Which of the following is true about speculative risks? a. The risk/return tradeoff is applicable to speculative risks. b. Speculative risk always has a positive payoff c. Speculative risk is not a source of great concern for risk managers. d. A firm cannot profit from its exposure to speculative risk e. Speculative risk has a higher risk than pure risk

Question

Computers and Technology

Madelynn Allison

14 July, 16:36

Which of the following is true about speculative risks? a. The risk/return tradeoff is applicable to speculative risks. b. Speculative risk always has a positive payoff c. Speculative risk is not a source of great concern for risk managers. d. A firm cannot profit from its exposure to speculative risk e. Speculative risk has a higher risk than pure risk

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Answers (1)

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Nigel Case · Answer 1

A) The risk/return Tradeoff is applicable to speculative risks.

Explanation:

Speculative risk always has a positive payoff and also a negative payoff, so option (b) is incorrect.

Speculative risk is a source of great concern for risk managers, so option (c) is incorrect.

Speculative risk is a category of risk that can be taken on voluntarily and will either result in a profit or loss, so option d is wrong

Pure risk, also called absolute risk, is a category of threat that is beyond human control and has only one possible outcome if it occurs: loss. Pure risk includes such incidents as natural disasters, fire or untimely death. so option (e) also incorrect