AIDA 182 FINAL EXAM NEWEST ACTUAL EXAM
COMPLETE 200 QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS)
|ALREADY GRADED A+
Risk quadrants are different from risk classifications. Risk quadrants focus on what? -
ANSWERThe source of the risk itself and what part of the organization has managed it in
the past.
An enterprise risk management approach is categorizing risks into quadrants. What are
hazard risks? - ANSWERNormally managed by risk management professionals.
What are the four risks in the enterprise risk management model? - ANSWERHazard,
operational, financial, and hazard.
What risk quadrant is the change of stocks or bonds values because interest rate
changes in? - ANSWERFinancial risks.
What is true of pure and speculative risks? - ANSWERAll businesses involve speculative
risks.
What is true of diversifiable and nondiversifiable risks? - ANSWERSystemic risks are
nondiversifiable generally.
What is an example of a strategic risk? - ANSWERA new computer chip that could give a
company growth.
What is an example of an operational risk? - ANSWERThe ability of suppliers to perform.
What is true of subjective and objective risks? - ANSWERSubjective risk can be present
where objective risk is not.
What is an example of a speculative risk? - ANSWERInvesting in stock.
What is true of diversifiable versus nondiversifiable risk? - ANSWERDiversifiable risks
are not correlated and can be managed through diversification or spread of risk.
A company's fleet of cars is worrying the managers liquidity of the company and fuel
prices having an adverse effect is which type of risk quadrant? - ANSWERFinancial risk.
, An employee embezzling funds from a company for not feeling adequately paid is what
risk? - ANSWERBoth a hazard and an operational risk.
Failing to respond to changing customer demands is an example of what risk? -
ANSWERStrategic risk.
The fear of your home being hit by a storm and damaged or destroyed is what risk for
you? - ANSWERA subjective risk.
What quadrant of risk is a harmful chemical found in a building with unknown harm to
residents and to the clean up crew part of? - ANSWERA hazard risk.
Driving instead of flying because of feeling of safety is an example of what? - ANSWERA
subjective risk.
Investing money in a rental property brings what? - ANSWERBoth speculative and pure
risks. The property values can increase or decrease and the building could burn down.
Increased competition is an example of what? - ANSWERA strategic risk.
Renovating a warehouse, purchasing a new order processing software, added two new
delivery trucks, and purchasing a production machine which also allows for potential for
a new product line, are all projects. Which project is the most speculative? -
ANSWERThe new production machine.
What is a true statement on the basic measures applying to risk management? -
ANSWERConsequences measure the degree to which an occurrence could positively or
negatively affect an organization.
The law of large numbers states as the number of exposure units increases, what
happens? - ANSWERThe relative accuracy of predictions about future losses increase.
Which two measures are important in assessing risk and how to manage it? -
ANSWERConsequences and likelihood.
What is the measure of the biggest potential loss of an occurrence. - ANSWERAn
exposure.
Giving discounts to everyone in one segment of your book of business or a bank in the
same town as a business it gives loans to including its employees, are both examples of
high correlation. What is true about correlation? - ANSWERWhen two variables are
perfectly positively correlated, one variable increases, and the other will increase in
direct proportion.
Covariance is different from correlation in that correlation represents how strongly
variables are related. Covariance is the measure of correlation. Therefore, covariance is
what? - ANSWERThe measure of the extent to which variables move together or
independently.
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