AIDA 182 (Latest 2023/ 2024 Update) Risk and Insurance Analysis Techniques Exam | Questions and Verified Answers| 100% Correct| Grade A

AIDA 182 (Latest 2023/ 2024 Update) Risk and Insurance Analysis Techniques Exam | Questions and Verified Answers| 100% Correct| Grade A Q: What is true of diversifiable versus non-diversifiable risk? Answer: Diversifiable risks are not correlated and can be managed through diversification or spread of risk. Q: 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? Answer: Financial risk. Q: An employee embezzling funds from a company for not feeling adequately paid is what risk? Answer: Both a hazard and an operational risk. Q: Failing to respond to changing customer demands is an example of what risk? Answer: Strategic risk. Q: The fear of your home being hit by a storm and damaged or destroyed is what risk for you? Answer: A subjective risk. Q: 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? Answer: A hazard risk. Q: Driving instead of flying because of feeling of safety is an example of what? Answer: A subjective risk. Q: Investing money in a rental property brings what? Answer: Both speculative and pure risks. The property values can increase or decrease and the building could burn down. Q: Increased competition is an example of what? Answer: A strategic risk. Q: 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? Answer: The new production machine. Q: What is a true statement on the basic measures applying to risk management? Answer: Consequences measure the degree to which an occurrence could positively or negatively affect an organization. Q: The law of large numbers states as the number of exposure units increases, what happens? Answer: The relative accuracy of predictions about future losses increase. Q: Which two measures are important in assessing risk and how to manage it? Answer: Consequences and likelihood. Q: What is the measure of the biggest potential loss of an occurrence. Answer: An exposure. Q: 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? Answer: When two variables are perfectly positively correlated, one variable increases, and the other will increase in direct proportion. Q: Covariance is different from correlation in that correlation represents how strongly variables are related. Covariance is the measure of correlation. Therefore, covariance is what? Answer: The measure of the extent to which variables move together or independently. Q: You own common stock of five large clothing brands. What would improve the portfolios risk the greatest? Answer: Adding a discount retailer stock, not a smaller clothing brand. Q: What is true of correlation analysis? Answer: Abnormal observations and inaccurate data may skew the analysis. Q: Stock A and B are correlated by 0.80 while stock A and C are correlated by 0.10. Which portfolio would produce the lowest risk? Answer: Portfolio with stock A and C.