PSI Life Exam Practice Test

Which type of risk involves the possibility of loss but not a possibility of gain?

1. Speculative risk

2. Pure risk

3. Commercial risk

4. Investment risk

The correct answer is: Pure risk

The type of risk that involves the possibility of loss but not the possibility of gain is pure risk. Pure risk is characterized by scenarios where outcomes are limited to two possibilities: loss or no loss. Examples of pure risk include risks associated with natural disasters, accidents, or health-related issues. In these situations, the potential outcomes do not include any opportunity for profit, only the potential for loss. On the other hand, speculative risk involves scenarios that can result in a gain, a loss, or no change at all. This type of risk is typically associated with investments and entrepreneurial pursuits, where there is the potential for both profits and losses. Commercial risk and investment risk also contain elements of speculative risk, as they often involve the uncertainty of returns. Thus, the defining aspect of pure risk is its exclusivity to loss, making it the correct answer to the question.