ARM 402 EXAM UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. Telematics devices allow organizations to accurately
identify patterns of risk and predict risk for which one of
the following types of loss exposures?
A. Automobile
B. Property
C. Workers compensation
D. Business income
Answer:
A
Question:
2. Which one of the following is a major benefit that smart
insurance contracts can provide to insurance customers?
A. Smart contracts can render a risk completely
preventable.
B. Smart contracts can provide broader coverage at a
lower cost.
C. Smart contracts can dramatically increase the speed of
loss payments.
D. Smart contracts can significantly increase the speed of
premium payments.
Answer:
C
Question:
3. Maxwell Company has just invested a large sum in new,
highly-sophisticated computer equipment and building
renovations. Maxwell arranged to lease identical
equipment at another location so that it could use the
equipment in the event of a disaster at its location.
Maxwell's lease of identical equipment at another
location is an example of
A. Duplication.
B. Separation.
C. Loss reduction.
D. Diversification.
Answer:
A
,Question:
4. Olivia is planning a meeting to explain a new cyber
security procedure. She expects that the meeting will be
impeded by hidden agendas. Which one of the following
is the best way for Olivia to deal with potential hidden
agendas?
A. Olivia should refuse to take questions during her
meeting, and request that any questions be forwarded to
her in writing after the meeting.
B. Olivia should start the meeting by stating that she does
not expect everyone like the new procedure, but they
must accept it.
C. Olivia should start the meeting by asking participants
to state their concerns or feeling about the procedure.
D. Olivia should hold a separate meeting for those
individuals who she suspects have a hidden agenda.
Answer:
C
Question:
5. Which one of the following is a common problem with
meetings that leaders should try to avoid?
A. Trying to stick to an agenda and avoid interruptions
B. Committing to an end time, as well as a start time
C. Having the wrong people attend
D. Stating the objective in writing before the meeting
Answer:
C
Question:
6. Which one of the following statements about correlation
and covariance is true?
A. Covariance is a scaled version of correlation and
ranges from -1 to +1.
B. The correlation between variables ranges from 0 to +1.
C. Covariance measures the extent to which variables
move together or independently.
D. Correlation measures causality.
Answer:
C
,Question:
7. Once a holistic risk management program is created and
put into effect, which one of the following methods can
be used to allow constant and consistent monitoring of
the process?
A. Bow-tie diagram
B. Feedback loop
C. Dashboard reporting
D. SWOT analysis
Answer:
B
Question:
8. A risk control technique that reduces the frequency of a
particular loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication.
Answer:
A
Question:
9. Ivanhoe Corporation purchases stock in a bank and in a
pharmaceutical manufacturer. Because these are
unrelated industries, Ivanhoe hope that any losses in one
stock will be more than offset by profits in another.
Ivanhoe is using which one of the following risk
management techniques?
A. Risk transfer
B. Duplication
C. Diversification
D. Separation
Answer:
C
, Question:
10. Pacific Bar and Grill was having a problem with
employees slipping and falling in the kitchen and bar
areas. Rather than incur the cost to replace the floors
with a new non-slip surface, the owners decided to
require employees to wear slip-resistant shoes and
monitor the floors for spills on a regular schedule. They
are also keeping track of the number of employee slips
and falls and the associated costs, as well as, the
expenses involved with this risk management program.
Which one of the following methods is Pacific Bar and
Grill using to measure the effectiveness of this risk
management process?
A. Dashboard reporting
B. Feedback loop
C. Scorecard
D. Bow-tie diagram
Answer:
B
Question:
11. Ed is investment manager of the Nellor Foundation, a
charitable trust. Recently, Ed met with the president of
the Foundation. Up until now, assets have been invested
in financial assets. Ed told the president that after
performing a simulation, he would like to add a high-
yielding, higher risk real estate investment to the
portfolio. When the president asked if it would be too
risky, Ed replied, "It will actually increase expected
returns while reducing risk." The purported reduction in
risk occurs because
A. The real estate investment will not be large enough to
significantly impact on the portfolio.
B. Rental income generated by the real estate investment
is not taxable.
C. Taxes on real estate investments may be deferred.
D. The real estate investment returns are negatively
correlated with the other assets.
Answer:
D
CORRECT ANSWERS
Question:
1. Telematics devices allow organizations to accurately
identify patterns of risk and predict risk for which one of
the following types of loss exposures?
A. Automobile
B. Property
C. Workers compensation
D. Business income
Answer:
A
Question:
2. Which one of the following is a major benefit that smart
insurance contracts can provide to insurance customers?
A. Smart contracts can render a risk completely
preventable.
B. Smart contracts can provide broader coverage at a
lower cost.
C. Smart contracts can dramatically increase the speed of
loss payments.
D. Smart contracts can significantly increase the speed of
premium payments.
Answer:
C
Question:
3. Maxwell Company has just invested a large sum in new,
highly-sophisticated computer equipment and building
renovations. Maxwell arranged to lease identical
equipment at another location so that it could use the
equipment in the event of a disaster at its location.
Maxwell's lease of identical equipment at another
location is an example of
A. Duplication.
B. Separation.
C. Loss reduction.
D. Diversification.
Answer:
A
,Question:
4. Olivia is planning a meeting to explain a new cyber
security procedure. She expects that the meeting will be
impeded by hidden agendas. Which one of the following
is the best way for Olivia to deal with potential hidden
agendas?
A. Olivia should refuse to take questions during her
meeting, and request that any questions be forwarded to
her in writing after the meeting.
B. Olivia should start the meeting by stating that she does
not expect everyone like the new procedure, but they
must accept it.
C. Olivia should start the meeting by asking participants
to state their concerns or feeling about the procedure.
D. Olivia should hold a separate meeting for those
individuals who she suspects have a hidden agenda.
Answer:
C
Question:
5. Which one of the following is a common problem with
meetings that leaders should try to avoid?
A. Trying to stick to an agenda and avoid interruptions
B. Committing to an end time, as well as a start time
C. Having the wrong people attend
D. Stating the objective in writing before the meeting
Answer:
C
Question:
6. Which one of the following statements about correlation
and covariance is true?
A. Covariance is a scaled version of correlation and
ranges from -1 to +1.
B. The correlation between variables ranges from 0 to +1.
C. Covariance measures the extent to which variables
move together or independently.
D. Correlation measures causality.
Answer:
C
,Question:
7. Once a holistic risk management program is created and
put into effect, which one of the following methods can
be used to allow constant and consistent monitoring of
the process?
A. Bow-tie diagram
B. Feedback loop
C. Dashboard reporting
D. SWOT analysis
Answer:
B
Question:
8. A risk control technique that reduces the frequency of a
particular loss is
A. Loss prevention.
B. Loss reduction.
C. Diversification.
D. Duplication.
Answer:
A
Question:
9. Ivanhoe Corporation purchases stock in a bank and in a
pharmaceutical manufacturer. Because these are
unrelated industries, Ivanhoe hope that any losses in one
stock will be more than offset by profits in another.
Ivanhoe is using which one of the following risk
management techniques?
A. Risk transfer
B. Duplication
C. Diversification
D. Separation
Answer:
C
, Question:
10. Pacific Bar and Grill was having a problem with
employees slipping and falling in the kitchen and bar
areas. Rather than incur the cost to replace the floors
with a new non-slip surface, the owners decided to
require employees to wear slip-resistant shoes and
monitor the floors for spills on a regular schedule. They
are also keeping track of the number of employee slips
and falls and the associated costs, as well as, the
expenses involved with this risk management program.
Which one of the following methods is Pacific Bar and
Grill using to measure the effectiveness of this risk
management process?
A. Dashboard reporting
B. Feedback loop
C. Scorecard
D. Bow-tie diagram
Answer:
B
Question:
11. Ed is investment manager of the Nellor Foundation, a
charitable trust. Recently, Ed met with the president of
the Foundation. Up until now, assets have been invested
in financial assets. Ed told the president that after
performing a simulation, he would like to add a high-
yielding, higher risk real estate investment to the
portfolio. When the president asked if it would be too
risky, Ed replied, "It will actually increase expected
returns while reducing risk." The purported reduction in
risk occurs because
A. The real estate investment will not be large enough to
significantly impact on the portfolio.
B. Rental income generated by the real estate investment
is not taxable.
C. Taxes on real estate investments may be deferred.
D. The real estate investment returns are negatively
correlated with the other assets.
Answer:
D
