Final answer:
a. Cost of paying and defending liability claims is an example of a direct loss from pure risk. b. Commodity price risk is not a type of price risk. c. Greater risk lowers costs (increases value). d. Longevity is a major type of price risk and the longevity risk refers to possibility that a person will die before reaching retirement age.
Step-by-step explanation:
Answer:
a. Cost of paying and defending liability claims is
an example of a direct loss from pure risk
. This is because it involves actual expenses incurred due to liability claims, which are uncertain events.
b. Commodity price risk
is not a type of price risk
. Commodity price risk refers to the uncertainty in the prices of commodities, such as agricultural products or energy resources, which is different from general price risk.
c.
Greater risk lowers costs (increases value)
. This statement is incorrect. Greater risk actually increases costs and lowers value because it requires additional resources and precautions to mitigate the risks.
d. Longevity
is a major type of price risk
, but the statement that longevity risk refers to the possibility that a person will die before reaching retirement age is incorrect. Longevity risk refers to the uncertainty in how long an individual will live, which affects various financial plans and insurance calculations.