FINC 351 Final Exam 2 Essay

857 Words Jan 27th, 2015 4 Pages
University of Maryland University College FINC 351

Final Examination

Answer the following questions in your own words (do not cut-and-paste from the textbook or other sources). Remember to provide citations and references as appropriate.

1. Distinguish between pure risk and speculative risk. List and explain in detail the three kinds of pure risk.
Pure risk exists when there is uncertainty as to whether loss will occur. There is no possibility that a gain is presentedonly the potential for loss.
Speculative risk exists when there is uncertainty about an event that can produce either a profit or a loss.
Pure risks: Personal – personal risks affect an individuals’ income/expenses or assets.
Pure risks: Property – if a person owns
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Credit risk is the risk that the bank will not be able to repay funds when they ask for them.
Currency risk is the potential risk of loss from fluctuating foreign exchange rates when an investor has exposure to foreign currency or in foreign-currency traded investments.
These risk can be minimized by using appropriate hedging techniques such as futures, options, and swaps, and by implementing controls that limit the amount of exposure taken by market makers.
4. You are a claims specialist for YYZ Insurance Company and your policyholder has purchased a trampoline to be placed in their backyard. They tell the neighbor’s kids they cannot use the trampoline, but while the policyholder was on vacation one of the neighbor’s kids jumped on the trampoline and fell, breaking his arm. Who is negligent? Include in your answer a review of the four elements that prove negligence.
The trampoline is an attractive nuisance. Attractive nuisance is objects that are potentially hazardous or dangerous condition that might attract children to enter a piece of property in order to play with or explore the hazardous condition or object in question.
It’s hard to tell who was negligent. It was not mentioned if there was a privacy fence put up, a “No Trespassing” sign posted on the property, or the parents were made aware. If the homeowners did not have either of those things then they are negligent. Even though, they

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