Ernesto is opening a new car wash. The required investment of money and time is sizable and although he has high hopes, Ernesto is taking a speculative risk. What does this mean?
A) His investment involves a chance of profit or loss.
B) His risk can be shifted to an insurance company if he buys product liability insurance.
C) He would be best advised to self-insure his exposure to malpractice liability.
D) His insurance premium would be based on the law of large numbers.

Question

Quizplus · Accepted Answer

A speculative risk involves the chance of either profit or loss. All entrepreneurs take speculative risk on the chance of making a profit.

Ernesto Is Opening a New Car Wash