RMI 211 Mock Test Complete Guide

RMI 211 Mock Test Complete Guide 1. A family's automobile that is a total loss as a result of a collision is an example of which of the following types of risk? - A) I only (Speculative risk) - B) II only (Diversifiable risk) - C) Both I and II - D) Neither I nor II Answer: B) II only 2. All of the following are programs to insure nondiversifiable risks EXCEPT - A) Federal flood insurance - B) Auto physical damage insurance - C) Social Security - D) Unemployment insurance Answer: B) Auto physical damage insurance 3. Which of the following statements about chance of loss and risk is (are) true? - A) I only - B) II only - C) Both I and II - D) Neither I nor II Answer: B) II only 4. A risk that affects only individuals or small groups and not the entire economy is called a - A) Diversifiable risk - B) Pure risk - C) Speculative risk - D) Nondiversifiable risk Answer: A) Diversifiable risk 5. Objective risk is defined as - A) The probability of loss - B) The relative variation of actual loss from expected loss - C) Uncertainty based on a person's mental condition or state of mind - D) The cause of loss Answer: B) The relative variation of actual loss from expected loss 6. An insurance company estimates its objective risk for 10,000 exposures to be 10 percent. Assuming the probability of loss remains the same, what would happen to the objective risk if the number of exposures were to increase to 1 million? - A) It would decrease to 1 percent - B) It would decrease to 5 percent - C) It would remain the same - D) It would increase to 20 percent Answer: C) It would remain the same 7. Which of the following statements is true regarding careers in risk management and insurance going forward? - A) Employment opportunities in insurance will be limited to sales and claims - B) Reduced consumer demand for insurance products will create significant job losses in the industry - C) Many job opportunities will be available requiring a wide range of knowledge and skills - D) A government takeover of the insurance industry is predicted, reducing the number of private sector jobs Answer: C) Many job opportunities will be available requiring a wide range of knowledge and skills 8. Janice mistakenly thought that Medicare covers the cost of a long-term care in a nursing home. So she did not purchase long-term care insurance or save in case she needed a long stay in a nursing home. Janice's treatment of the risk of a long-term stay in a nursing home is best described as - A) Planned retention - B) Unplanned retention - C) Risk transfer - D) Risk control Answer: B) Unplanned retention 9. Williams Company installed smoke detectors, a sprinkler system, and fire extinguishers in its new manufacturing facility. These devices are all examples of - A) Risk control - B) Noninsurance transfer - C) Risk avoidance - D) Risk retention Answer: A) Risk control 10. Five years ago, Shannon decided to start investing monthly in the common stock of ABC Telecom Company. Her financial well-being will be harmed if the price of ABC Telecom stock drops significantly. The risk of investment loss can be reduced if she invests in other companies and other types of financial assets. The risk Shannon faces with regard to her investments is a(n) - A) Enterprise risk - B) Diversifiable risk - C) Pure risk - D) Nondiversifiable risk Answer: B) Diversifiable risk