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CPCU 500 EXAM STUDY MATERIALS QUESTION AND ANSWERS (VERIFIED ANSWERS)
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CPCU 500 EXAM STUDY MATERIALS QUESTION AND ANSWERS (VERIFIED ANSWERS)
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ESTUDYCPCU 500 EXAM STUDY MATERIALS QUESTION AND ANSWERS
(VERIFIED ANSWERS)
1. **What are the two elements of risk?**
- a) Possibility of loss, probability of gain
- b) Uncertainty of outcomes, possibility of a negative outcome
- c) Certainty of outcomes, potential for profit
- d) Known outcomes, risk of loss
- **Answer:** b) Uncertainty of outcomes, possibility of a negative outcome
2. **What is the difference between possibility and probability?**
- a) Possibility is the chance of an event; probability is the likelihood of it happening
- b) Possibility measures outcomes; probability measures risk
- c) Possibility is the certainty of an event; probability is the outcome
- d) Possibility and probability are the same
- **Answer:** a) Possibility is the chance of an event; probability is the likelihood of it happening
3. **Does possibility or probability measure risk?**
- a) Possibility
- b) Probability
- c) Both
- d) Neither
- **Answer:** b) Probability
4. **How can understanding various outcome probabilities aid an organization in risk management?**
- a) By focusing on all possible outcomes
, ESTUDY
- b) By avoiding risks completely
- c) By focusing risk management efforts on manageable risks and deciding which risks to take
- d) By eliminating all risks
- **Answer:** c) By focusing risk management efforts on manageable risks and deciding which risks to
take
5. **How does classifying risk help an organization's risk management process?**
- a) By assessing all risks equally
- b) By helping assess and manage risks with similar attributes using similar techniques and ensuring
none are overlooked
- c) By ignoring less significant risks
- d) By only focusing on high-impact risks
- **Answer:** b) By helping assess and manage risks with similar attributes using similar techniques
and ensuring none are overlooked
6. **What is the difference between pure and speculative risk? Why is it important to distinguish
between them?**
- a) Pure risk involves profit or loss; speculative risk involves loss or no loss
- b) Pure risk involves loss or no loss; speculative risk involves profit or loss. It's important because
they must be managed differently.
- c) Pure risk is managed the same as speculative risk
- d) Speculative risk is not managed
- **Answer:** b) Pure risk involves loss or no loss; speculative risk involves profit or loss. It's
important because they must be managed differently.
7. **Why might subjective and objective risks differ?**
- a) Due to familiarity, control, consequences, or risk awareness
- b) Because of different types of insurance
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