CPCU Simulated Exam Questions
Risk is - Answer-Uncertainty of outcomes
Recalibrating predictive models to give more weight to recent events is the insurance industry's
response to which one of the following evolving risks? - Answer-Climate change
Lori and Denise work in the same region at Taunton Insurance. They were working on individual projects
with different objectives but realized that they could help each other out by sharing information and
resources. Which one of the following is the act of working together to achieve individual objectives
rather than a shared objective? - Answer-Cooperation
The use of risk quadrants to identify and categorize risk provides a framework for - Answer-Holistic risk
identification
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 - Answer-
Strategic risk
Regarding diversifiable and nondiversifiable risk, which one of the following statements is accurate? -
Answer-Systemic risks are generally nondiversifiable.
Place the following activities in the proper stage of the risk management process.
, 1. Company X hired a safety consultant to complete a walkthrough of their operations and advise them
of any unsafe conditions or out-of-compliance procedures.
2. Company Y considered purchasing a new type of battery for their phones, but the board rejected the
idea due to the increased risk of product liability claims.
3. Company Z conducted a quantitative risk assessment examining the likelihood and consequences of
the major risks to their company. - Answer-Identify risks - Company X
Analyze risks - Company Z
Treat risks - Company Y
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? - Answer-
The rental property presents both pure and speculative risk; property values may increase, and the
building could burn down.
An integral part of the risk management process is defining risk criteria. These criteria should be aligned
with an organization's (select all that apply): - Answer-Resources, Objectives, Risk management policy
Sixth National Bank stores all of its financial records in an electronic data base. Sixth National customers
are able to access their accounts on-line with a user identification number and a password. Last
weekend, a computer hacker was able to breach the firewall of the electronic database and gain access
to customer account data. This operational risk for Sixth National Bank is - Answer-A systems risk.
Four Grains Cereal Company signed a contract to deliver 250,000 boxes of cereal to a national
supermarket chain at a specified price per box of cereal six months from today. Between now and when
the grain to make the cereal is purchased, the cost of the grain may increase. If the cost of this
Risk is - Answer-Uncertainty of outcomes
Recalibrating predictive models to give more weight to recent events is the insurance industry's
response to which one of the following evolving risks? - Answer-Climate change
Lori and Denise work in the same region at Taunton Insurance. They were working on individual projects
with different objectives but realized that they could help each other out by sharing information and
resources. Which one of the following is the act of working together to achieve individual objectives
rather than a shared objective? - Answer-Cooperation
The use of risk quadrants to identify and categorize risk provides a framework for - Answer-Holistic risk
identification
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 - Answer-
Strategic risk
Regarding diversifiable and nondiversifiable risk, which one of the following statements is accurate? -
Answer-Systemic risks are generally nondiversifiable.
Place the following activities in the proper stage of the risk management process.
, 1. Company X hired a safety consultant to complete a walkthrough of their operations and advise them
of any unsafe conditions or out-of-compliance procedures.
2. Company Y considered purchasing a new type of battery for their phones, but the board rejected the
idea due to the increased risk of product liability claims.
3. Company Z conducted a quantitative risk assessment examining the likelihood and consequences of
the major risks to their company. - Answer-Identify risks - Company X
Analyze risks - Company Z
Treat risks - Company Y
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? - Answer-
The rental property presents both pure and speculative risk; property values may increase, and the
building could burn down.
An integral part of the risk management process is defining risk criteria. These criteria should be aligned
with an organization's (select all that apply): - Answer-Resources, Objectives, Risk management policy
Sixth National Bank stores all of its financial records in an electronic data base. Sixth National customers
are able to access their accounts on-line with a user identification number and a password. Last
weekend, a computer hacker was able to breach the firewall of the electronic database and gain access
to customer account data. This operational risk for Sixth National Bank is - Answer-A systems risk.
Four Grains Cereal Company signed a contract to deliver 250,000 boxes of cereal to a national
supermarket chain at a specified price per box of cereal six months from today. Between now and when
the grain to make the cereal is purchased, the cost of the grain may increase. If the cost of this
