Question 77

Dale's investment is a pure risk.

A pure risk involves situations where there is a possibility of loss but no potential for gain. In Dale's case, his investment in a startup allows for both the chance of financial gain and the risk of financial loss, making the statement that it is a pure risk false.

A) There is a possibility of both financial gain and financial loss from his investment.

This statement is true as investments in startups inherently carry the risk of losing the invested capital while also providing the potential for significant returns. Dale's situation exemplifies this dual possibility, affirming the accuracy of the statement.

B) Dale is engaging in a speculative risk.

This statement is also true because speculative risks involve scenarios where there is a chance of gain or loss. By investing in a startup, Dale is indeed taking on speculative risk, making this statement correct.

C) Dale's investment is a pure risk.

This statement is false as pure risks do not allow for the possibility of profit, only loss. Since Dale's investment in the startup can yield both gains and losses, it does not fit the definition of a pure risk.

D) His investment is generally not considered an insurable risk by traditional insurers.

This statement is true. Investments in startups are typically not insurable risks through traditional insurance because they involve market performance and entrepreneurial risk, which cannot be predicted or guaranteed.

Conclusion

The statement that Dale's investment is a pure risk is definitively false, as it disregards the potential for financial gain that accompanies such investments. All other options accurately reflect the nature of Dale's investment, illustrating the risks and potential rewards inherent in speculative ventures. Thus, C is the only statement that does not align with the realities of his financial situation.