Which statement describes pure risk?

Which statement describes pure risk?

• A. The possibility of gain only
• B. The possibility of loss only
• C. No risk
• D. Both loss and gain

Answer: (B)

Pure risk refers to situations where only adverse outcomes are possible—there may be a loss, or no loss at all, but there is no possibility of a gain. In other words, the risk can hurt you, but it cannot benefit you. The statement describing loss only best matches this idea because it centers on the potential for loss as the adverse outcome and excludes any gain. If a risk could lead to a gain, or to both gain and loss, that would be speculative risk, not pure risk. And saying there is no risk would mean zero chance of any loss, which isn’t what pure risk describes.

Pure risk refers to situations where only adverse outcomes are possible—there may be a loss, or no loss at all, but there is no possibility of a gain. In other words, the risk can hurt you, but it cannot benefit you. The statement describing loss only best matches this idea because it centers on the potential for loss as the adverse outcome and excludes any gain. If a risk could lead to a gain, or to both gain and loss, that would be speculative risk, not pure risk. And saying there is no risk would mean zero chance of any loss, which isn’t what pure risk describes.