Risk Management and Insurance Final
Exam Tests 1 and 2 @PCC 2026
passed
A - ANS✔✔ A pure risk is defined as:
A. An event that offers no opportunity for financial gain
B. The chance a loss will occur
C. A diversifiable risk
D. A contingency that increases the chance of a loos
D - ANS✔✔ Which of the following is not a method of protection of risk?
A. Group insurance plans
B. Employee benefits
C. Social insurance
D. Humanitarian aid
B - ANS✔✔ Risk Pooling is an example of:
A. A catastrophic loss event
B. Diversifying risk
C. A speculate risk
D. Applying the risk-return trade-off
D - ANS✔✔ Which of the following is not a hazard?
A. Storing one ton of dynamite in a garage
B. Bad diet (eating lots of junk food)
,C. Skating on thin ice
D. Getting shot accidentally while deer hunting
A - ANS✔✔ The correct order of the steps in the Risk Management Process is: (too long to type
them all out)
A. Establish goals, Identify potential loss exposure, Measure potential loss exposure, Choose risk
handling techniques, Implement techniques and monitor effectiveness
A - ANS✔✔ Which of the following is not a type of risk when identifying a pure risk?
A. Retention risk
B. Property risk
C. Liability risk
D. Human resource risk
B - ANS✔✔ Which of the following is not a risk handling technique?
A. Loss control
B. Loss diversification
C. Loss transfer
D. Loss financing
D - ANS✔✔ Diversifiable risk is defined as:
A. Risk with two possible outcomes
B. Risk with three possible outcomes
C. An individual's perception of risk
D. None of the above
A - ANS✔✔ Catastrophic losses are not insured by the private insurance industry because:
, A. If a truly catastrophic loss occurs, it can threaten the solvency of the insurer
B. Catastrophic losses can result from an individual's moral hazard
C. The federal government wants to insure catastrophic losses
D. The losses require foreign reinsurance companies to operate in the U.S.
D - ANS✔✔ Examine the following list of "risks". Determine which of these are "pure risks"
I. The risk that your antique Corvette will depreciate in market value
II. The risk that you will have a collision in your Corvette, thus causing you to spend thousands
of dollars in repair costs
III. The risk that someone will steal your Corvette
IV. The risk that you will buy a house and lightning will strike your roof, thus causing you to have
to purchase a new roof
V. The risk that you will invest your life savings in a business venture that fails, thus causing you
to lose your tire investment
A. I,II,III,IV,V
B. I,II,IV
C. I,II,III,IV
D. II,III,IV
B - ANS✔✔ Which of the following is an accurate definition of "insurance"?
A. A savings account designed to protect you in the event of a rainy day
B. a financial arrangement that redistributes the costs of unexpected losses among a pool of
insureds
C. A communist plot to destroy capitalist enterprise
D. A contractual agreement in which the insurer agrees to pay the insured only if the insured
requests the money
D - ANS✔✔ In the Context of ERM, hazard risk is defined as:
Exam Tests 1 and 2 @PCC 2026
passed
A - ANS✔✔ A pure risk is defined as:
A. An event that offers no opportunity for financial gain
B. The chance a loss will occur
C. A diversifiable risk
D. A contingency that increases the chance of a loos
D - ANS✔✔ Which of the following is not a method of protection of risk?
A. Group insurance plans
B. Employee benefits
C. Social insurance
D. Humanitarian aid
B - ANS✔✔ Risk Pooling is an example of:
A. A catastrophic loss event
B. Diversifying risk
C. A speculate risk
D. Applying the risk-return trade-off
D - ANS✔✔ Which of the following is not a hazard?
A. Storing one ton of dynamite in a garage
B. Bad diet (eating lots of junk food)
,C. Skating on thin ice
D. Getting shot accidentally while deer hunting
A - ANS✔✔ The correct order of the steps in the Risk Management Process is: (too long to type
them all out)
A. Establish goals, Identify potential loss exposure, Measure potential loss exposure, Choose risk
handling techniques, Implement techniques and monitor effectiveness
A - ANS✔✔ Which of the following is not a type of risk when identifying a pure risk?
A. Retention risk
B. Property risk
C. Liability risk
D. Human resource risk
B - ANS✔✔ Which of the following is not a risk handling technique?
A. Loss control
B. Loss diversification
C. Loss transfer
D. Loss financing
D - ANS✔✔ Diversifiable risk is defined as:
A. Risk with two possible outcomes
B. Risk with three possible outcomes
C. An individual's perception of risk
D. None of the above
A - ANS✔✔ Catastrophic losses are not insured by the private insurance industry because:
, A. If a truly catastrophic loss occurs, it can threaten the solvency of the insurer
B. Catastrophic losses can result from an individual's moral hazard
C. The federal government wants to insure catastrophic losses
D. The losses require foreign reinsurance companies to operate in the U.S.
D - ANS✔✔ Examine the following list of "risks". Determine which of these are "pure risks"
I. The risk that your antique Corvette will depreciate in market value
II. The risk that you will have a collision in your Corvette, thus causing you to spend thousands
of dollars in repair costs
III. The risk that someone will steal your Corvette
IV. The risk that you will buy a house and lightning will strike your roof, thus causing you to have
to purchase a new roof
V. The risk that you will invest your life savings in a business venture that fails, thus causing you
to lose your tire investment
A. I,II,III,IV,V
B. I,II,IV
C. I,II,III,IV
D. II,III,IV
B - ANS✔✔ Which of the following is an accurate definition of "insurance"?
A. A savings account designed to protect you in the event of a rainy day
B. a financial arrangement that redistributes the costs of unexpected losses among a pool of
insureds
C. A communist plot to destroy capitalist enterprise
D. A contractual agreement in which the insurer agrees to pay the insured only if the insured
requests the money
D - ANS✔✔ In the Context of ERM, hazard risk is defined as:
