ARM 402 PRACTICE ACTUAL TEST PAPER 2026
COMPLETE QUESTIONS AND SOLUTIONS
GRADED A+
◉ Which one of the following is a common problem with meetings
that leaders should try to avoid?
A. Trying to stick to an agenda and avoid interruptions
B. Committing to an end time, as well as a start time
C. Having the wrong people attend
D. Stating the objective in writing before the meeting. Answer: C
◉ Which one of the following statements about correlation and
covariance is true?
A. Covariance is a scaled version of correlation and ranges from -1 to
+1.
B. The correlation between variables ranges from 0 to +1.
C. Covariance measures the extent to which variables move together
or independently.
D. Correlation measures causality.. Answer: C
◉ Once a holistic risk management program is created and put into
effect, which one of the following methods can be used to allow
constant and consistent monitoring of the process?
,A. Bow-tie diagram
B. Feedback loop
C. Dashboard reporting
D. SWOT analysis. Answer: B
◉ A risk control technique that reduces the frequency of a particular
loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication.. Answer: A
◉ Ivanhoe Corporation purchases stock in a bank and in a
pharmaceutical manufacturer. Because these are unrelated
industries, Ivanhoe hope that any losses in one stock will be more
than offset by profits in another. Ivanhoe is using which one of the
following risk management techniques?
A. Risk transfer
B. Duplication
C. Diversification
D. Separation. Answer: C
,◉ Pacific Bar and Grill was having a problem with employees
slipping and falling in the kitchen and bar areas. Rather than incur
the cost to replace the floors with a new non-slip surface, the owners
decided to require employees to wear slip-resistant shoes and
monitor the floors for spills on a regular schedule. They are also
keeping track of the number of employee slips and falls and the
associated costs, as well as, the expenses involved with this risk
management program. Which one of the following methods is Pacific
Bar and Grill using to measure the effectiveness of this risk
management process?
A. Dashboard reporting
B. Feedback loop
C. Scorecard
D. Bow-tie diagram. Answer: B
◉ Ed is investment manager of the Nellor Foundation, a charitable
trust. Recently, Ed met with the president of the Foundation. Up until
now, assets have been invested in financial assets. Ed told the
president that after performing a simulation, he would like to add a
high-yielding, higher risk real estate investment to the portfolio.
When the president asked if it would be too risky, Ed replied, "It will
actually increase expected returns while reducing risk." The
purported reduction in risk occurs because
A. The real estate investment will not be large enough to
significantly impact on the portfolio.
B. Rental income generated by the real estate investment is not
taxable.
, C. Taxes on real estate investments may be deferred.
D. The real estate investment returns are negatively correlated with
the other assets.. Answer: D
◉ Which one of the following risk control techniques is generally
used to reduce the frequency of a particular loss?
A. Separation
B. Loss reduction
C. Avoidance
D. Loss prevention. Answer: D
◉ Which one of the following statements regarding correlation
analysis is true?
A. Because it incorporates so much data, a risk professional can rely
on correlation analysis only when making a major decision.
B. Abnormal observations and inaccurate data may skew correlation
analysis.
C. The range of correlation coefficients is from 0 to +1.
D. Correlation analysis can indicate causality between variables..
Answer: B
◉ When organizations invest their assets among a mix of stocks and
bonds from companies in different industry sectors they are using
the risk management technique of
COMPLETE QUESTIONS AND SOLUTIONS
GRADED A+
◉ Which one of the following is a common problem with meetings
that leaders should try to avoid?
A. Trying to stick to an agenda and avoid interruptions
B. Committing to an end time, as well as a start time
C. Having the wrong people attend
D. Stating the objective in writing before the meeting. Answer: C
◉ Which one of the following statements about correlation and
covariance is true?
A. Covariance is a scaled version of correlation and ranges from -1 to
+1.
B. The correlation between variables ranges from 0 to +1.
C. Covariance measures the extent to which variables move together
or independently.
D. Correlation measures causality.. Answer: C
◉ Once a holistic risk management program is created and put into
effect, which one of the following methods can be used to allow
constant and consistent monitoring of the process?
,A. Bow-tie diagram
B. Feedback loop
C. Dashboard reporting
D. SWOT analysis. Answer: B
◉ A risk control technique that reduces the frequency of a particular
loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication.. Answer: A
◉ Ivanhoe Corporation purchases stock in a bank and in a
pharmaceutical manufacturer. Because these are unrelated
industries, Ivanhoe hope that any losses in one stock will be more
than offset by profits in another. Ivanhoe is using which one of the
following risk management techniques?
A. Risk transfer
B. Duplication
C. Diversification
D. Separation. Answer: C
,◉ Pacific Bar and Grill was having a problem with employees
slipping and falling in the kitchen and bar areas. Rather than incur
the cost to replace the floors with a new non-slip surface, the owners
decided to require employees to wear slip-resistant shoes and
monitor the floors for spills on a regular schedule. They are also
keeping track of the number of employee slips and falls and the
associated costs, as well as, the expenses involved with this risk
management program. Which one of the following methods is Pacific
Bar and Grill using to measure the effectiveness of this risk
management process?
A. Dashboard reporting
B. Feedback loop
C. Scorecard
D. Bow-tie diagram. Answer: B
◉ Ed is investment manager of the Nellor Foundation, a charitable
trust. Recently, Ed met with the president of the Foundation. Up until
now, assets have been invested in financial assets. Ed told the
president that after performing a simulation, he would like to add a
high-yielding, higher risk real estate investment to the portfolio.
When the president asked if it would be too risky, Ed replied, "It will
actually increase expected returns while reducing risk." The
purported reduction in risk occurs because
A. The real estate investment will not be large enough to
significantly impact on the portfolio.
B. Rental income generated by the real estate investment is not
taxable.
, C. Taxes on real estate investments may be deferred.
D. The real estate investment returns are negatively correlated with
the other assets.. Answer: D
◉ Which one of the following risk control techniques is generally
used to reduce the frequency of a particular loss?
A. Separation
B. Loss reduction
C. Avoidance
D. Loss prevention. Answer: D
◉ Which one of the following statements regarding correlation
analysis is true?
A. Because it incorporates so much data, a risk professional can rely
on correlation analysis only when making a major decision.
B. Abnormal observations and inaccurate data may skew correlation
analysis.
C. The range of correlation coefficients is from 0 to +1.
D. Correlation analysis can indicate causality between variables..
Answer: B
◉ When organizations invest their assets among a mix of stocks and
bonds from companies in different industry sectors they are using
the risk management technique of
