• Chapter 4: Review Section, p. 60: Questions1. How is loss prevention different from loss reduction? Give some examples of each. The objective of risk management is to prevent and reduce the frequency and severity of potential losses. Loss prevention programs promote loss avoidance by measuring the frequency of losses. Some examples are safety programs implemented to prevent workplace injuries, fire detectors, burglar alarms, and other protective devices to prevent losses caused by fire and theft. Insurance companies offer discounts to organizations or individuals who take loss prevention measures as an incentive to participate. Whereas, in the area of ​​loss reduction, the scope of programs limits the magnitude of losses when they occur. Reducing severity helps minimize the impact of the loss on the organization. Examples, clear procedures and warning signs, airbags in the vehicle, firewalls and fire doors. Both risk controls are only justified when savings exceed losses.6. Describe the advantages and disadvantages of using insurance as a loss financing technique. Using insurance as a loss management technique provides a financial advantage. Businesses write off the cost of insurance premiums as a tax deduction expense. As long as premiums are fixed for the life of the policy, the budget is not. Additionally, when the organization's loss frequency is low and the probability of severity is high, insurance provides the necessary funds in the event of a loss. Which will be impossible for some individuals and organizations to support alone. On the contrary, changing loading (fees to cover administrative expenses incurred) can be costly. Additionally, insurance sometimes fails to meet demand, providing limited protection, which can lead to ineffective insurance regulations. Additionally, for consumers with minimal loss experience, their premium will be high because their probability of loss is high. • Chapter 5: Review Section, page 78: Questions14. From an option holder's perspective, what is the difference between a call option and a put option? “Options give you the right (without obligation) to trade a security at a predetermined price within a certain time period. In a call option, the buyer has the right (but is not obligated) to purchase an agreed upon quantity of a commodity or financial instrument (called the underlying asset) from a seller before a certain date (the expiration) for a certain price (the strike price). A put option is the right to sell the underlying stock at a predetermined strike price by a certain date” (Call Option vs Put Option, 2014). Chapter 6: Review Section, page 92, Question