CPCU 500 UPDATED CORE EXAMINATION
MANUAL QUESTIONS AND ANSWERS SURE A+
✔✔Which one of the following is an element of a loss exposure?
Choose one answer.
A. The verification of risk
B. A cause of loss
C. The probability of a loss
D. The occurrence of a loss - ✔✔B. A cause of loss
✔✔The statement "There is a 5 percent chance that John will be injured in an
automobile accident while driving to work tomorrow." is an example of
Choose one answer.
A. Quantifying risk.
B. Verifying risk.
C. Quantifying loss exposures.
D. Indentifying hazards. - ✔✔A. Quantifying risk.
✔✔Dave owns a computer store. He stores backup media copies of confidential records
off site in case there is a fire at the computer store. The risk control technique Dave is
using to protect the confidential records is
Choose one answer.
A. Diversification.
,B. Duplication.
C. Avoidance.
D. Separation. - ✔✔B. Duplication.
✔✔Which one of the following statements regarding monitoring the results of a risk
management program is true?
Choose one answer.
A. A results standard focuses on the quality and quantity of the risk management
activities undertaken by the organization.
B. Risk management professionals generally prefer performance standards that are
solely dependent on the organization's loss record.
C. Activities standards are necessary to obtain a complete picture of the success or
failure of a risk management program.
D. When performance substantially exceeds the standard, the risk management
professional knows that the standard has been appropriately set. - ✔✔C. Activities
standards are necessary to obtain a complete picture of the success or failure of a risk
management program.
✔✔Delmond Manufacturing is opening a new manufacturing facility in a building that it
purchased from a competitor. Using the information below, which one of the following
represents the cost of risk of opening the new facility?
New building cost $60.0 million
Safety system upgrades $6.0 million
Insurance premiums $1.5 million
Retained losses $3.0 million
Risk management department budget at the site $1.0 million
Choose one answer.
A. $7.0 million
B. $10.0 million
C. $11.5 million
D. $71.5 million - ✔✔C. $11.5 million
✔✔Achieving any post-loss goal involves expending risk management resources, which
may conflict with the pre-loss goal of
Choose one answer.
A. Economy of operations.
B. Earnings stability.
C. Social responsibility.
D. Tolerable uncertainty. - ✔✔A. Economy of operations.
✔✔Another term for cause of loss is
Choose one answer.
A. Negative outcome.
B. Exposure.
,C. Peril.
D. Hazard. - ✔✔C. Peril
✔✔Which one of the following financial consequences of loss can be established with a
high degree of certainty fairly soon after the loss occurs?
Choose one answer.
A. The value of a pollution loss
B. The value of a building that has been damaged by fire
C. The value of business lost while the building damaged by fire is being restored
D. The value of liability claims related to a defective product - ✔✔B. The value of a
building that has been damaged by fire
✔✔Which one of the following statements is correct with respect to the expected cost of
losses or gains?
Choose one answer.
A. The expected cost of gains or losses includes only the direct costs associated with a
particular risk.
B. Calculating the expected cost of losses or gains for pure risks is more complex than
for speculative risks.
C. Industrial accidents can illustrate the various costs that need to be accounted for in
determining cost of losses.
D. The expected cost of losses is equal to the uninsured portion of any bodily injury or
property damage. - ✔✔C. Industrial accidents can illustrate the various costs that need
to be accounted for in determining cost of losses.
✔✔An example of an intangible asset that an individual may possess is
Choose one answer.
A. An investment portfolio.
B. A unique skill set.
C. Money that is owed to them.
D. A rental property. - ✔✔B. A unique skill set.
✔✔During the past year, International Toys has undertaken four capital projects. The
company has renovated and refurbished one of its aging warehouse buildings. It has
purchased the most recent version of its current order processing computer software. It
has added two trucks to its fleet of delivery vehicles. Lastly, it has purchased a new
production machine that will allow it to launch a new product line. Which one of the
following company projects is the most speculative risk?
Choose one answer.
A. The warehouse refurbishment
B. The software upgrade
C. The two new trucks
D. The new production machine - ✔✔D. The new production machine
✔✔Which one of the following is measurable and quantifies risk?
, Choose one answer.
A. Uncertainty
B. Possibility
C. Probability
D. Feasibility - ✔✔C. Probability
✔✔One enterprise risk management (ERM) approach to categorizing risks involves
dividing risks into four risk quadrants. The risks categorized as hazard risks are
Choose one answer.
A. Traditionally managed by risk management professionals.
B. Speculative risks that fall outside the operational risk category.
C. Traditionally handled by the treasury function.
D. Fundamental to an organization's existence and business plans. - ✔✔A.
Traditionally managed by risk management professionals.
✔✔Question 23. Despite being frequently reminded otherwise, Laura was in the habit of
leaving her car door unlocked, often with her purse inside. As a result, Laura's car was
stolen, along with her purse. Laura's behavior is an example of a
Choose one answer.
A. Moral hazard.
B. Morale hazard.
C. Physical hazard.
D. Legal hazard. - ✔✔B. Morale hazard.
✔✔Organizations find it difficult to establish a benchmark against which the
performance of their risk management program can be assessed because it is difficult
to assign a specific value to the
Choose one answer.
A. Cost of implementing and administering risk management.
B. Cost of losses not reimbursed by insurance.
C. Cost of residual uncertainty.
D. Cost of measures to prevent or reduce the size of potential losses. - ✔✔C. Cost of
residual uncertainty.
✔✔Which one of the following best explains the term "residual uncertainty"?
Choose one answer.
A. It is the level of risk that remains after implementing risk management plans.
B. It is the difference between estimated subjective risk and calculated objective risk.
C. It is the amount invested in risk management in order to eliminate concern.
D. It is uncertainty regarding the value of any residual salvage that would remain after a
loss. - ✔✔A. It is the level of risk that remains after implementing risk management
plans.
MANUAL QUESTIONS AND ANSWERS SURE A+
✔✔Which one of the following is an element of a loss exposure?
Choose one answer.
A. The verification of risk
B. A cause of loss
C. The probability of a loss
D. The occurrence of a loss - ✔✔B. A cause of loss
✔✔The statement "There is a 5 percent chance that John will be injured in an
automobile accident while driving to work tomorrow." is an example of
Choose one answer.
A. Quantifying risk.
B. Verifying risk.
C. Quantifying loss exposures.
D. Indentifying hazards. - ✔✔A. Quantifying risk.
✔✔Dave owns a computer store. He stores backup media copies of confidential records
off site in case there is a fire at the computer store. The risk control technique Dave is
using to protect the confidential records is
Choose one answer.
A. Diversification.
,B. Duplication.
C. Avoidance.
D. Separation. - ✔✔B. Duplication.
✔✔Which one of the following statements regarding monitoring the results of a risk
management program is true?
Choose one answer.
A. A results standard focuses on the quality and quantity of the risk management
activities undertaken by the organization.
B. Risk management professionals generally prefer performance standards that are
solely dependent on the organization's loss record.
C. Activities standards are necessary to obtain a complete picture of the success or
failure of a risk management program.
D. When performance substantially exceeds the standard, the risk management
professional knows that the standard has been appropriately set. - ✔✔C. Activities
standards are necessary to obtain a complete picture of the success or failure of a risk
management program.
✔✔Delmond Manufacturing is opening a new manufacturing facility in a building that it
purchased from a competitor. Using the information below, which one of the following
represents the cost of risk of opening the new facility?
New building cost $60.0 million
Safety system upgrades $6.0 million
Insurance premiums $1.5 million
Retained losses $3.0 million
Risk management department budget at the site $1.0 million
Choose one answer.
A. $7.0 million
B. $10.0 million
C. $11.5 million
D. $71.5 million - ✔✔C. $11.5 million
✔✔Achieving any post-loss goal involves expending risk management resources, which
may conflict with the pre-loss goal of
Choose one answer.
A. Economy of operations.
B. Earnings stability.
C. Social responsibility.
D. Tolerable uncertainty. - ✔✔A. Economy of operations.
✔✔Another term for cause of loss is
Choose one answer.
A. Negative outcome.
B. Exposure.
,C. Peril.
D. Hazard. - ✔✔C. Peril
✔✔Which one of the following financial consequences of loss can be established with a
high degree of certainty fairly soon after the loss occurs?
Choose one answer.
A. The value of a pollution loss
B. The value of a building that has been damaged by fire
C. The value of business lost while the building damaged by fire is being restored
D. The value of liability claims related to a defective product - ✔✔B. The value of a
building that has been damaged by fire
✔✔Which one of the following statements is correct with respect to the expected cost of
losses or gains?
Choose one answer.
A. The expected cost of gains or losses includes only the direct costs associated with a
particular risk.
B. Calculating the expected cost of losses or gains for pure risks is more complex than
for speculative risks.
C. Industrial accidents can illustrate the various costs that need to be accounted for in
determining cost of losses.
D. The expected cost of losses is equal to the uninsured portion of any bodily injury or
property damage. - ✔✔C. Industrial accidents can illustrate the various costs that need
to be accounted for in determining cost of losses.
✔✔An example of an intangible asset that an individual may possess is
Choose one answer.
A. An investment portfolio.
B. A unique skill set.
C. Money that is owed to them.
D. A rental property. - ✔✔B. A unique skill set.
✔✔During the past year, International Toys has undertaken four capital projects. The
company has renovated and refurbished one of its aging warehouse buildings. It has
purchased the most recent version of its current order processing computer software. It
has added two trucks to its fleet of delivery vehicles. Lastly, it has purchased a new
production machine that will allow it to launch a new product line. Which one of the
following company projects is the most speculative risk?
Choose one answer.
A. The warehouse refurbishment
B. The software upgrade
C. The two new trucks
D. The new production machine - ✔✔D. The new production machine
✔✔Which one of the following is measurable and quantifies risk?
, Choose one answer.
A. Uncertainty
B. Possibility
C. Probability
D. Feasibility - ✔✔C. Probability
✔✔One enterprise risk management (ERM) approach to categorizing risks involves
dividing risks into four risk quadrants. The risks categorized as hazard risks are
Choose one answer.
A. Traditionally managed by risk management professionals.
B. Speculative risks that fall outside the operational risk category.
C. Traditionally handled by the treasury function.
D. Fundamental to an organization's existence and business plans. - ✔✔A.
Traditionally managed by risk management professionals.
✔✔Question 23. Despite being frequently reminded otherwise, Laura was in the habit of
leaving her car door unlocked, often with her purse inside. As a result, Laura's car was
stolen, along with her purse. Laura's behavior is an example of a
Choose one answer.
A. Moral hazard.
B. Morale hazard.
C. Physical hazard.
D. Legal hazard. - ✔✔B. Morale hazard.
✔✔Organizations find it difficult to establish a benchmark against which the
performance of their risk management program can be assessed because it is difficult
to assign a specific value to the
Choose one answer.
A. Cost of implementing and administering risk management.
B. Cost of losses not reimbursed by insurance.
C. Cost of residual uncertainty.
D. Cost of measures to prevent or reduce the size of potential losses. - ✔✔C. Cost of
residual uncertainty.
✔✔Which one of the following best explains the term "residual uncertainty"?
Choose one answer.
A. It is the level of risk that remains after implementing risk management plans.
B. It is the difference between estimated subjective risk and calculated objective risk.
C. It is the amount invested in risk management in order to eliminate concern.
D. It is uncertainty regarding the value of any residual salvage that would remain after a
loss. - ✔✔A. It is the level of risk that remains after implementing risk management
plans.
