Question 4

Joan's fur coat is stored at a storage facility.

Pure risk refers to situations that result in a loss or no loss, with no potential for gain. Storing Joan's fur coat at a storage facility exemplifies pure risk because it involves the possibility of loss through theft, damage, or destruction, without any opportunity for financial gain.

A) Ken buys a collector car as an investment.

This option represents speculative risk rather than pure risk, as Ken's purchase of a collector car is aimed at potential financial gain. The value of the car could appreciate over time, introducing the possibility of both profit and loss.

B) A fundraising event that includes a poker game.

This choice involves speculative risk, as the poker game can lead to winnings or losses for participants. The nature of gambling inherently carries the potential for both financial gain and loss, which does not fit the definition of pure risk.

C) Joan's fur coat is stored at a storage facility.

This is the correct choice as it represents pure risk. The scenario only allows for loss if the coat is damaged or stolen, with no potential for gain involved in the storage process.

D) Anne purchases several shares of stock in a computer company.

This option is also an example of speculative risk. Anne's investment in stocks involves the possibility of financial gain through appreciation in stock value, but also the risk of losing money if the value decreases, which is contrary to the concept of pure risk.

Conclusion

The correct answer, Joan's fur coat being stored at a storage facility, is a clear example of pure risk, as it presents the potential for loss without any chance of gain. In contrast, all other options involve speculative risks where the potential for profit exists alongside the risk of loss, thus failing to meet the criteria for pure risk.