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ARM54 Questions With Complete Answers (Graded A+)
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ARM54 Questions With Complete Answers (Graded A+)
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ARM54 Questions With Complete Answers (Graded A+)Systematic risk Right Ans - Risk that is common to all securities of the same
general class and that therefore cannot be eliminated by diversification
Interest rate risk Right Ans - The risk that a security's future value will
decline because of changes in interest rates
Swap Right Ans - An agreement between two organizations to exchange
payments based on changes in the value of an asset, yield, or index over a
specific period.
Cash matching Right Ans - The process of matching an investment's
maturity value with the amount of expected loss payments
Zero-coupon bond Right Ans - A corporate bond that does not pay periodic
interest income
Reinvestment Risk Right Ans - The risk that the rate at which periodic
interest payments can be reinvested over the life of the investment will be
unfavorable
Commodity price risk Right Ans - The risk associated with a change in the
prices of commodities that are necessary to an organization's operations
Cash flow Right Ans - Cash inflow minus cash outflow
Commodity futures contract Right Ans - A contract either to make or to
accept delivery of a specified quantity of a commodity on a given date
Equity price risk Right Ans - The risk that changes in the price of a stock or
another security will increase or decrease
Call option Right Ans - An option to buy a set amount of the underlying
security at any time within a specified period
Put option Right Ans - An option giving the holder the right to sell a set
amount of the underlying security at any time within a specified period
,Price Risk Right Ans - The potential for a change in revenue or cost because
of an increase or a decrease in the price of a product or an input
Earnings at risk Right Ans - The maximum expected loss of earning within
a specific degree of confidence
Conditional Value at risk Right Ans - A model to determine the likelihood of
a loss given that the loss is greater than or equal to the Value at Risk
Root Cause Right Ans - The event or circumstance that directly leads to an
occurrence
Key risk indicator Right Ans - A financial or nonfinancial metric used to
help define and measure potential losses
Exposure indicator Right Ans - A metric used to identify risk inherent to an
organization's operations
Loss Ratio Right Ans - A ratio that measures losses and loss adjustment
expenses against earned premiums and that reflects the percentage of
premiums being consumed by losses
Control indicator Right Ans - A metric used to identify an organization's
management of risk
Risk optimization Right Ans - A state whereby risk and return are balanced
so that a maximum return is achieved for the level of risk accepted by an
organization
Hedging Right Ans - A financial transaction in which one asset is held to
offset the risk associated with another asset
Monte Carlo Simulation Right Ans - A computerized statistical model that
simulates the effects of various types of uncertainty
Capital Right Ans - The accumulated assets of a business or an owner's
equity in a business
, Equity capital Right Ans - Preferred stock, surplus, common stock,
undivided profits and capital reserves, and net unrealized holding gains (or
losses) on securities that are not available for sale
Leverage Right Ans - The practice of using borrowed money to invest
Generally accepted accounting principles Right Ans - A common set of
accounting standards and procedures used in the preparation of financial
statements to ensure consistency of presentation and reported results
Statutory accounting principles Right Ans - The accounting principles and
practices that are prescribed or permitted by an insurer's domiciliary state
and that insurers must follow
Market value surplus Right Ans - The fair value of assets minus the fair
value of liabilities
Tariff Right Ans - A tax that shields domestic producers from foreign
competition
Demographics Right Ans - The statistical characteristics of human
populations
Political risk Right Ans - Any action by a government that favors domestic
over foreign organizations or poses a threat to foreign organizations
Risk owner Right Ans - An individual accountable for the identification,
assessment, treatment, and monitoring of risks in a specific environment
Key performance indicator Right Ans - Financial or nonfinancial
measurement that defines how successfully an organization is progressing
toward its long-term goals
Key risk indicator Right Ans - A tool used by an organization to measure
the uncertainty of meeting a strategic business objective
P-D-C-A Cycle Right Ans - The P-D-C-A Cycle, also known as the Shewhart
cycle and the Deming cycle, is an expansion of an approach to process
improvement. The steps include Plan, Do, Check, and Act
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