Which of the following is true about speculative risks?
A) A firm cannot profit from its exposure to speculative risk.
B) The risk/return tradeoff is not applicable to speculative risks.
C) Risk managers must be tolerant of negative outcomes related to speculative risks.
D) Speculative risk is not a source of great concern for risk managers.

Question

Quizplus · Accepted Answer

Speculative risks are risks that may result in gain or loss, unlike pure risks, which only have the potential for loss. Given that there is a possibility of gain, risk managers must be tolerant of negative outcomes related to speculative risks. Additionally, firms can potentially profit from their exposure to speculative risks, which makes it different from pure risks. Therefore, option A and B are incorrect. Option D is not true since speculative risks can have significant implications for firms, and risk managers must take necessary measures to manage these risks.

Which of the Following Is True About Speculative Risks