Final answer:
When a contingent event likely to cause a future loss is considered 'probable.' This assessment is essential in scenarios like natural disasters, wars, unemployment, environmental policy disputes, and calculating the present discounted value of future cash flows.
Step-by-step explanation:
When a contingent event that may give rise to a future loss is likely to occur, it is said to be probable. This concept is important in various contexts, such as assessing occurrence economic risks over which individuals have little control. For example, the likelihood of natural disasters, wars, or massive unemployment can significantly impact how individuals and governments plan for the future.
Similarly, it influences decisions regarding environmental policies, like reducing carbon dioxide emissions, where one has to compare the present costs with long-term future benefits. Additionally, when someone receives a lottery payout over a duration, understanding the present discounted value of those payments is crucial. It helps them ascertain the current worth of future cash flows.