RMI Exam 1 Questions with complete
solution
Slippery roads or fog are examples of a:
A. Physical hazard
B. Moral hazard
C. Societal hazard
D. Liability hazard
E. Hazardous environment - correct answer ✔A
When measuring risk, frequency is synonymous with:
A. Impact
B. Likelihood
C.Severity
D.Expected value
E. Standard deviation - correct answer ✔B
Air bags in a vehicle are an example of:
A. Risk (loss) prevention
B. Risk (loss) reduction
C.Investments in information
D.Retention
E. Hedging - correct answer ✔B
Which of the following is one of the "rules of risk management"
:I. Consider the odds
,II. Don't risk more than you can afford to lose
III. Minimize risk when possible
A. I only
B. II only
C.I & II
D.II & III
E. I, II, & III - correct answer ✔C
(we manage risks, we don't always minimize, some risks are worth taking, it
depends on the risk & the reward)
Which of the following allows individuals to substitute a small certain payment
for a larger uncertain possibility of a loss. In other words, what makes
insurance possible?
A. Expected Value
B. Standard Deviation
C.Law of Large Numbers
D.All of the above
E. None of the above - correct answer ✔C
Paying unanticipated losses out of normal cash flows is an example of:
A. Funded retention
B. Unfunded retention
C.Transfer
D.Unplanned retention
E. All of the above - correct answer ✔D
,(hard question, key word here is "unanticipated" losses - didn't see them
coming so it is unplanned retention, since it was unplanned also will be
unfunded)
Which of the following is the best measure of risk:
A. Expected value
B. Expected utility
C.Standard deviation
D.All of the above
E. None of the above - correct answer ✔C
Which of the following categories of risk represent the risks that have no
possibility for gain:
A. Secondary
B. Speculative
C.Fundamental
D.Pure
E. None of the above - correct answer ✔D
The possibility of a homeowner being sued because his dog bit his neighbor,
is an example of which source of risk:
A. Personal
B. Property
C.Liability
D.Static
E. Dynamic - correct answer ✔C
, Fed Ex & UPS have thousands of trucks on the road every day. The
possibility of an auto accident is:
A. An exposure
B. A peril
C.A hazard
D.Adverse selection
E. Moral hazard - correct answer ✔B
You decide to store your extra gasoline cans next to your furnace in the
basement. Your house is destroyed by fire. In this example, what is the
house?
A. An exposure
B. A peril
C.A hazard
D.Adverse selection
E. Moral hazard - correct answer ✔A
The preferred approach to risk identification is:
A. Questionnaires
B. Checklists
C.Procedure guides
D.Contract analysis
E. Combination approach - correct answer ✔E
diversification is a method of:
A. Risk (loss) contro
lB. Risk (loss) financing
solution
Slippery roads or fog are examples of a:
A. Physical hazard
B. Moral hazard
C. Societal hazard
D. Liability hazard
E. Hazardous environment - correct answer ✔A
When measuring risk, frequency is synonymous with:
A. Impact
B. Likelihood
C.Severity
D.Expected value
E. Standard deviation - correct answer ✔B
Air bags in a vehicle are an example of:
A. Risk (loss) prevention
B. Risk (loss) reduction
C.Investments in information
D.Retention
E. Hedging - correct answer ✔B
Which of the following is one of the "rules of risk management"
:I. Consider the odds
,II. Don't risk more than you can afford to lose
III. Minimize risk when possible
A. I only
B. II only
C.I & II
D.II & III
E. I, II, & III - correct answer ✔C
(we manage risks, we don't always minimize, some risks are worth taking, it
depends on the risk & the reward)
Which of the following allows individuals to substitute a small certain payment
for a larger uncertain possibility of a loss. In other words, what makes
insurance possible?
A. Expected Value
B. Standard Deviation
C.Law of Large Numbers
D.All of the above
E. None of the above - correct answer ✔C
Paying unanticipated losses out of normal cash flows is an example of:
A. Funded retention
B. Unfunded retention
C.Transfer
D.Unplanned retention
E. All of the above - correct answer ✔D
,(hard question, key word here is "unanticipated" losses - didn't see them
coming so it is unplanned retention, since it was unplanned also will be
unfunded)
Which of the following is the best measure of risk:
A. Expected value
B. Expected utility
C.Standard deviation
D.All of the above
E. None of the above - correct answer ✔C
Which of the following categories of risk represent the risks that have no
possibility for gain:
A. Secondary
B. Speculative
C.Fundamental
D.Pure
E. None of the above - correct answer ✔D
The possibility of a homeowner being sued because his dog bit his neighbor,
is an example of which source of risk:
A. Personal
B. Property
C.Liability
D.Static
E. Dynamic - correct answer ✔C
, Fed Ex & UPS have thousands of trucks on the road every day. The
possibility of an auto accident is:
A. An exposure
B. A peril
C.A hazard
D.Adverse selection
E. Moral hazard - correct answer ✔B
You decide to store your extra gasoline cans next to your furnace in the
basement. Your house is destroyed by fire. In this example, what is the
house?
A. An exposure
B. A peril
C.A hazard
D.Adverse selection
E. Moral hazard - correct answer ✔A
The preferred approach to risk identification is:
A. Questionnaires
B. Checklists
C.Procedure guides
D.Contract analysis
E. Combination approach - correct answer ✔E
diversification is a method of:
A. Risk (loss) contro
lB. Risk (loss) financing
