CPCU 500 Exam Study Guide |2025 UPDATE COMPLETE FREQUENTLY TESTED
QUESTIONS WITH VERIFIED ANSWERS |GET IT 100% ACCURATE!!
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.
Risk can be classified as pure or speculative. Which one of the following is the
best example of a speculative risk?
A. Acquiring a new television
B. Investing in shares of stock
C. Buying a new personal vehicle
,D. Purchasing an insurance policy - ANSWER-B. Investing in shares of stock
Which one of the following statements is true regarding enterprise risk
management (ERM)?
A. ERM is concerned with an organization's pure risk, primarily hazard risk.
B. The ERM framework encompasses all stakeholders in the organization.
C. In ERM, the risk management function is the responsibility of the safety
manager.
D. ERM requires less communication than traditional risk management. - ANSWER-
B. The ERM framework encompasses all stakeholders in the organization.
A risk management plan that considers all of the risks that an organization faces,
including operational, financial, and strategic risks, is called
A. An enterprise risk management plan.
B. An open-perils risk management plan.
C. A protected cell risk management plan.
D. A hazard risk management plan. - ANSWER-A. An enterprise risk management
plan.
, 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
QUESTIONS WITH VERIFIED ANSWERS |GET IT 100% ACCURATE!!
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.
Risk can be classified as pure or speculative. Which one of the following is the
best example of a speculative risk?
A. Acquiring a new television
B. Investing in shares of stock
C. Buying a new personal vehicle
,D. Purchasing an insurance policy - ANSWER-B. Investing in shares of stock
Which one of the following statements is true regarding enterprise risk
management (ERM)?
A. ERM is concerned with an organization's pure risk, primarily hazard risk.
B. The ERM framework encompasses all stakeholders in the organization.
C. In ERM, the risk management function is the responsibility of the safety
manager.
D. ERM requires less communication than traditional risk management. - ANSWER-
B. The ERM framework encompasses all stakeholders in the organization.
A risk management plan that considers all of the risks that an organization faces,
including operational, financial, and strategic risks, is called
A. An enterprise risk management plan.
B. An open-perils risk management plan.
C. A protected cell risk management plan.
D. A hazard risk management plan. - ANSWER-A. An enterprise risk management
plan.
, 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
