1. Based on the tenets of utility theory, people can be shown to:

A. Derive positive utility from additions to their wealth.

B. Derive positive utility from risk.

C. Derive negative utility from additions to their wealth.

D. Derive negative utility from risk.

E. Both A and B.

F. Both A and D,

2. Which of the following does NOT seem to support the fundamental financial tenet that rational people are risk averse?

A. People buy insurance.

B. People gamble.

C. People hedge their risks.

D. People diversify their portfolios.

E. Both A and B.

F. Both C and D.

3. The term "loss severity" is another name for:

A. Loss given default.

B. Legal risk.

C. Operational risk.

D. Market risk.

E. Risk identification.