A certain risk has a 1% likelihood of occurrence in the coming year. If the risk is observed, the organization estimates a loss of $1million. A second risk has a 15% likelihood of occurrence in the coming year. If the second risk is observed, the organization estimates a loss of $100,000. Comparing the two risks
A) Risk 2 is greater than risk 1
B) Risk 1 is greater than risk 2
C) Risk 2 is equal to risk 1
D) Risk 2 is negligible

Question

Quizplus · Accepted Answer

Risk 2 is greater than risk 1 because its expected loss (15% of $100,000 = $15,000) is higher than the expected loss of risk 1 (1% of $1,000,000 = $10,000).

A Certain Risk Has a 1% Likelihood of Occurrence in the Coming