Which of the following is NOT an example of speculative risk?

• A. Investing in the stock market
• B. Gambling in a casino
• C. Buying insurance against theft
• D. Starting a new business

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definition of speculative risk. Speculative risk involves a situation where there is a chance of either a gain or a loss. It is different from pure risk, where the outcome is either a loss or no loss (no gain).
2. Step 2: Analyze each option to determine if it involves speculative risk. For example, investing in the stock market can result in gains or losses, so it is a speculative risk.
3. Step 3: Consider gambling in a casino. Since gambling can lead to winning money or losing money, it also represents a speculative risk.
4. Step 4: Look at buying insurance against theft. Insurance is designed to protect against pure risk, where the outcome is either a loss (theft) or no loss (no theft). There is no opportunity for gain, so this is not a speculative risk.
5. Step 5: Evaluate starting a new business. Starting a business can result in profits or losses, so it is a speculative risk.