RMI Exam Questions and Answers
"Innovation Risk: How to Make Smarter Decisions" says that models can only be
meaningfully evaluated as a triplet. What does this mean? - ANSWER-Equal
consideration must be given to the model, application, and user.
"Risk management is fundamentally a question of values. In a democratic society, there
is no acceptable way to make these choices without involving the citizens who will be
affected by them." What does this statement mean? - ANSWER-Everyone possibly
affected by a risk should have a say in the reduction or response to a risk.
A bias can be described by which of the following? - ANSWER-Subjective view
A company has noticed employees taking a lot of sick time off around the flu season.
They are concerned with the overall health of their employees and don't want them to
catch/spread the flu. The company begins offering free flu shots for the employee and
up to 4 family members. This is an example of: - ANSWER-Organizational Level
Incentives
A girl is given $15 by her parents. She has two options of how to spend the money. She
can either save the money for future purchases or she can start a lemonade stand on
her driveway. If she spends all of her $15 on the lemonade stand, there is a 50%
probability she will lose $10 ($5 left) and a 50% probability she will profit $12 beyond
her initial investment (a total of $27). Assuming the girl has a square root utility function,
what should the girl do with the money? - ANSWER-Save her money, the utils from the
$15 is 3.87, the utils from the lemonade stand is 3.71.
A matrix of conditional values associated with all possible combinations a series of
events is a: - ANSWER-Pay-off Table
A national restoration contractor has $5 million to invest in new software to become
more efficient in writing estimates and reducing errors, increasing net profits for the
company. There are three products under consideration, each with a cost of $5 million
to implement across the company. Which product should be purchased?
Product A:
Probability / Outcome
.%
.%
.25 / -10%
Product B:
Probability / Outcome
.45/ 17%
.%
, .15 / -12%
Product C:
Probability / Outcome
.%
.%
.20 / -5% - ANSWER-Product B
A pay-off is a(n) __________ value in the sense that associated with each course of
action is a certain profit/loss. - ANSWER-conditional
A restaurant owner has a net profit of $125,000. She has the choice of taking this
amount as salary for herself or investing all of it in another location that has recently
become available.
There is a 50% chance the second location will have a net gain of $200,000 from the
investment, and a 50% chance it will lose $75,000. ($50,000 left). Assuming she has a
square root utility function, what should she do? - ANSWER-Invest in the new location.
Taking the salary Utils is $125,000.5 = 353.55
Investing Utils is .5(325,000.5) +.5(50,000.5) = 396.84
According to "Innovation Risk: How to Make Smarter Decisions", the infrastructure
should be changed based on every new innovation. - ANSWER-False - There are
frequent innovation to infrastructure so the changes to infrastructure would be constant.
According to "Innovation Risk: How to Make Smarter Decisions", the utility of a model
depends on the model itself, why it's being used and which of the following? -
ANSWER-Who is using the model
According to "Innovation Risk: How to Make Smarter Decisions", which of the following
is NOT one of the five rules of thumb to minimizing risk? - ANSWER-Determine which
risks are being faced
According to "Innovation Risk: How to Make Smarter Decisions", which one of the
following was NOT one of the simultaneous factors of the recent financial crisis? -
ANSWER-High interest rates
According to "Innovation Risk: How to Make Smarter Decisions", you use models every
day. Why is it that you don't recognize that you're using a model? - ANSWER-Models
that apply to real-life situations are often applied semiconsciously.
According to "Scientific View of Risk" most risks are relative. What does this mean? -
ANSWER-Any given risk should be weighed with other risks or lost benefits that can
result from attempts to reduce the given risk.
According to "Scientific View of Risk", how can risk probabilities be misused?
"Innovation Risk: How to Make Smarter Decisions" says that models can only be
meaningfully evaluated as a triplet. What does this mean? - ANSWER-Equal
consideration must be given to the model, application, and user.
"Risk management is fundamentally a question of values. In a democratic society, there
is no acceptable way to make these choices without involving the citizens who will be
affected by them." What does this statement mean? - ANSWER-Everyone possibly
affected by a risk should have a say in the reduction or response to a risk.
A bias can be described by which of the following? - ANSWER-Subjective view
A company has noticed employees taking a lot of sick time off around the flu season.
They are concerned with the overall health of their employees and don't want them to
catch/spread the flu. The company begins offering free flu shots for the employee and
up to 4 family members. This is an example of: - ANSWER-Organizational Level
Incentives
A girl is given $15 by her parents. She has two options of how to spend the money. She
can either save the money for future purchases or she can start a lemonade stand on
her driveway. If she spends all of her $15 on the lemonade stand, there is a 50%
probability she will lose $10 ($5 left) and a 50% probability she will profit $12 beyond
her initial investment (a total of $27). Assuming the girl has a square root utility function,
what should the girl do with the money? - ANSWER-Save her money, the utils from the
$15 is 3.87, the utils from the lemonade stand is 3.71.
A matrix of conditional values associated with all possible combinations a series of
events is a: - ANSWER-Pay-off Table
A national restoration contractor has $5 million to invest in new software to become
more efficient in writing estimates and reducing errors, increasing net profits for the
company. There are three products under consideration, each with a cost of $5 million
to implement across the company. Which product should be purchased?
Product A:
Probability / Outcome
.%
.%
.25 / -10%
Product B:
Probability / Outcome
.45/ 17%
.%
, .15 / -12%
Product C:
Probability / Outcome
.%
.%
.20 / -5% - ANSWER-Product B
A pay-off is a(n) __________ value in the sense that associated with each course of
action is a certain profit/loss. - ANSWER-conditional
A restaurant owner has a net profit of $125,000. She has the choice of taking this
amount as salary for herself or investing all of it in another location that has recently
become available.
There is a 50% chance the second location will have a net gain of $200,000 from the
investment, and a 50% chance it will lose $75,000. ($50,000 left). Assuming she has a
square root utility function, what should she do? - ANSWER-Invest in the new location.
Taking the salary Utils is $125,000.5 = 353.55
Investing Utils is .5(325,000.5) +.5(50,000.5) = 396.84
According to "Innovation Risk: How to Make Smarter Decisions", the infrastructure
should be changed based on every new innovation. - ANSWER-False - There are
frequent innovation to infrastructure so the changes to infrastructure would be constant.
According to "Innovation Risk: How to Make Smarter Decisions", the utility of a model
depends on the model itself, why it's being used and which of the following? -
ANSWER-Who is using the model
According to "Innovation Risk: How to Make Smarter Decisions", which of the following
is NOT one of the five rules of thumb to minimizing risk? - ANSWER-Determine which
risks are being faced
According to "Innovation Risk: How to Make Smarter Decisions", which one of the
following was NOT one of the simultaneous factors of the recent financial crisis? -
ANSWER-High interest rates
According to "Innovation Risk: How to Make Smarter Decisions", you use models every
day. Why is it that you don't recognize that you're using a model? - ANSWER-Models
that apply to real-life situations are often applied semiconsciously.
According to "Scientific View of Risk" most risks are relative. What does this mean? -
ANSWER-Any given risk should be weighed with other risks or lost benefits that can
result from attempts to reduce the given risk.
According to "Scientific View of Risk", how can risk probabilities be misused?
