ARM 401 Exam Practice Exam (428 Questions) With 100 Complete Verified Solution-41

Which one of the following statements is true if earnings at risk are $200,000 with 90% confidence? A. Earnings at risk are projected to be $180,000. B. Earnings at risk are projected to be less than $200,000 10% ofthe time. C. Earnings at risk are projected to be $200,000 90% of the time. D. Earnings at risk are projected to be greater than $200,000 10% ofthe time. - B Determining earnings-at-risk (EaR) entails modeling the influence of factors such as A. Differences in the prices of products from competitors' prices. B. The potential for both positive and negative credit risk for the organization. C. Employee satisfaction and other subjective variables that can be used for financial organizations but not nonfinancial organizations. D. Changes in the prices of products and production costs on an organization's earnings. - D Which one of the following statements is true regarding event tree analysis? A. Event tree analysis typically provides only two options, success or failure. B. Event tree analysis provides only quantitative information. C. Event tree analysis provides only qualitative information. D. Event tree analysis can be used to select the most effective strategy to achieve a goal. - A In Fred 's large landscaping business, he knows that there is a point where equipment becomes unsafe and difficult to maintain. Fred realizes that after 2,000 miles of use, his costs for maintenance on his large mowers and sod busters dramatically rise. Using probability analysis Fred can better know A. When to replace equipment. B. Which equipment is likely to cause bodily injury to operators or customers. C. What type of equipment is needed for future projects. D. When to schedule routine maint - A Global Reinsurance Company (GRC) is a European reinsurer that accepts risks from insurers around the world. Financial managers at GRC would like to estimate profitability for next year for their five primary risk areas: flood risk in Europe, earthquake risk in Japan, hurricane risk for the Gulf Coast of the United States, California earthquake risk, and typhoon risk in Indian Ocean nations. The financial managers entered event probabilities, loss payment estimates, retained loss levels, premiums - A Blakely Company insures its fleet of vehicles under an auto policy with a $10,000 deductible for auto physical damage losses. The estimated probability distribution for Blakely's auto physical damage losses is shown below: A. 33.0% B. 82.5% c. 15.0% D. 6.5% -B Decision tree analysis and event tree analysis are similar in a number of ways, but differ in their A. Process. B. Approach. C. Purpose. D. Appearance. - C Which one of the following statements is true regarding characteristics of normal distributions? A. In theory, the normal distribution assigns some negative probability no greater than zero for every outcome.