CPCU 500 (insurance designation) Exam Questions
and Answers 100% Verified
Question:
Risk
Answer:
the uncertainty about outcomes, with the possibility that some of the outcomes can be
negative. Quantified by knowing the probability of the possible outcomes
Question:
Probability
Answer:
the likelihood that an outcome or event will occur. Probabilities are stated as a decimal
figure, a percentage, or a fraction.
Question:
What are the 2 elements associated with risk?
Answer:
uncertainty of outcome + possibility of negative outcome
Question:
Pure Risk
Answer:
a chance of loss or no loss, but no chance of gain.
, Question:
Speculative Risk
Answer:
a chance of gain or loss (investment).
Question:
Price Risk
Answer:
the uncertainty over the size of cash flows resulting from possible changes in the cost of raw
materials and other inputs (lumber, gas, or electricity)
Question:
Credit Risk
Answer:
the risk that customers and other debtors will fail to make promised payments.
Question:
Distinguish Diversifiable vs. Nondiversifiable Risk
Answer:
Diversifiable risks can be managed by spreading (such as purchasing multiple businesses).
Nondiversifiable risks are correlated so that their gains or losses tend to occur
simultaneously rather than randomly.
and Answers 100% Verified
Question:
Risk
Answer:
the uncertainty about outcomes, with the possibility that some of the outcomes can be
negative. Quantified by knowing the probability of the possible outcomes
Question:
Probability
Answer:
the likelihood that an outcome or event will occur. Probabilities are stated as a decimal
figure, a percentage, or a fraction.
Question:
What are the 2 elements associated with risk?
Answer:
uncertainty of outcome + possibility of negative outcome
Question:
Pure Risk
Answer:
a chance of loss or no loss, but no chance of gain.
, Question:
Speculative Risk
Answer:
a chance of gain or loss (investment).
Question:
Price Risk
Answer:
the uncertainty over the size of cash flows resulting from possible changes in the cost of raw
materials and other inputs (lumber, gas, or electricity)
Question:
Credit Risk
Answer:
the risk that customers and other debtors will fail to make promised payments.
Question:
Distinguish Diversifiable vs. Nondiversifiable Risk
Answer:
Diversifiable risks can be managed by spreading (such as purchasing multiple businesses).
Nondiversifiable risks are correlated so that their gains or losses tend to occur
simultaneously rather than randomly.
