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CPCU 500 Exam Study Guide with verified answers
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CPCU 500 Exam Study Guide with verified answersIn |the |context |of |risk, |the |chance |of |being |injured |while |driving |to |and |from |work, |loading |a |truck |at |
work, |moving |furniture |at |home, |or |falling |in |an |icy |parking |lot |at |the |mall |are |all |examples |of
A. |Possibilities.
B. |Uncertainties.
C. |Probabilities.
D. |Losses. |- |correct |answer |-A. |Possibilities.
The |statement, |"There |is |a |five |percent |chance |that |John |will |be |injured |in |an |automobile |accident |
while |driving |to |work |tomorrow," |is |an |example |of
A. |Quantifying |risk.
B. |Verifying |risk.
C. |Quantifying |loss |exposures.
D. |Identifying |hazards. |- |correct |answer |-A. |Quantifying |risk.
Which |one |of |the |following |is |measurable |and |quantifies |risk?
A. |Probability
B. |Possibility
,C. |Uncertainty
D. |Feasibility |- |correct |answer |-A. |Probability
One |of |the |elements |of |risk |is |uncertainty. |Which |one |of |the |following |best |describes |the |uncertainty |
that |risk |involves? |
A. |Uncertainty |as |to |how |to |manage |potential |losses
B. |Uncertainty |as |to |whether |a |negative |outcome |is |possible
C. |Uncertainty |as |to |the |type |and |timing |of |an |outcome
D. |Uncertainty |as |to |whether |insurance |is |available |- |correct |answer |-C. |Uncertainty |as |to |the |type |
and |timing |of |an |outcome
Hardware |Store |has |been |able |to |control |its |prices |and |inventory |since |it |has |no |competitors. |A |new |
highway |currently |being |constructed |is |going |to |allow |increased |competition |for |Hardware |Store. |
According |to |the |quadrants |of |risk, |this |risk |of |increased |competition |falls |into |the |category |of
A. |Strategic |risk.
B. |Hazard |risk.
C. |Operational |risk.
D. |Financial |risk. |- |correct |answer |-A. |Strategic |risk.
,Company |G |is |a |manufacturer |of |high |profile |golf |equipment. |The |risk |management |professional |for |
Company |G |is |concerned |about |loss |of |business |related |to |product |design. |Failing |to |respond |to |
changing |customer |demand |and |preferences |in |the |design |of |golf |clubs |could |cost |Company |G |
significant |market |share. |Categorized |according |to |the |quadrants |of |risk, |this |exposure |to |loss |would |
be |classified |as |a(n)
A. |Strategic |risk.
B. |Financial |risk.
C. |Operational |risk.
D. |Hazard |risk. |- |correct |answer |-A. |Strategic |risk.
George |has |received |an |inheritance |and |is |deciding |what |to |do |with |the |money. |He |has |limited |his |
options |to |four |choices: |donate |all |the |money |to |his |favorite |charity, |use |the |entire |inheritance |to |
buy |a |yacht, |invest |the |inheritance |in |a |small |rental |property, |or |use |the |entire |amount |to |purchase |
T-bills. |Which |one |of |the |following |statements |is |true |regarding |the |risk |involved |in |George's |options?
A. |Donating |his |inheritance |to |charity |is |a |pure |risk; |there |is |no |uncertainty |that |the |money |will |be |
gone |and |George |will |have |no |chance |of |profit.
B. |Buying |a |boat |is |a |nondiversifiable |risk |because |George |can |only |afford |to |purchase |a |single |yacht.
C. |The |rental |property |presents |both |pure |and |speculative |risk; |property |values |may |increase, |and |the
|building |could |burn |down.
D. |Purchasing |T-bills |is |a |pure |risk |because |the |interest |rate |payable |is |known, |and |the |chance |of |loss
|is |minimal. |- |correct |answer |-C. |The |rental |property |presents |both |pure |and |speculative |risk; |property
|values |may |increase, |and |the |building |could |burn |down.
Risk |can |be |classified |as |pure |or |speculative. |Which |one |of |the |following |is |the |best |example |of |a |
speculative |risk?
, A. |Acquiring |a |new |television
B. |Investing |in |shares |of |stock
C. |Buying |a |new |personal |vehicle
D. |Purchasing |an |insurance |policy |- |correct |answer |-B. |Investing |in |shares |of |stock
Which |one |of |the |following |statements |is |true |regarding |enterprise |risk |management |(ERM)?
A. |ERM |is |concerned |with |an |organization's |pure |risk, |primarily |hazard |risk.
B. |The |ERM |framework |encompasses |all |stakeholders |in |the |organization.
C. |In |ERM, |the |risk |management |function |is |the |responsibility |of |the |safety |manager.
D. |ERM |requires |less |communication |than |traditional |risk |management. |- |correct |answer |-B. |The |ERM |
framework |encompasses |all |stakeholders |in |the |organization.
A |risk |management |plan |that |considers |all |of |the |risks |that |an |organization |faces, |including |
operational, |financial, |and |strategic |risks, |is |called
A. |An |enterprise |risk |management |plan.
B. |An |open-perils |risk |management |plan.
C. |A |protected |cell |risk |management |plan.
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