What type of risk involves loss that does not involve the possibility of gain?

What type of risk involves loss that does not involve the possibility of gain?

• A. Speculative risk
• B. Pure risk
• C. Investment risk
• D. Market risk

Answer: (B)

The correct answer is pure risk. Pure risk refers to situations where there is a possibility of loss but no opportunity for gain. This type of risk typically relates to events that can only result in negative outcomes, such as accidents, natural disasters, or health issues. Pure risks are insurable, as insurance is designed to provide protection against the financial impact of such adverse events. In contrast, speculative risk includes situations that can result in both loss and gain, such as investing in the stock market or gambling. Investment risk relates specifically to the potential for loss associated with financial investments, while market risk pertains to the risk of losing value due to changes in market conditions. Neither speculative, investment, nor market risks fits the definition of a risk that solely involves loss without any opportunity for gain.

The correct answer is pure risk. Pure risk refers to situations where there is a possibility of loss but no opportunity for gain. This type of risk typically relates to events that can only result in negative outcomes, such as accidents, natural disasters, or health issues. Pure risks are insurable, as insurance is designed to provide protection against the financial impact of such adverse events.

In contrast, speculative risk includes situations that can result in both loss and gain, such as investing in the stock market or gambling. Investment risk relates specifically to the potential for loss associated with financial investments, while market risk pertains to the risk of losing value due to changes in market conditions. Neither speculative, investment, nor market risks fits the definition of a risk that solely involves loss without any opportunity for gain.