FIN 502 Study Guide - Limited Liability, Liability Insurance, Moral Hazard

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7 Feb 2014
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Pure risk prob of winning/ losing choose to accept rather than encounter f/ circumstances all investments, shares, lottery possibility of loss only early death, disability happen w/out making conscious choice to seek them out. Step 1: identifying the risks life cycle stages - health and disability important and possible. Material liability - ensure property no danger to reasonable person. Torts - legal wrongs/ injuries one person causes to another. Common law - law determined by court over long period of time rather than statute: you not responsible if take reasonable care. Cost of finding other accommodation (inclu hotel bill) 2: risk is insupportable if it materially affects family"s std of living o. Immaterial: lost income and family duties huge and unmanageable fin loss, large, small depend on family"s resources liability insurance reserve cash. Freq/ prob of occurrence: events subj to risk mgmt occur infrequently. Avoidance - applies to actions where we have some choice in what we do.

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