CPCU 500 Practice Correct Questions & Answers!!

Which one of the following statements is true regarding the nature of probability? A. Probabilities deduced solely from historical data may change as new data are discovered or the environment changes. B. The type of probability most commonly used by risk management professionals is theoretical probability. C. Empirical probability distributions are constant as long as the physical conditions that generate them remain unchanged. D. Theoretical probabilities are only estimates whose accuracy depends on the size and representative nature of the samples considered. - ANSWERSA. Probabilities deduced solely from historical data may change as new data are discovered or the environment changes. Creative Catering has a 15 year old vehicle that was originally built to prepare and serve sandwiches and drinks at various outdoor functions such as car shows, sporting events, etc. The vehicle is of low value but it generates approximately $100,000 a year in sales. The risk management professional will primarily be concerned about its: - ANSWERSEconomic value Jane always drives to visit her children who live one thousand miles away. She enjoys driving and feels safer in a vehicle than on an airplane because she feels she has more control of her fate. This driving versus flying decision is an example of: A. Nondiversifiable risk. B. Objective risk. C. Speculative risk. D. Subjective risk. - ANSWERSD. Subjective risk. An excess liability insurance policy that covers a claim in excess of the underlying limits only if the loss is covered by the underlying policy is called A. A true excess policy. B. A following-form excess policy. C. A layered policy. D. An umbrella policy. - ANSWERSB. A following-form excess policy. Which one of the following is a specific duty of a fiduciary supported by the Employee Retirement Income Security Act? A. Be a beneficiary of plan