Question 7

C. The possibility of dying prematurely.

Pure risk is characterized by scenarios that can only result in a loss or no loss at all, without any potential for gain. The possibility of dying prematurely fits this definition, as it represents a situation where the outcome is either loss (premature death) or no loss (continuing to live).

A) The purchase of a lottery ticket.

The purchase of a lottery ticket is not an example of pure risk as it involves the potential for both loss and gain. While there is a chance of losing the money spent on the ticket, there is also a significant chance of winning a prize, which means it involves speculative risk rather than pure risk.

B) The purchase of stock certificates.

Buying stock certificates does not exemplify pure risk because it carries both the risk of loss and the opportunity for gain. The value of stocks can fluctuate, leading to potential financial gain or loss, thereby categorizing it as speculative risk.

C) The possibility of dying prematurely.

This option accurately represents pure risk, as it solely involves the chance of loss, specifically the loss of life, with no potential for gain. There are no favorable outcomes in this scenario, making it a clear example of pure risk.

D) The purchase of a rare antique.

The purchase of a rare antique does not illustrate pure risk because it includes the potential for both financial loss and appreciation in value. While the antique could lose value, it could also increase in worth, thus embodying speculative risk rather than pure risk.

Conclusion

The correct answer, C, is a definitive illustration of pure risk, as it solely involves the potential for loss without any chance of gain. In contrast, options A, B, and D represent scenarios that involve both loss and gain, categorizing them as speculative risks. Therefore, C stands out as the only option that aligns with the core definition of pure risk.