What is a key difference between pure risk and speculative risk?

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A key difference between pure risk and speculative risk lies in the potential outcomes associated with each type of risk. Pure risk is characterized by the possibility of loss or no loss; there are no opportunities for gain. This means that situations classified as pure risk do not offer any upside, such as situations involving natural disasters, illness, or accidents, all of which only involve the potential for harm or loss.

In contrast, speculative risk involves scenarios where there is a possibility of both gain and loss, such as investments or starting a business. Individuals engaging in speculative risk are hoping for favorable outcomes, but they also face the risk of losing their investment. This fundamental distinction underscores why the assertion about pure risk having no potential for gain is accurate and highlights the unique nature of pure risk compared to speculative risk.

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