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Answer: A

Traditionally, risk has been defined as

  1. A) any situation in which the probability of loss is one.
  2. B) any situation in which the probability of loss is zero.
  3. C) uncertainty concerning the occurrence of loss.
  4. D) the probability of a loss occurring.
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Objective risk is defined as

  1. A) the probability of loss.
  2. B) the relative variation of actual loss from expected loss.
  3. C) uncertainty based on a person's mental condition or state of mind.
  4. D) the cause of loss.
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An insurance company estimates its objective risk for 10,000 exposures to be 10 percent. Assuming the probability of loss remains the same, what would happen to the objective risk if the number of exposures were to increase to 1 million?

  1. A) It would decrease to 1 percent.
  2. B) It would decrease to 5 percent.
  3. C) It would remain the same.
  4. D) It would increase to 20 percent.
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