IRM Exam 1 and Quiz 2 Questions and
Answers5
Fundamental purposes of the principle of indemnity include which of the following?
I. To reduce physical hazards to insureds.
II. To prevent the insured from profiting from insurance. - ANSWERS-II only
What is the role of the Chief Risk Officer [CRO]? - ANSWERS-CRO is responsible for managing all
aspects of risks within a company.
The function of an actuary is to .. - ANSWERS-determine insurance premiums.
Assuming cost of capital to be 10%, the Present Value of expected cash flows of $11 in 1 year
and $12.1 in two years is - ANSWERS-20
Which of the following statements is (are) true with respect to catastrophe bonds?
I. The bonds are issued by the U.S. Government
II. The bonds have relatively high interest (coupon) rates.
A) I only
B) II only
C) Both I and II
D) Neither I nor II - ANSWERS-B) II only
When comparing the variability (or relative dispersion) of two random variables, the best
measure is - ANSWERS-Coefficient of variation
, A pure risk is defined as a situation in which there is - ANSWERS-Only the possibility of loss or
no loss
A risk that affects only individuals or small groups and not the entire economy is called a -
ANSWERS-diversifiable risk
A stakeholder of a company is an individual/business who - ANSWERS-Engages in economic
transactions with the company
Which of the following is not a step of the risk management process - ANSWERS-Elimination of
all risks
The asset substitution hypothesis states that - ANSWERS-The firm exchanges its low-risk for
high-risk investment; this substitution transfers value from a firm's bondholders to its
shareholders
Which of the following is a post-loss risk management objective - ANSWERS-Continuing
operations
A risk manager is concerned with which of the following?
I. Identifying potential losses
II. Selecting the appropriate techniques for treating loss exposures - ANSWERS-Both I and II
What is the first step in the risk management process? - ANSWERS-Risk identification
What type of risk is best managed through the purchase of insurance or risk transfer? -
ANSWERS-Low frequency, high severity
Which of the following statements regarding the use of retention is (are) true?
Answers5
Fundamental purposes of the principle of indemnity include which of the following?
I. To reduce physical hazards to insureds.
II. To prevent the insured from profiting from insurance. - ANSWERS-II only
What is the role of the Chief Risk Officer [CRO]? - ANSWERS-CRO is responsible for managing all
aspects of risks within a company.
The function of an actuary is to .. - ANSWERS-determine insurance premiums.
Assuming cost of capital to be 10%, the Present Value of expected cash flows of $11 in 1 year
and $12.1 in two years is - ANSWERS-20
Which of the following statements is (are) true with respect to catastrophe bonds?
I. The bonds are issued by the U.S. Government
II. The bonds have relatively high interest (coupon) rates.
A) I only
B) II only
C) Both I and II
D) Neither I nor II - ANSWERS-B) II only
When comparing the variability (or relative dispersion) of two random variables, the best
measure is - ANSWERS-Coefficient of variation
, A pure risk is defined as a situation in which there is - ANSWERS-Only the possibility of loss or
no loss
A risk that affects only individuals or small groups and not the entire economy is called a -
ANSWERS-diversifiable risk
A stakeholder of a company is an individual/business who - ANSWERS-Engages in economic
transactions with the company
Which of the following is not a step of the risk management process - ANSWERS-Elimination of
all risks
The asset substitution hypothesis states that - ANSWERS-The firm exchanges its low-risk for
high-risk investment; this substitution transfers value from a firm's bondholders to its
shareholders
Which of the following is a post-loss risk management objective - ANSWERS-Continuing
operations
A risk manager is concerned with which of the following?
I. Identifying potential losses
II. Selecting the appropriate techniques for treating loss exposures - ANSWERS-Both I and II
What is the first step in the risk management process? - ANSWERS-Risk identification
What type of risk is best managed through the purchase of insurance or risk transfer? -
ANSWERS-Low frequency, high severity
Which of the following statements regarding the use of retention is (are) true?
