ARM 400 FINAL EXAM ACTUAL QUESTIONS AND
ANSWERS MARKED A+
✔✔In an effort to grow personal lines book, an insurer decides to offer discounts on
homeowners and personal auto insurance to the employees of its largest business lines
account. Which one of the following risk measures is most likely to increase as a result
of this marketing decision? - ✔✔Correlation
(think law of large numbers)
✔✔Which one of the following statements is true regarding the basic measures that
apply to risk management? - ✔✔consequences measure the degree to which an
occurrence could positively or negatively affect an organization
✔✔The traditional definition of risk management reflects the traditional concept of risk
as ___________ - ✔✔negative
✔✔Sets of data that are too large to be gathered and analyzed by traditional methods -
✔✔big data
✔✔An innovative item that uses sensors; wireless sensor networks; and data collection,
transmission, and analysis to further enable the item to be faster more useful, or
otherwise improved. - ✔✔smart product
✔✔A network of objects that transmit data to and from each other without human
interaction. - ✔✔internet of things
✔✔Information, technology, and storage services contractually provided from remote
locations, through the internet or another network, without a direct server connection. -
✔✔cloud computing
✔✔A distributed digital ledger that facilitates secure transactions without the need for a
third party. - ✔✔blockchain
✔✔The use of technological devices in vehicles with wireless communication and GPS
tracking that transmit data to businesses or government agencies; some return
information for the driver. - ✔✔Telematics
✔✔Obtaining information through language recognition. - ✔✔text mining
✔✔Amount of risk an organization is willing to take on in order to achieve an anticipated
result or return. - ✔✔risk appetite
, ✔✔A technique to quantify financial risk by measuring the likelihood of losing more than
a specific dollar amount over a specific period of time. - ✔✔value at risk
✔✔The total cost incurred by an organization because of the possibility of accidental
loss. - ✔✔cost of risk
✔✔Any condition that presents a possibility of gain or loss, whether or not an actual loss
occurs. - ✔✔exposure
✔✔Frequent fluctuations, such as in the price of an asset. - ✔✔volatility
✔✔A qualitative estimate of the certainty with which the outcome of a specific even can
be predicted. - ✔✔likelihood
✔✔The effects, positive or negative, of an occurrence - ✔✔consequences
✔✔Estimated duration. - ✔✔time horizon
✔✔A relationship between variables. - ✔✔correlation
✔✔A chance of loss or no loss, but no chance of gain. - ✔✔pure risk
✔✔A chance of loss, no loss, or gain. - ✔✔speculative risk
✔✔The risk that customers or other creditors will fail to make promised payments as
they come due. - ✔✔credit risk
✔✔The perceived amount of risk based on an individual's or organization's opinion. -
✔✔subjective risk
✔✔The measurable variation in uncertain outcomes based on facts and data. -
✔✔objective risk
✔✔A risk that affects only some individuals, businesses, or small groups. -
✔✔diversifiable risk
✔✔The potential for a major disruption in the function of an entire market or financial
system. - ✔✔systemic risk
✔✔Uncertainty about investments future value because of potential changes in the
market for that type of investment. - ✔✔market risk
ANSWERS MARKED A+
✔✔In an effort to grow personal lines book, an insurer decides to offer discounts on
homeowners and personal auto insurance to the employees of its largest business lines
account. Which one of the following risk measures is most likely to increase as a result
of this marketing decision? - ✔✔Correlation
(think law of large numbers)
✔✔Which one of the following statements is true regarding the basic measures that
apply to risk management? - ✔✔consequences measure the degree to which an
occurrence could positively or negatively affect an organization
✔✔The traditional definition of risk management reflects the traditional concept of risk
as ___________ - ✔✔negative
✔✔Sets of data that are too large to be gathered and analyzed by traditional methods -
✔✔big data
✔✔An innovative item that uses sensors; wireless sensor networks; and data collection,
transmission, and analysis to further enable the item to be faster more useful, or
otherwise improved. - ✔✔smart product
✔✔A network of objects that transmit data to and from each other without human
interaction. - ✔✔internet of things
✔✔Information, technology, and storage services contractually provided from remote
locations, through the internet or another network, without a direct server connection. -
✔✔cloud computing
✔✔A distributed digital ledger that facilitates secure transactions without the need for a
third party. - ✔✔blockchain
✔✔The use of technological devices in vehicles with wireless communication and GPS
tracking that transmit data to businesses or government agencies; some return
information for the driver. - ✔✔Telematics
✔✔Obtaining information through language recognition. - ✔✔text mining
✔✔Amount of risk an organization is willing to take on in order to achieve an anticipated
result or return. - ✔✔risk appetite
, ✔✔A technique to quantify financial risk by measuring the likelihood of losing more than
a specific dollar amount over a specific period of time. - ✔✔value at risk
✔✔The total cost incurred by an organization because of the possibility of accidental
loss. - ✔✔cost of risk
✔✔Any condition that presents a possibility of gain or loss, whether or not an actual loss
occurs. - ✔✔exposure
✔✔Frequent fluctuations, such as in the price of an asset. - ✔✔volatility
✔✔A qualitative estimate of the certainty with which the outcome of a specific even can
be predicted. - ✔✔likelihood
✔✔The effects, positive or negative, of an occurrence - ✔✔consequences
✔✔Estimated duration. - ✔✔time horizon
✔✔A relationship between variables. - ✔✔correlation
✔✔A chance of loss or no loss, but no chance of gain. - ✔✔pure risk
✔✔A chance of loss, no loss, or gain. - ✔✔speculative risk
✔✔The risk that customers or other creditors will fail to make promised payments as
they come due. - ✔✔credit risk
✔✔The perceived amount of risk based on an individual's or organization's opinion. -
✔✔subjective risk
✔✔The measurable variation in uncertain outcomes based on facts and data. -
✔✔objective risk
✔✔A risk that affects only some individuals, businesses, or small groups. -
✔✔diversifiable risk
✔✔The potential for a major disruption in the function of an entire market or financial
system. - ✔✔systemic risk
✔✔Uncertainty about investments future value because of potential changes in the
market for that type of investment. - ✔✔market risk
