CPCU 500 3rd Edition Final Practice exam
1 UPDATED Study Guide QUESTIONS
AND CORRECT ANSWERS
Risk involves the possibility of a negative outcome. Possibility means -
CORRECT ANSWERS That an outcome may or may not occur.
Risk can be classified as subjective or objective. Which one of the following
statements is correct with respect to these risk classifications? - CORRECT
ANSWERS Subjective risk can exist even where objective risk does not.
The concept of correlation, in the context of why enterprise risk management
works, - CORRECT ANSWERS Is the proposition that correlation
increases risk while uncorrelated risks can reduce risk
The use of data gleaned from sensors to react immediately to hazardous
situations is known as - CORRECT ANSWERS Real-time risk
management.
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 - CORRECT
ANSWERS $11.5 million
An organization must meet the standard of care that it owes to others in order to
ensure that - CORRECT ANSWERS Legal obligations are satisfied
, A risk management program must be monitored and periodically revised, and
that revision involves four steps. Which one of the following is one of those
four steps? - CORRECT ANSWERS Compare actual results with the
established performance standards.
Property insurance policies not only protect the property owner but also
generally protect a secured lender's interest in the financed property by -
CORRECT ANSWERS Naming the lender on the owner's policy.
Perils are an important aspect of property insurance. Which one of the following
statements is correct with respect to perils? - CORRECT ANSWERS A
peril is the actual means by which property is damaged or destroyed such as
fire, lightning, windstorm, hail, or theft.
A building contractor uses lower grade materials than called for in the
specifications for an office building. A year after the building was completed, a
balcony collapses, injuring several employees and customers and causing
damage to the building and contents. For the building construction company,
this is an example of - CORRECT ANSWERS A completed operations
liability exposure.
Josephine Redmond who is the sole proprietor of Dream Quilts, Inc., operates
out of three branch offices with 17 employees. What happens to Josephine's
business if she dies or retires? - CORRECT ANSWERS The business
ceases to exist
An auto dealer's showroom is destroyed by fire, and the dealer has to
temporarily rent an adjacent building to use as a showroom. This is an example
of - CORRECT ANSWERS An extra expense
Which one of the following is correct with respect to compliance reviews? -
CORRECT ANSWERS Monitoring and maintaining compliance through
1 UPDATED Study Guide QUESTIONS
AND CORRECT ANSWERS
Risk involves the possibility of a negative outcome. Possibility means -
CORRECT ANSWERS That an outcome may or may not occur.
Risk can be classified as subjective or objective. Which one of the following
statements is correct with respect to these risk classifications? - CORRECT
ANSWERS Subjective risk can exist even where objective risk does not.
The concept of correlation, in the context of why enterprise risk management
works, - CORRECT ANSWERS Is the proposition that correlation
increases risk while uncorrelated risks can reduce risk
The use of data gleaned from sensors to react immediately to hazardous
situations is known as - CORRECT ANSWERS Real-time risk
management.
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 - CORRECT
ANSWERS $11.5 million
An organization must meet the standard of care that it owes to others in order to
ensure that - CORRECT ANSWERS Legal obligations are satisfied
, A risk management program must be monitored and periodically revised, and
that revision involves four steps. Which one of the following is one of those
four steps? - CORRECT ANSWERS Compare actual results with the
established performance standards.
Property insurance policies not only protect the property owner but also
generally protect a secured lender's interest in the financed property by -
CORRECT ANSWERS Naming the lender on the owner's policy.
Perils are an important aspect of property insurance. Which one of the following
statements is correct with respect to perils? - CORRECT ANSWERS A
peril is the actual means by which property is damaged or destroyed such as
fire, lightning, windstorm, hail, or theft.
A building contractor uses lower grade materials than called for in the
specifications for an office building. A year after the building was completed, a
balcony collapses, injuring several employees and customers and causing
damage to the building and contents. For the building construction company,
this is an example of - CORRECT ANSWERS A completed operations
liability exposure.
Josephine Redmond who is the sole proprietor of Dream Quilts, Inc., operates
out of three branch offices with 17 employees. What happens to Josephine's
business if she dies or retires? - CORRECT ANSWERS The business
ceases to exist
An auto dealer's showroom is destroyed by fire, and the dealer has to
temporarily rent an adjacent building to use as a showroom. This is an example
of - CORRECT ANSWERS An extra expense
Which one of the following is correct with respect to compliance reviews? -
CORRECT ANSWERS Monitoring and maintaining compliance through
