CPCU 500 Exam Study Guide Questions and Answers Graded A+

CPCU 500 Exam Study Guide Questions and Answers Graded A+ In the context of risk, the chance of being injured while driving to and from work, loading a truck at work, moving furniture at home, or falling in an icy parking lot at the mall are all examples of A. Possibilities. B. Uncertainties. C. Probabilities. D. Losses. -Answer A. Possibilities. The statement, "There is a five percent chance that John will be injured in an automobile accident while driving to work tomorrow," is an example of A. Quantifying risk. B. Verifying risk. C. Quantifying loss exposures. D. Identifying hazards. -Answer A. Quantifying risk. Which one of the following is measurable and quantifies risk? A. Probability B. Possibility C. Uncertainty D. Feasibility -Answer A. Probability One of the elements of risk is uncertainty. Which one of the following best describes the uncertainty that risk involves? A. Uncertainty as to how to manage potential losses B. Uncertainty as to whether a negative outcome is possible C. Uncertainty as to the type and timing of an outcome D. Uncertainty as to whether insurance is available -Answer C. Uncertainty as to the type and timing of an outcome Hardware Store has been able to control its prices and inventory since it has no competitors. A new highway currently being constructed is going to allow increased competition for Hardware Store. According to the quadrants of risk, this risk of increased competition falls into the category of A. Strategic risk. B. Hazard risk. C. Operational risk. D. Financial risk. -Answer A. Strategic risk. Company G is a manufacturer of high profile golf equipment. The risk management professional for Company G is concerned about loss of business related to product design. Failing to respond to changing customer demand and preferences in the design of golf clubs could cost Company G significant market share. Categorized according to the quadrants of risk, this exposure to loss would be classified as a(n) A. Strategic risk. B. Financial risk. C. Operational risk. D. Hazard risk. -Answer A. Strategic risk. George has received an inheritance and is deciding what to do with the money. He has limited his options to four choices: donate all the money to his favorite charity, use the entire inheritance to buy a yacht, invest the inheritance in a small rental property, or use the entire amount to purchase T-bills. Which one of the following statements is true regarding the risk involved in George's options? A. Donating his inheritance to charity is a pure risk; there is no uncertainty that the money will be gone and George will have no chance of profit. B. Buying a boat is a nondiversifiable risk because George can only afford to purchase a single yacht. C. The rental property presents both pure and speculative risk; property values may increase, and the building could burn down. D. Purchasing T-bills is a pure risk because the interest rate payable is known, and the chance of loss is minimal. -Answer C. The rental property presents both pure and speculative risk; property values may increase, and the building could burn down.