Question 23

A defining attribute of speculative risk is that there is a chance of profit.

Speculative risk involves scenarios where there is potential for both gain and loss, distinguishing it from pure risk which only pertains to situations with the possibility of loss.

A) It is insurable.

This option is incorrect because speculative risks are generally not insurable. Insurance typically covers pure risks, which involve only the possibility of loss without any potential for profit.

B) It is pure in nature.

This choice is incorrect as it conflates speculative risk with pure risk. Pure risk refers to situations that can only result in a loss or no change, whereas speculative risk includes the possibility of profit.

C) There is a chance of profit.

This option is correct as it accurately describes speculative risk. The defining feature of speculative risk is the opportunity for both gains and losses, which is not present in pure risks.

D) There are no loss exposures.

This statement is incorrect because speculative risks inherently involve loss exposures alongside the potential for profit. Therefore, it cannot be characterized by the absence of loss.

Conclusion

The defining attribute of speculative risk is indeed the chance of profit, setting it apart from pure risk. Options A, B, and D fail to reflect the characteristics of speculative risk, while only C encapsulates its essence. This understanding is crucial for differentiating between types of risks in economic and insurance contexts.