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CPCU 500 3rd Edition Final Practice exam 1 with answers
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CPCU 500 3rd Edition Final Practice exam 1 with answersRisk |involves |the |possibility |of |a |negative |outcome. |Possibility |means |- |correct |answer |-That |an |
outcome |may |or |may |not |occur.
Risk |can |be |classified |as |subjective |or |objective. |Which |one |of |the |following |statements |is |correct |
with |respect |to |these |risk |classifications? |- |correct |answer |-Subjective |risk |can |exist |even |where |
objective |risk |does |not.
The |concept |of |correlation, |in |the |context |of |why |enterprise |risk |management |works, |- |correct |
answer |-Is |the |proposition |that |correlation |increases |risk |while |uncorrelated |risks |can |reduce |risk
The |use |of |data |gleaned |from |sensors |to |react |immediately |to |hazardous |situations |is |known |as |- |
correct |answer |-Real-time |risk |management.
Delmond |Manufacturing |is |opening |a |new |manufacturing |facility |in |a |building |that |it |purchased |from |
a |competitor. |Using |the |information |below, |which |one |of |the |following |represents |the |cost |of |risk |of |
opening |the |new |facility?
New |building |cost |$60.0 |million |Safety |system |upgrades |$6.0 |million |Insurance |premiums |$1.5 |million
Retained |losses |$3.0 |million
Risk |management |department |budget |at |the |site |$1.0 |million |- |correct |answer |-$11.5 |million
An |organization |must |meet |the |standard |of |care |that |it |owes |to |others |in |order |to |ensure |that |- |
correct |answer |-Legal |obligations |are |satisfied
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? |- |correct |answer |-Compare |actual |
results |with |the |established |performance |standards.
Property |insurance |policies |not |only |protect |the |property |owner |but |also |generally |protect |a |secured |
lender's |interest |in |the |financed |property |by |- |correct |answer |-Naming |the |lender |on |the |owner's |
policy.
, Perils |are |an |important |aspect |of |property |insurance. |Which |one |of |the |following |statements |is |
correct |with |respect |to |perils? |- |correct |answer |-A |peril |is |the |actual |means |by |which |property |is |
damaged |or |destroyed |such |as |fire, |lightning, |windstorm, |hail, |or |theft.
A |building |contractor |uses |lower |grade |materials |than |called |for |in |the |specifications |for |an |office |
building. |A |year |after |the |building |was |completed, |a |balcony |collapses, |injuring |several |employees |and
|customers |and |causing |damage |to |the |building |and |contents. |For |the |building |construction |company, |
this |is |an |example |of |- |correct |answer |-A |completed |operations |liability |exposure.
Josephine |Redmond |who |is |the |sole |proprietor |of |Dream |Quilts, |Inc., |operates |out |of |three |branch |
offices |with |17 |employees. |What |happens |to |Josephine's |business |if |she |dies |or |retires? |- |correct |
answer |-The |business |ceases |to |exist
An |auto |dealer's |showroom |is |destroyed |by |fire, |and |the |dealer |has |to |temporarily |rent |an |adjacent |
building |to |use |as |a |showroom. |This |is |an |example |of |- |correct |answer |-An |extra |expense
Which |one |of |the |following |is |correct |with |respect |to |compliance |reviews? |- |correct |answer |-
Monitoring |and |maintaining |compliance |through |compliance |reviews |can |prevent |significant |losses |
that |the |organization |would |otherwise |incur.
In |order |to |avoid |underestimating |or |overestimating |loss |projections, |historical |loss |data |must |be |
expressed |in |- |correct |answer |-Constant |dollars.
Probability |analysis |is |best |suited |for |organizations |that |have |- |correct |answer |-A |substantial |volume |
of |data |on |past |losses
This |graph |illustrates |a |probability |distribution. |The |horizontal |axis |illustrates |possible |outcomes, |and |
the |vertical |axis |shows |the |probability |of |each. |Which |one |of |the |following |statements |is |true |
regarding |the |information |presented |in |this |graph? |- |correct |answer |-The |most |frequently |occurring |
value |is |seven
To |determine |which |one |of |the |following |measures |must |the |values |in |a |data |set |be |arranged |by |
size? |- |correct |answer |-Median
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