CPCU 500 Questions & Answers 100% Verified!!!

Risk - ANSWERthe uncertainty about outcomes, with the possibility that some of the outcomes can be negative. Quantified by knowing the probability of the possible outcomes Probability - ANSWERthe likelihood that an outcome or event will occur. Probabilities are stated as a decimal figure, a percentage, or a fraction. What are the 2 elements associated with risk? - ANSWERuncertainty of outcome + possibility of negative outcome Pure Risk - ANSWERa chance of loss or no loss, but no chance of gain. Speculative Risk - ANSWERa chance of gain or loss (investment). Price Risk - ANSWERthe uncertainty over the size of cash flows resulting from possible changes in the cost of raw materials and other inputs (lumber, gas, or electricity) Credit Risk - ANSWERthe risk that customers and other debtors will fail to make promised payments. Distinguish Diversifiable vs. Nondiversifiable Risk - ANSWERDiversifiable risks can be managed by spreading (such as purchasing multiple businesses). Nondiversifiable risks are correlated so that their gains or losses tend to occur simultaneously rather than randomly. What are the 4 quadrants of risk? - ANSWERHazard, Operational, Financial, and Strategic risk Hazard - ANSWERa condition that increases the frequency or severity of a loss. What are the classifications of risk? - ANSWERpure vs. speculative. subjective vs. objective. diversifiable vs. nondiversifiable. Th