7/13/25, 11:05
AM
MARK CPCU 500 CH. 6 EXAM QUESTIONS AND
ANSWERS WITH COMPLETE SOLUTIONS VERIFIED
GRADED A++ 2025/2026
1-1. Describe the Losses are independent when a loss
traits of an at one loss expsoure has no effect on
independent, or the probability of a loss at another
uncorrelated, loss expsosure.
loss exposure.
1-2. Describe the As the number of members in the
likelihood of pool increases, the expected losses
extreme and standard deviation of the pool
outcomes when both increase. However, on a per
using a pooling member basis, the expected value
arrangement. remains unchanged and the standard
deviation decreases. This occurs
because the extreme outcomes
become less likely at the pool
level.
1-3. Describe the Pooling does not change the frequency or
effect of pooling severity of an individual loss exposure,
1/
22
,7/13/25, 11:05
AM
on the frequency but it does change the probability
of loss, severity of distribution of the loss because the
loss, and the sources of the loss exposures and
probability the resources to pay for losses have
distribution of been combined. The result is that
losses. the uncertainty around the
expected value has decreased.
2/
22
, 7/13/25, 11:05
AM
1-4. The Atwell Bus a. An example of a correlated loss
Corporation is a exposure is a bus breakdown
publicly held caused by a defective design in
corporation Atwell's buses.
providing school
bus b. An example of an uncorrelated loss
transportation to exposure is a serious bus accident
public and private resulting in multiple deaths.
schools in Midland
County. Atwell c. For the correlated loss exposure,
owns 200 school assuming both Atwell's and Green's fleets
buses, garaged included buses with the same defect
in three (perfectly positively correlated loss),
different cities the risks would be unchanged. If
within the county. losses are not perfectly positively
Its major correlated, some risk would be
competitors are reduced through pooling, although
two larger bus the magnitude is less than with
companies that uncorrelated losses.
operate in the
same general
For the uncorrelated loss
area.
exposure, although the number of
School districts and
serious accidents for which Atwell
3/
22
AM
MARK CPCU 500 CH. 6 EXAM QUESTIONS AND
ANSWERS WITH COMPLETE SOLUTIONS VERIFIED
GRADED A++ 2025/2026
1-1. Describe the Losses are independent when a loss
traits of an at one loss expsoure has no effect on
independent, or the probability of a loss at another
uncorrelated, loss expsosure.
loss exposure.
1-2. Describe the As the number of members in the
likelihood of pool increases, the expected losses
extreme and standard deviation of the pool
outcomes when both increase. However, on a per
using a pooling member basis, the expected value
arrangement. remains unchanged and the standard
deviation decreases. This occurs
because the extreme outcomes
become less likely at the pool
level.
1-3. Describe the Pooling does not change the frequency or
effect of pooling severity of an individual loss exposure,
1/
22
,7/13/25, 11:05
AM
on the frequency but it does change the probability
of loss, severity of distribution of the loss because the
loss, and the sources of the loss exposures and
probability the resources to pay for losses have
distribution of been combined. The result is that
losses. the uncertainty around the
expected value has decreased.
2/
22
, 7/13/25, 11:05
AM
1-4. The Atwell Bus a. An example of a correlated loss
Corporation is a exposure is a bus breakdown
publicly held caused by a defective design in
corporation Atwell's buses.
providing school
bus b. An example of an uncorrelated loss
transportation to exposure is a serious bus accident
public and private resulting in multiple deaths.
schools in Midland
County. Atwell c. For the correlated loss exposure,
owns 200 school assuming both Atwell's and Green's fleets
buses, garaged included buses with the same defect
in three (perfectly positively correlated loss),
different cities the risks would be unchanged. If
within the county. losses are not perfectly positively
Its major correlated, some risk would be
competitors are reduced through pooling, although
two larger bus the magnitude is less than with
companies that uncorrelated losses.
operate in the
same general
For the uncorrelated loss
area.
exposure, although the number of
School districts and
serious accidents for which Atwell
3/
22
