of gain. Defective electrical wiring that may lead to fire is an example of a pure risk because, if the wiring causes a fire, the homeowner will suffer a loss, but there is no possibility of gaining anything from the situation.
A non-diversifiable risk is a risk that cannot be reduced by diversification. Defective electrical wiring is an example of a non-diversifiable risk because it is a risk that affects everyone, regardless of their investment portfolio.
A speculative risk is a risk that can result in either a loss or a gain. Investing in stocks is an example of a speculative risk because there is a chance that the investment will increase in value, but there is also a chance that it will decrease in value.
A physical hazard is a hazard that is caused by the physical environment. Defective electrical wiring is an example of a physical hazard because it is a hazard that is caused by the wiring itself.
I hope this helps! Let me know if you have any other questions.