Case Application #1 50 points (5 points for each correct answer)

Michael is a college senior majoring in Marketing. He owns a high mileage 2005 Ford that has a current market value or $2,500. The replacement value of his clothing, television, computer, other electronic equipment and other items in his rented apartment is $10,000. He uses disposable contact lenses which cost $200 for a 6-month supply. He uses a waterbed in his rented apartment that is old and has leaked in the past. Michael is an avid runner and runs 5 miles a day in a nearby public park the because of assaults, muggings and drive-by shootings. Michael had a limited income and relies on his parents to pay his tuition.

For each of the personal risks that Michael faces, identify an appropriate risk management technique that Michael could use to deal with the exposure, and explain your answer.

1. Physical damage to his vehicle due to a collision or theft.

2. Possible lawsuit for his negligent operation of the vehicle.

3. Loss of his apartment contents due to a kitchen fire in his apartment.

4. Losing a contact lens.

5. A waterbed leak that damages the apartment below him.

6. Injuries due to being assaulted in the park.

7. Loss of tuition if Michaels father dies.

8. Are these speculative or pure risks that Michael is facing? Explain.

9. Are the risks that Michael faces diversifiable? explain

10. What is the difference between peril and hazard?