CPCU 500 Final Practice Test Questions & Answers 100% Correct(scored A)

Risk involves The possibility of a negative outcome. Possibility means - ANSWERThat an outcome may or may not occur. Probabilities are stated as decimal figure, a percentage, or a - ANSWERFraction To understand risk, one needs to know the probability of an outcome or event occurring. Which one of the following statements is correct with respect to probability? - ANSWERIt can be used to decide which activities to undertake. 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 - ANSWERQuantifying risk One of the elements of risk is uncertainty. Which one of the following best describes the uncertainty that risk involves? - ANSWERUncertainty as to the type and timing of an outcome. 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 - ANSWERPossibilities Which one of the following is measurable and quantifies risk? - ANSWERProbability Risk can be classified as pure or speculative. Which one of the following is the best example of a speculative risk? - ANSWERInvesting in shares of stock. Classifying risk appropriately can help in managing risk. Which one of the following statements is correct with respect to the classification of risk. - ANSWERA pure risk is a chance of loss or no loss, but no chance of gain. Risk can be classified as subjective or objective. Which one of the following statements is correct wit respect to these risk classifications? - ANSWERSubjective risk can exist even where objective risk does not. Which one of the following statements is accurate regarding pure and speculative risks? - ANSWEREvery business venture involves speculative risks. Regarding diversifiable and nondiversifiable risk, which one of the following statements is accurate? - ANSWERSystemic risks are generally nondiversifiable. Classifying the various types of risk can help in assessing, controlling, and financing risk as part of the risk management process. Which one of the following statements is true regarding the typical classifications of risk? - ANSWERClassifications of risk can help with controlling and financing risk. Insurance deals primarily with - ANSWERPure risks One approach to categorizing risks involves dividing risks into risk quadrants. The risks categorized as hazards are - ANSWERTraditionally managed by risk management professionals. The focus of risk quadrants is different from the focus of risk classifications. While the classifications of risk focus on some aspect of risk itself, the four quadrants of risk focus on - ANSWERThe source of risk and who has traditionally managed them. Risk can be classified as divesifiable or nondiversifiable. Which one of the following st