CPCU 500 ACTUAL TEST QUESTIONS WITH
COMPLETE ANSWER KEY
●● Internet of Things (IoT)
Answer: A network of objects that transmit data to computers.
●● Smart product
Answer: An innovative item that uses sensors; wireless sensor networks;
and data collection, transmission, and analysis to further enable the item
to be faster, more useful, or otherwise improved.
●● Sensor
Answer: A device that detects and measures stimuli in its environment.
●● Wireless sensor network (WSN)
Answer: A wireless network consisting of individual sensors placed at
various locations to exchange data.
●● Big data
Answer: Sets of data that are too large to be gathered and analyzed by
traditional methods.
●● Predictive analytics
,Answer: Statistical and analytical techniques used to develop models
that predict future events or behaviors.
●● Data science
Answer: An interdisciplinary field involving the design and use of
techniques to process very large amounts of data from a variety of
sources and to provide knowledge based on the data.
●● Speculative risk
Answer: A chance of loss, no loss, or gain.
●● Credit risk
Answer: The risk that customers or other creditors will fail to make
promised payments as they come due.
●● Subjective risk
Answer: The perceived amount of risk based on an individual's or
organization's opinion.
●● Objective risk
Answer: The measurable variation in uncertain outcomes based on facts
and data.
●● Diversifiable risk
,Answer: A risk that affects only some individuals, businesses, or small
groups.
●● Systemic risk
Answer: The potential for a major disruption in the function of an entire
market or financial system.
●● Market risk
Answer: Uncertainty about an investment's future value because of
potential changes in the market for that type of investment.
●● Liquidity risk
Answer: The risk that an asset cannot be sold on short notice without
incurring a loss.
●● Risk management framework
Answer: A foundation for applying the risk management process
throughout the organization.
●● Risk criteria
Answer: Information used as a basis for measuring the significance of a
risk.
●● Risk management process
, Answer: A set of interconnected and simultaneous activities that varies
from organization to organization.
●● The five essential activities of the risk management process
Answer: Scan the Environment, Identify Risks, Analyze Risks, Treat
Risks, Monitor and Review
●● Strategic risk
Answer: Uncertainties associated with the organization's long-term goals
and management decisions
●● Operational risk
Answer: Uncertainties associated with the organization's procedures,
systems, and policies.
●● Financial risk
Answer: Uncertainties associated with the organization's financial
activities.
●● Natural Risks
Answer: Natural risks are largely beyond human control. Natural perils
known to cause property damage include freezing, sinkholes, and vermin
infestation. Organizations can implement loss-reduction measures.
COMPLETE ANSWER KEY
●● Internet of Things (IoT)
Answer: A network of objects that transmit data to computers.
●● Smart product
Answer: An innovative item that uses sensors; wireless sensor networks;
and data collection, transmission, and analysis to further enable the item
to be faster, more useful, or otherwise improved.
●● Sensor
Answer: A device that detects and measures stimuli in its environment.
●● Wireless sensor network (WSN)
Answer: A wireless network consisting of individual sensors placed at
various locations to exchange data.
●● Big data
Answer: Sets of data that are too large to be gathered and analyzed by
traditional methods.
●● Predictive analytics
,Answer: Statistical and analytical techniques used to develop models
that predict future events or behaviors.
●● Data science
Answer: An interdisciplinary field involving the design and use of
techniques to process very large amounts of data from a variety of
sources and to provide knowledge based on the data.
●● Speculative risk
Answer: A chance of loss, no loss, or gain.
●● Credit risk
Answer: The risk that customers or other creditors will fail to make
promised payments as they come due.
●● Subjective risk
Answer: The perceived amount of risk based on an individual's or
organization's opinion.
●● Objective risk
Answer: The measurable variation in uncertain outcomes based on facts
and data.
●● Diversifiable risk
,Answer: A risk that affects only some individuals, businesses, or small
groups.
●● Systemic risk
Answer: The potential for a major disruption in the function of an entire
market or financial system.
●● Market risk
Answer: Uncertainty about an investment's future value because of
potential changes in the market for that type of investment.
●● Liquidity risk
Answer: The risk that an asset cannot be sold on short notice without
incurring a loss.
●● Risk management framework
Answer: A foundation for applying the risk management process
throughout the organization.
●● Risk criteria
Answer: Information used as a basis for measuring the significance of a
risk.
●● Risk management process
, Answer: A set of interconnected and simultaneous activities that varies
from organization to organization.
●● The five essential activities of the risk management process
Answer: Scan the Environment, Identify Risks, Analyze Risks, Treat
Risks, Monitor and Review
●● Strategic risk
Answer: Uncertainties associated with the organization's long-term goals
and management decisions
●● Operational risk
Answer: Uncertainties associated with the organization's procedures,
systems, and policies.
●● Financial risk
Answer: Uncertainties associated with the organization's financial
activities.
●● Natural Risks
Answer: Natural risks are largely beyond human control. Natural perils
known to cause property damage include freezing, sinkholes, and vermin
infestation. Organizations can implement loss-reduction measures.
