CPCU 500 ACTUAL QUESTIONS AND
CORRECT ANSWERS
For public entities such as cities, counties and public utilities, which one of the
following is normally the most important post-loss risk management goal?
Choose one answer.
A. Growth
B. Profitability
C. Continuity of operations
D. Earnings stability - CORRECT ANSWERS C. Continuity of
operations
Which one of the following is the goal of enterprise-wide risk management
(ERM)?
Choose one answer.
A. Coordinate loss reduction efforts
B. Reduce risk management costs
C. Decentralize control of business decisions
D. Maximize the organization's value - CORRECT ANSWERS D.
Maximize the organization's value
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?
Choose one answer.
A. Establish results-based rather than activity-based standards of acceptable
performance.
B. Compare actual results with the established performance standards.
C. Reduce any performance standards that have not been achieved by the actual
results.
, D. Return to the first step in the risk management process to identify new loss
exposures. - CORRECT ANSWERS B. Compare actual results with the
established performance standards.
Risk can be classified as subjective or objective. Which one of the following
statements is correct with respect to these risk classifications?
Choose one answer.
A. Subjective risk is risk associated with individuals; objective risk is risk
associated with objects or things.
B. Risk managers focus on objective risk and attempt to avoid allowing
subjective risk to affect their decisions.
C. Subjective risk can exist even where objective risk does not.
D. Individuals' subjective perception of risk in a given set of circumstances is
typically much higher than the objective risk. - CORRECT ANSWERS
C. Subjective risk can exist even where objective risk does not.
JNL Construction is a general contractor. As the risk management professional
for JNL, Marie should be aware of the company's contractual obligations, as
well as the contractual obligations that others owe JNL. This knowledge is
necessary for Marie to meet which one of the following pre-loss risk
management goals?
Choose one answer.
A. Legality
B. Social responsibility
C. Tolerable uncertainty
D. Continuity of operations - CORRECT ANSWERS A. Legality
Residual uncertainty is the level of risk that remains after organizations
implement their risk management plans. Which one of the following statements
is correct with respect to residual uncertainty?
Choose one answer.
,A. Residual uncertainty is an objective measure, independent of an
organization's subjective view of the
risks to which it is exposed.
B. The cost of residual uncertainty is relatively easy to calculate and comprises
an important part of any cost of risk study.
C. Residual uncertainty can be minimized, but doing so is costly because more
has to be spent on attempts to control or finance the risks involved.
D. Cost of residual uncertainty is a factor only in the case of speculative risk; it
is not a consideration where pure risk is concerned. - CORRECT ANSWERS
C. Residual uncertainty can be minimized, but doing so is costly because
more has to be spent on attempts to control or finance the risks involved.
Tania has been unemployed for six months, and her unpaid bills are mounting.
She recently damaged the front fender of her vehicle after running off the road.
When seeking repairs to the vehicle, she convinced the auto body shop to
include damages from previous incidents in the estimate. This would allow her
to collect extra money from her insurer. From an insurance and risk
management perspective, Tania's behavior is indicative of a
Choose one answer.
A. Legal hazard.
B. Moral hazard.
C. Morale hazard.
D. Physical hazard. - CORRECT ANSWERS B. Moral hazard.
Which one of the following describes how an effective risk management
program should support an organization's pre-loss operational goals?
Choose one answer.
A. It should ensure that risk management costs are kept to a minimum.
B. It should eliminate uncertainty by identifying and managing loss exposures.
C. It should help ensure that the organization's legal obligations are satisfied.
, D. It should ensure that no conflicts exist among the pre-loss goals. -
CORRECT ANSWERS C. It should help ensure that the organization's
legal obligations are satisfied.
Which one of the following statements is true regarding risk management
techniques?
Choose one answer.
A. Data based on objective risk factors are usually the only criteria considered
in determining appropriate risk management techniques.
B. The risk management techniques selected by for-profit organizations should
be both effective in meeting the organizations' goals and economical.
C. In support of the goal of economy of operations, the risk management
techniques selected by most for-profit organizations should be the least
expensive ones.
D. Nonfinancial considerations are usually disregarded in selecting risk
management techniques because they cannot be factored into a cost/benefit
analysis. - CORRECT ANSWERS B. The risk management techniques
selected by for-profit organizations should be both effective in meeting the
organizations' goals and economical.
Which one of the following is an element of a loss exposure?
Choose one answer.
A. The verification of risk
B. A cause of loss
C. The probability of a loss
D. The occurrence of a loss - CORRECT ANSWERS B. A cause of loss
The statement "There is a 5 percent chance that John will be injured in an
automobile accident while driving to work tomorrow." is an example of
Choose one answer.
CORRECT ANSWERS
For public entities such as cities, counties and public utilities, which one of the
following is normally the most important post-loss risk management goal?
Choose one answer.
A. Growth
B. Profitability
C. Continuity of operations
D. Earnings stability - CORRECT ANSWERS C. Continuity of
operations
Which one of the following is the goal of enterprise-wide risk management
(ERM)?
Choose one answer.
A. Coordinate loss reduction efforts
B. Reduce risk management costs
C. Decentralize control of business decisions
D. Maximize the organization's value - CORRECT ANSWERS D.
Maximize the organization's value
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?
Choose one answer.
A. Establish results-based rather than activity-based standards of acceptable
performance.
B. Compare actual results with the established performance standards.
C. Reduce any performance standards that have not been achieved by the actual
results.
, D. Return to the first step in the risk management process to identify new loss
exposures. - CORRECT ANSWERS B. Compare actual results with the
established performance standards.
Risk can be classified as subjective or objective. Which one of the following
statements is correct with respect to these risk classifications?
Choose one answer.
A. Subjective risk is risk associated with individuals; objective risk is risk
associated with objects or things.
B. Risk managers focus on objective risk and attempt to avoid allowing
subjective risk to affect their decisions.
C. Subjective risk can exist even where objective risk does not.
D. Individuals' subjective perception of risk in a given set of circumstances is
typically much higher than the objective risk. - CORRECT ANSWERS
C. Subjective risk can exist even where objective risk does not.
JNL Construction is a general contractor. As the risk management professional
for JNL, Marie should be aware of the company's contractual obligations, as
well as the contractual obligations that others owe JNL. This knowledge is
necessary for Marie to meet which one of the following pre-loss risk
management goals?
Choose one answer.
A. Legality
B. Social responsibility
C. Tolerable uncertainty
D. Continuity of operations - CORRECT ANSWERS A. Legality
Residual uncertainty is the level of risk that remains after organizations
implement their risk management plans. Which one of the following statements
is correct with respect to residual uncertainty?
Choose one answer.
,A. Residual uncertainty is an objective measure, independent of an
organization's subjective view of the
risks to which it is exposed.
B. The cost of residual uncertainty is relatively easy to calculate and comprises
an important part of any cost of risk study.
C. Residual uncertainty can be minimized, but doing so is costly because more
has to be spent on attempts to control or finance the risks involved.
D. Cost of residual uncertainty is a factor only in the case of speculative risk; it
is not a consideration where pure risk is concerned. - CORRECT ANSWERS
C. Residual uncertainty can be minimized, but doing so is costly because
more has to be spent on attempts to control or finance the risks involved.
Tania has been unemployed for six months, and her unpaid bills are mounting.
She recently damaged the front fender of her vehicle after running off the road.
When seeking repairs to the vehicle, she convinced the auto body shop to
include damages from previous incidents in the estimate. This would allow her
to collect extra money from her insurer. From an insurance and risk
management perspective, Tania's behavior is indicative of a
Choose one answer.
A. Legal hazard.
B. Moral hazard.
C. Morale hazard.
D. Physical hazard. - CORRECT ANSWERS B. Moral hazard.
Which one of the following describes how an effective risk management
program should support an organization's pre-loss operational goals?
Choose one answer.
A. It should ensure that risk management costs are kept to a minimum.
B. It should eliminate uncertainty by identifying and managing loss exposures.
C. It should help ensure that the organization's legal obligations are satisfied.
, D. It should ensure that no conflicts exist among the pre-loss goals. -
CORRECT ANSWERS C. It should help ensure that the organization's
legal obligations are satisfied.
Which one of the following statements is true regarding risk management
techniques?
Choose one answer.
A. Data based on objective risk factors are usually the only criteria considered
in determining appropriate risk management techniques.
B. The risk management techniques selected by for-profit organizations should
be both effective in meeting the organizations' goals and economical.
C. In support of the goal of economy of operations, the risk management
techniques selected by most for-profit organizations should be the least
expensive ones.
D. Nonfinancial considerations are usually disregarded in selecting risk
management techniques because they cannot be factored into a cost/benefit
analysis. - CORRECT ANSWERS B. The risk management techniques
selected by for-profit organizations should be both effective in meeting the
organizations' goals and economical.
Which one of the following is an element of a loss exposure?
Choose one answer.
A. The verification of risk
B. A cause of loss
C. The probability of a loss
D. The occurrence of a loss - CORRECT ANSWERS B. A cause of loss
The statement "There is a 5 percent chance that John will be injured in an
automobile accident while driving to work tomorrow." is an example of
Choose one answer.
