Which type of risk involves the possibility of both gain and loss?

Prepare for the North Carolina Property and Casualty State Exam. Use flashcards and multiple choice questions with hints and explanations. Boost your exam readiness!

The identified type of risk that involves the possibility of both gain and loss is speculative risk. This risk encompasses situations where there is a chance of profit or loss depending on the outcome of an uncertain event. For example, investing in stocks or starting a new business involves speculative risk because these actions can lead to either financial gain if successful or a financial loss if not.

In contrast, pure risk only involves the possibility of loss and does not offer the chance for a gain; it is typically associated with risks that can lead to negative outcomes, such as natural disasters or accidents. Insurable risk refers to risks that meet certain criteria, making them suitable for insurance coverage. Statistical risk generally refers to risks that can be quantified using statistical methods and does not imply the potential for both gain and loss.

Therefore, speculative risk is correctly identified as the risk type that includes the possibility of both financial gain and loss.

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