CPCU 500 EXAM STUDY GUIDE | UPDATED 2025 WITH
VERIFIED QUESTIONS AND ANSWERS | GRADED A+
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. - correct 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. - correct answer A. Quantifying risk.
Which one of the following is measurable and quantifies risk?
A. Probability
B. Possibility
C. Uncertainty
D. Feasibility - correct answer A. Probability
One of the elements of risk is uncertainty. Which one of the following best describes
the uncertainty that risk involves?
A. Uncertainty as to how to manage potential losses
B. Uncertainty as to whether a negative outcome is possible
C. Uncertainty as to the type and timing of an outcome
,D. Uncertainty as to whether insurance is available - correct answer C. Uncertainty
as to the type and timing of an outcome
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. - correct 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. - correct 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. - correct 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 - correct 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. - correct
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. - correct answer A. An enterprise risk
management plan.
The single largest impediment to successful implementation of an enterprise risk
management (ERM) program is
Select one:
A. Traditional organizational culture with entrenched risk silos.
B. Lack of required skills to effectively implement an ERM program.
C. Lack of vision by the management team that leads to under-performance of the
ERM plan and early termination.
D. Opposition from stakeholders—employees, stockholders, customers, and
suppliers. - correct answer A. Traditional organizational culture with entrenched risk
silos.
The consensus process by which the veracity of data is confirmed and verified is
known as
Select one:
A. Telematics.
, B. Machine learning.
C. The Internet of Things.
D. Mining. - correct answer D. Mining.
Which one of the following is a virtual ledger of data that has been verified,
timestamped, encrypted, and protected against tampering?
Select one:
A. Artificial intelligence
B. The Internet of Things
C. Closed-loop system
D. Blockchain - correct answer D. Blockchain
Which one of the following is the network through which sensors and other smart
products capture and transmit data?
Select one:
A. Blockchain
B. Cloud
C. Artificial intelligence
D. Internet of Things - correct answer D. Internet of Things
Insurers and risk managers can use the large volumes of data collected and
organized through telematics to help improve results for which one of the following
types of insurance?
Select one:
A. Health
B. Workers compensation
C. Automobile
D. Property - correct answer C. Automobile
Organizations find it difficult to establish a benchmark against which the performance
of their risk management program can be assessed because it is difficult to assign a
specific value to the
Select one:
A. Cost of implementing and administering risk management.
VERIFIED QUESTIONS AND ANSWERS | GRADED A+
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. - correct 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. - correct answer A. Quantifying risk.
Which one of the following is measurable and quantifies risk?
A. Probability
B. Possibility
C. Uncertainty
D. Feasibility - correct answer A. Probability
One of the elements of risk is uncertainty. Which one of the following best describes
the uncertainty that risk involves?
A. Uncertainty as to how to manage potential losses
B. Uncertainty as to whether a negative outcome is possible
C. Uncertainty as to the type and timing of an outcome
,D. Uncertainty as to whether insurance is available - correct answer C. Uncertainty
as to the type and timing of an outcome
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. - correct 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. - correct 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. - correct 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 - correct 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. - correct
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. - correct answer A. An enterprise risk
management plan.
The single largest impediment to successful implementation of an enterprise risk
management (ERM) program is
Select one:
A. Traditional organizational culture with entrenched risk silos.
B. Lack of required skills to effectively implement an ERM program.
C. Lack of vision by the management team that leads to under-performance of the
ERM plan and early termination.
D. Opposition from stakeholders—employees, stockholders, customers, and
suppliers. - correct answer A. Traditional organizational culture with entrenched risk
silos.
The consensus process by which the veracity of data is confirmed and verified is
known as
Select one:
A. Telematics.
, B. Machine learning.
C. The Internet of Things.
D. Mining. - correct answer D. Mining.
Which one of the following is a virtual ledger of data that has been verified,
timestamped, encrypted, and protected against tampering?
Select one:
A. Artificial intelligence
B. The Internet of Things
C. Closed-loop system
D. Blockchain - correct answer D. Blockchain
Which one of the following is the network through which sensors and other smart
products capture and transmit data?
Select one:
A. Blockchain
B. Cloud
C. Artificial intelligence
D. Internet of Things - correct answer D. Internet of Things
Insurers and risk managers can use the large volumes of data collected and
organized through telematics to help improve results for which one of the following
types of insurance?
Select one:
A. Health
B. Workers compensation
C. Automobile
D. Property - correct answer C. Automobile
Organizations find it difficult to establish a benchmark against which the performance
of their risk management program can be assessed because it is difficult to assign a
specific value to the
Select one:
A. Cost of implementing and administering risk management.
