Question

Several types of risk are present in the U.S. economy. For each of the following, identify the type of risk that is present. Explain your answer.
a. The Department of Homeland Security alerts the nation of a possible attack by terrorists.
b. A house may be severely damaged in a fire.
c. A family head may be totally disabled in a plant explosion.
d. An investor purchases 100 shares of Microsoft stock.
e. A river that periodically overflows may cause substantial property damage to thousands of homes in the floodplain.
f. Home buyers may be faced with higher mortgage payments if the Federal Reserve raises interest rates at its next meeting.
g. A worker on vacation plays the slot machines in a casino.

Answer 1

Answer and Explanation:

a. This is a fundamental risk case since there is a loss possibility. As the attack is done by the terrorists and the loss is definite in terms

b. It is a property risk as the house is damaged in a fire that resulted into a financial loss

c. It is a personal risk case as the head of the family is totally disabled that directly impact the family which leads to non-fulfillment of the financial liabilities so ultimately its an income loss.

d. It is a case of speculative as the investor purchase 100 shares that resulted in either profit or loss

e. This is a case of fundamental risk as the overflow of the river impacts the property of thousands people

f. This is a case of financial risk as the risk impacted the opposite changes in the price of the commodity, rate of interest, etc

g. It is a speculative case as the worker could either win or loss