CPCU 500 Exam Study Guide/
357 Questions and Answers/
Graded A+
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
A. Possibilities.
B. Uncertainties.
C. Probabilities.
D. Losses. - -A. Possibilities.
-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
A. Quantifying risk.
B. Verifying risk.
C. Quantifying loss exposures.
D. Identifying hazards. - -A. Quantifying risk.
-Which one of the following is measurable and quantifies risk?
A. Probability
,B. Possibility
C. Uncertainty
D. Feasibility - -A. Probability
-One of the elements of risk is uncertainty. Which one of the
following best describes the uncertainty that risk involves?
A. Uncertainty as to how to manage potential losses
B. Uncertainty as to whether a negative outcome is possible
C. Uncertainty as to the type and timing of an outcome
D. Uncertainty as to whether insurance is available - -C.
Uncertainty as to the type and timing of an outcome
-Hardware Store has been able to control its prices and inventory
since it has no competitors. A new highway currently being
constructed is going to allow increased competition for Hardware
Store. According to the quadrants of risk, this risk of increased
competition falls into the category of
A. Strategic risk.
B. Hazard risk.
C. Operational risk.
D. Financial risk. - -A. Strategic risk.
-Company G is a manufacturer of high profile golf equipment. The
risk management professional for Company G is concerned about
,loss of business related to product design. Failing to respond to
changing customer demand and preferences in the design of golf
clubs could cost Company G significant market share. Categorized
according to the quadrants of risk, this exposure to loss would be
classified as a(n)
A. Strategic risk.
B. Financial risk.
C. Operational risk.
D. Hazard risk. - -A. Strategic risk.
-George has received an inheritance and is deciding what to do
with the money. He has limited his options to four choices: donate
all the money to his favorite charity, use the entire inheritance to
buy a yacht, invest the inheritance in a small rental property, or
use the entire amount to purchase T-bills. Which one of the
following statements is true regarding the risk involved in
George's options?
A. Donating his inheritance to charity is a pure risk; there is no
uncertainty that the money will be gone and George will have no
chance of profit.
B. Buying a boat is a nondiversifiable risk because George can
only afford to purchase a single yacht.
C. The rental property presents both pure and speculative risk;
property values may increase, and the building could burn down.
D. Purchasing T-bills is a pure risk because the interest rate
payable is known, and the chance of loss is minimal. - -C. The
, rental property presents both pure and speculative risk; property
values may increase, and the building could burn down.
-Risk can be classified as pure or speculative. Which one of the
following is the best example of a speculative risk?
A. Acquiring a new television
B. Investing in shares of stock
C. Buying a new personal vehicle
D. Purchasing an insurance policy - -B. Investing in shares of
stock
-Which one of the following statements is true regarding
enterprise risk management (ERM)?
A. ERM is concerned with an organization's pure risk, primarily
hazard risk.
B. The ERM framework encompasses all stakeholders in the
organization.
C. In ERM, the risk management function is the responsibility of
the safety manager.
D. ERM requires less communication than traditional risk
management. - -B. The ERM framework encompasses all
stakeholders in the organization.
-A risk management plan that considers all of the risks that an
organization faces, including operational, financial, and strategic
risks, is called
357 Questions and Answers/
Graded A+
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
A. Possibilities.
B. Uncertainties.
C. Probabilities.
D. Losses. - -A. Possibilities.
-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
A. Quantifying risk.
B. Verifying risk.
C. Quantifying loss exposures.
D. Identifying hazards. - -A. Quantifying risk.
-Which one of the following is measurable and quantifies risk?
A. Probability
,B. Possibility
C. Uncertainty
D. Feasibility - -A. Probability
-One of the elements of risk is uncertainty. Which one of the
following best describes the uncertainty that risk involves?
A. Uncertainty as to how to manage potential losses
B. Uncertainty as to whether a negative outcome is possible
C. Uncertainty as to the type and timing of an outcome
D. Uncertainty as to whether insurance is available - -C.
Uncertainty as to the type and timing of an outcome
-Hardware Store has been able to control its prices and inventory
since it has no competitors. A new highway currently being
constructed is going to allow increased competition for Hardware
Store. According to the quadrants of risk, this risk of increased
competition falls into the category of
A. Strategic risk.
B. Hazard risk.
C. Operational risk.
D. Financial risk. - -A. Strategic risk.
-Company G is a manufacturer of high profile golf equipment. The
risk management professional for Company G is concerned about
,loss of business related to product design. Failing to respond to
changing customer demand and preferences in the design of golf
clubs could cost Company G significant market share. Categorized
according to the quadrants of risk, this exposure to loss would be
classified as a(n)
A. Strategic risk.
B. Financial risk.
C. Operational risk.
D. Hazard risk. - -A. Strategic risk.
-George has received an inheritance and is deciding what to do
with the money. He has limited his options to four choices: donate
all the money to his favorite charity, use the entire inheritance to
buy a yacht, invest the inheritance in a small rental property, or
use the entire amount to purchase T-bills. Which one of the
following statements is true regarding the risk involved in
George's options?
A. Donating his inheritance to charity is a pure risk; there is no
uncertainty that the money will be gone and George will have no
chance of profit.
B. Buying a boat is a nondiversifiable risk because George can
only afford to purchase a single yacht.
C. The rental property presents both pure and speculative risk;
property values may increase, and the building could burn down.
D. Purchasing T-bills is a pure risk because the interest rate
payable is known, and the chance of loss is minimal. - -C. The
, rental property presents both pure and speculative risk; property
values may increase, and the building could burn down.
-Risk can be classified as pure or speculative. Which one of the
following is the best example of a speculative risk?
A. Acquiring a new television
B. Investing in shares of stock
C. Buying a new personal vehicle
D. Purchasing an insurance policy - -B. Investing in shares of
stock
-Which one of the following statements is true regarding
enterprise risk management (ERM)?
A. ERM is concerned with an organization's pure risk, primarily
hazard risk.
B. The ERM framework encompasses all stakeholders in the
organization.
C. In ERM, the risk management function is the responsibility of
the safety manager.
D. ERM requires less communication than traditional risk
management. - -B. The ERM framework encompasses all
stakeholders in the organization.
-A risk management plan that considers all of the risks that an
organization faces, including operational, financial, and strategic
risks, is called
