RMI 2302 MODULES EXAM 1 QUESTIONS AND
ANSWERS
Loss frequency describes which of the following? - Answers - number of losses
Carly is involved in a three-car automobile accident. Which type of risk is this an
example of? - Answers - particular risk
Which of the following is the last step in the risk management process (but often done
first)? - Answers - Review and Evaluate
Loss severity describes which of the following? - Answers - financial impact of losses
Risk prevention and risk reduction are both included under which of the following? -
Answers - risk (loss) control
Which of the following is NOT a method of categorizing risk? - Answers - certain versus
uncertain
Hazards may be categorized by which of the following groups? - Answers - Tangible
(Physical) and intangible
Which of the following method(s) best identifies all the risks faced by an organization? -
Answers - combination of all of the above
Answers:
a. questionnaires
b. checklists
c. procedure guides
Donna has a home that is insured to its maximum value. She often leaves the door
unlocked in case she forgets her keys. She knows that her insurance policy will pay for
any losses if her home is robbed. Which of the following best applies to Donna? -
Answers - moral/morale hazard
As the manager of High Speed Records, you have signed a new artist to the label.
There are three different outcomes for investing in the artist. What is the expected
return on investment using the information below?
Outcome Probability Return
1. .35 .20
, 2. .25 .36
3. .40 .10 - Answers - .20
Multiply prob. by return, then add them all up
According to "Innovation Risk: How to Make Smarter Decisions", mathematical
modeling is more precise than which of the following? - Answers - Human cognition
The reading "A Scientific View of Risk" has a different definition of risk than we have
used in class. The definition used in this reading added what component to the
definition? - Answers - a time element (given period of time)
One of the examples used in "A Scientific View of Risk" is that 1 in 8 women will
develop breast cancer. This statistic is for women who live to be 95 years old. This
example measures the likelihood of developing cancer over an entire lifetime. This
ignores some information, what information is ignored? - Answers - The number of days
of life lost.
Greg and Emily were tasked with developing a model of how an individual may allocate
risk. Greg's model for determining appropriate allocation of risk neglected to consider
one important factor - the initial wealth of the individuals. Emily's model incorporated all
of the factors that Greg did AND included initial wealth and found very different results
than Greg's model. Which of the following describes Greg's model? - Answers -
Incomplete
...An incorrect model is a model whose internal logic or underlying assumptions are
wrong. An incomplete model is a model that contains no fundamentally wrong
assumptions, but may not be complete. An incomplete model may be added to. An
incorrect model needs to be discontinued.
According to "Innovation Risk: How to Make Smarter Decisions", which one of the
following was NOT one of the simultaneous factors of the recent financial crisis? -
Answers - High interest rates
Greg and Emily were tasked with developing a model of how an individual may
purchase lottery tickets. Greg's model for determining ticket purchases incorrectly
assumes all people are equally likely to play the lottery. Emily's model correctly
assumed that lottery ticket purchases vary with income and education levels and found
very different results than Greg's model. Which of the following describes Greg's
model? - Answers - Incorrect
Model should be discontinued
Think about the following statement. "Innovations to make us feel safer often lead to us
changing our habits because we feel safer, thereby increasing risk." Which of the
ANSWERS
Loss frequency describes which of the following? - Answers - number of losses
Carly is involved in a three-car automobile accident. Which type of risk is this an
example of? - Answers - particular risk
Which of the following is the last step in the risk management process (but often done
first)? - Answers - Review and Evaluate
Loss severity describes which of the following? - Answers - financial impact of losses
Risk prevention and risk reduction are both included under which of the following? -
Answers - risk (loss) control
Which of the following is NOT a method of categorizing risk? - Answers - certain versus
uncertain
Hazards may be categorized by which of the following groups? - Answers - Tangible
(Physical) and intangible
Which of the following method(s) best identifies all the risks faced by an organization? -
Answers - combination of all of the above
Answers:
a. questionnaires
b. checklists
c. procedure guides
Donna has a home that is insured to its maximum value. She often leaves the door
unlocked in case she forgets her keys. She knows that her insurance policy will pay for
any losses if her home is robbed. Which of the following best applies to Donna? -
Answers - moral/morale hazard
As the manager of High Speed Records, you have signed a new artist to the label.
There are three different outcomes for investing in the artist. What is the expected
return on investment using the information below?
Outcome Probability Return
1. .35 .20
, 2. .25 .36
3. .40 .10 - Answers - .20
Multiply prob. by return, then add them all up
According to "Innovation Risk: How to Make Smarter Decisions", mathematical
modeling is more precise than which of the following? - Answers - Human cognition
The reading "A Scientific View of Risk" has a different definition of risk than we have
used in class. The definition used in this reading added what component to the
definition? - Answers - a time element (given period of time)
One of the examples used in "A Scientific View of Risk" is that 1 in 8 women will
develop breast cancer. This statistic is for women who live to be 95 years old. This
example measures the likelihood of developing cancer over an entire lifetime. This
ignores some information, what information is ignored? - Answers - The number of days
of life lost.
Greg and Emily were tasked with developing a model of how an individual may allocate
risk. Greg's model for determining appropriate allocation of risk neglected to consider
one important factor - the initial wealth of the individuals. Emily's model incorporated all
of the factors that Greg did AND included initial wealth and found very different results
than Greg's model. Which of the following describes Greg's model? - Answers -
Incomplete
...An incorrect model is a model whose internal logic or underlying assumptions are
wrong. An incomplete model is a model that contains no fundamentally wrong
assumptions, but may not be complete. An incomplete model may be added to. An
incorrect model needs to be discontinued.
According to "Innovation Risk: How to Make Smarter Decisions", which one of the
following was NOT one of the simultaneous factors of the recent financial crisis? -
Answers - High interest rates
Greg and Emily were tasked with developing a model of how an individual may
purchase lottery tickets. Greg's model for determining ticket purchases incorrectly
assumes all people are equally likely to play the lottery. Emily's model correctly
assumed that lottery ticket purchases vary with income and education levels and found
very different results than Greg's model. Which of the following describes Greg's
model? - Answers - Incorrect
Model should be discontinued
Think about the following statement. "Innovations to make us feel safer often lead to us
changing our habits because we feel safer, thereby increasing risk." Which of the
