CPCU 500 Exam Study Guide Questions with 100% accurate
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solutions
In the context of risk, the chance of being injured while driving to and from work, loading a
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truck at work, moving furniture at home, or falling in an icy parking lot at the mall are all
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examples of ||
A. Possibilities.
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B. Uncertainties.
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C. Probabilities.
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D. Losses. - ✔✔A. Possibilities.
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The statement, "There is a five percent chance that John will be injured in an automobile
|| || || || || || || || || || || || || || || ||
accident while driving to work tomorrow," is an example of
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A. Quantifying risk.
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B. Verifying risk.
|| ||
C. Quantifying loss exposures.
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D. Identifying hazards. - ✔✔A. Quantifying risk.
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,Which one of the following is measurable and quantifies risk?
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A. Probability
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B. Possibility
||
C. Uncertainty
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D. Feasibility - ✔✔A. Probability
|| || || ||
One of the elements of risk is uncertainty. Which one of the following best describes the
|| || || || || || || || || || || || || || || ||
uncertainty that risk involves? || || || ||
A. Uncertainty as to how to manage potential losses
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B. Uncertainty as to whether a negative outcome is possible
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C. Uncertainty as to the type and timing of an outcome
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D. Uncertainty as to whether insurance is available - ✔✔C. Uncertainty as to the type and
|| || || || || || || || || || || || || || || ||
timing of an outcome
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Hardware Store has been able to control its prices and inventory since it has no competitors.
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A new highway currently being constructed is going to allow increased competition for
|| || || || || || || || || || || || || ||
Hardware Store. According to the quadrants of risk, this risk of increased competition falls
|| || || || || || || || || || || || || ||
into the category of
|| || ||
,A. Strategic risk.
|| ||
B. Hazard risk.
|| ||
C. Operational risk.
|| ||
D. Financial risk. - ✔✔A. Strategic risk.
|| || || || || ||
Company G is a manufacturer of high profile golf equipment. The risk management
|| || || || || || || || || || || || ||
professional for Company G is concerned about loss of business related to product design.
|| || || || || || || || || || || || || ||
Failing to respond to changing customer demand and preferences in the design of golf clubs
|| || || || || || || || || || || || || ||
could cost Company G significant market share. Categorized according to the quadrants of
|| || || || || || || || || || || || || ||
risk, this exposure to loss would be classified as a(n)
|| || || || || || || || ||
A. Strategic risk.
|| ||
B. Financial risk.
|| ||
C. Operational risk.
|| ||
D. Hazard risk. - ✔✔A. Strategic risk.
|| || || || || ||
George has received an inheritance and is deciding what to do with the money. He has
|| || || || || || || || || || || || || || || ||
limited his options to four choices: donate all the money to his favorite charity, use the
|| || || || || || || || || || || || || || || ||
entire inheritance to buy a yacht, invest the inheritance in a small rental property, or use
|| || || || || || || || || || || || || || || ||
the entire amount to purchase T-bills. Which one of the following statements is true
|| || || || || || || || || || || || || ||
regarding the risk involved in George's options?
|| || || || || ||
, A. Donating his inheritance to charity is a pure risk; there is no uncertainty that the money
|| || || || || || || || || || || || || || || || ||
will be gone and George will have no chance of profit.
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B. Buying a boat is a nondiversifiable risk because George can only afford to purchase a
|| || || || || || || || || || || || || || || ||
single yacht. ||
C. The rental property presents both pure and speculative risk; property values may
|| || || || || || || || || || || || ||
increase, and the building could burn down.|| || || || || ||
D. Purchasing T-bills is a pure risk because the interest rate payable is known, and the
|| || || || || || || || || || || || || || || ||
chance of loss is minimal. - ✔✔C. The rental property presents both pure and speculative
|| || || || || || || || || || || || || || ||
risk; property values may increase, and the building could burn down.
|| || || || || || || || || ||
Risk can be classified as pure or speculative. Which one of the following is the best example
|| || || || || || || || || || || || || || || || ||
of a speculative risk?
|| || ||
A. Acquiring a new television
|| || || ||
B. Investing in shares of stock
|| || || || ||
C. Buying a new personal vehicle
|| || || || ||
D. Purchasing an insurance policy - ✔✔B. Investing in shares of stock
|| || || || || || || || || || ||
Which one of the following statements is true regarding enterprise risk management
|| || || || || || || || || || || ||
(ERM)?
A. ERM is concerned with an organization's pure risk, primarily hazard risk.
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solutions
In the context of risk, the chance of being injured while driving to and from work, loading a
|| || || || || || || || || || || || || || || || || ||
truck at work, moving furniture at home, or falling in an icy parking lot at the mall are all
|| || || || || || || || || || || || || || || || || || ||
examples of ||
A. Possibilities.
||
B. Uncertainties.
||
C. Probabilities.
||
D. Losses. - ✔✔A. Possibilities.
|| || || ||
The statement, "There is a five percent chance that John will be injured in an automobile
|| || || || || || || || || || || || || || || ||
accident while driving to work tomorrow," is an example of
|| || || || || || || || ||
A. Quantifying risk.
|| ||
B. Verifying risk.
|| ||
C. Quantifying loss exposures.
|| || ||
D. Identifying hazards. - ✔✔A. Quantifying risk.
|| || || || || ||
,Which one of the following is measurable and quantifies risk?
|| || || || || || || || ||
A. Probability
||
B. Possibility
||
C. Uncertainty
||
D. Feasibility - ✔✔A. Probability
|| || || ||
One of the elements of risk is uncertainty. Which one of the following best describes the
|| || || || || || || || || || || || || || || ||
uncertainty that risk involves? || || || ||
A. Uncertainty as to how to manage potential losses
|| || || || || || || ||
B. Uncertainty as to whether a negative outcome is possible
|| || || || || || || || ||
C. Uncertainty as to the type and timing of an outcome
|| || || || || || || || || ||
D. Uncertainty as to whether insurance is available - ✔✔C. Uncertainty as to the type and
|| || || || || || || || || || || || || || || ||
timing of an outcome
|| || ||
Hardware Store has been able to control its prices and inventory since it has no competitors.
|| || || || || || || || || || || || || || ||
A new highway currently being constructed is going to allow increased competition for
|| || || || || || || || || || || || || ||
Hardware Store. According to the quadrants of risk, this risk of increased competition falls
|| || || || || || || || || || || || || ||
into the category of
|| || ||
,A. Strategic risk.
|| ||
B. Hazard risk.
|| ||
C. Operational risk.
|| ||
D. Financial risk. - ✔✔A. Strategic risk.
|| || || || || ||
Company G is a manufacturer of high profile golf equipment. The risk management
|| || || || || || || || || || || || ||
professional for Company G is concerned about loss of business related to product design.
|| || || || || || || || || || || || || ||
Failing to respond to changing customer demand and preferences in the design of golf clubs
|| || || || || || || || || || || || || ||
could cost Company G significant market share. Categorized according to the quadrants of
|| || || || || || || || || || || || || ||
risk, this exposure to loss would be classified as a(n)
|| || || || || || || || ||
A. Strategic risk.
|| ||
B. Financial risk.
|| ||
C. Operational risk.
|| ||
D. Hazard risk. - ✔✔A. Strategic risk.
|| || || || || ||
George has received an inheritance and is deciding what to do with the money. He has
|| || || || || || || || || || || || || || || ||
limited his options to four choices: donate all the money to his favorite charity, use the
|| || || || || || || || || || || || || || || ||
entire inheritance to buy a yacht, invest the inheritance in a small rental property, or use
|| || || || || || || || || || || || || || || ||
the entire amount to purchase T-bills. Which one of the following statements is true
|| || || || || || || || || || || || || ||
regarding the risk involved in George's options?
|| || || || || ||
, A. Donating his inheritance to charity is a pure risk; there is no uncertainty that the money
|| || || || || || || || || || || || || || || || ||
will be gone and George will have no chance of profit.
|| || || || || || || || || ||
B. Buying a boat is a nondiversifiable risk because George can only afford to purchase a
|| || || || || || || || || || || || || || || ||
single yacht. ||
C. The rental property presents both pure and speculative risk; property values may
|| || || || || || || || || || || || ||
increase, and the building could burn down.|| || || || || ||
D. Purchasing T-bills is a pure risk because the interest rate payable is known, and the
|| || || || || || || || || || || || || || || ||
chance of loss is minimal. - ✔✔C. The rental property presents both pure and speculative
|| || || || || || || || || || || || || || ||
risk; property values may increase, and the building could burn down.
|| || || || || || || || || ||
Risk can be classified as pure or speculative. Which one of the following is the best example
|| || || || || || || || || || || || || || || || ||
of a speculative risk?
|| || ||
A. Acquiring a new television
|| || || ||
B. Investing in shares of stock
|| || || || ||
C. Buying a new personal vehicle
|| || || || ||
D. Purchasing an insurance policy - ✔✔B. Investing in shares of stock
|| || || || || || || || || || ||
Which one of the following statements is true regarding enterprise risk management
|| || || || || || || || || || || ||
(ERM)?
A. ERM is concerned with an organization's pure risk, primarily hazard risk.
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