CFP FP512 Review Exam
Verified Exam Questions and Answers Latest update 2026/2027
Question:
Abandonment -
Answer:
Represents the possibility of a loss-or a negative
deviation from a desired outcome.
Question:
Peril -
Answer:
is the cause of a loss
Question:
Hazard -
Answer:
Increases the potential for loss
Question:
Static Risks -
Answer:
Such as earthquakes and floods, result from factors
other than changes in the economy. They tend to occur with regularity and can be insured.
Question:
Dynamic Risks -
Answer:
Are the result of changes in the economy, such as
changes in the business cycle or inflation. Insurance does not typically cover these types of risks.
Question:
Fundamental Risks -
Answer:
affect a large group of people. Examples
include recessions and earthquakes.
Question:
Particular Risks -
,Answer:
affect individuals or small groups of people
Question:
Pure risk -
Answer:
Involves only the chance of loss or no loss; in other
words, there is no chance of gain. The possibility that a person's home will burn represents this
type of risk because there is no chance of gain but only the chance of loss or no loss.
Question:
Speculative Risk -
Answer:
Involves both the chance of loss and the chance
of gain. Gambling is a classic example of this risk because it presents both the chance of loss and
the chance of gain.
Question:
Risk Management Process -
Answer:
Step 1: Identify and Establish Risk
Management Goals
Step 2: Gather pertinent data to determine risk exposures
Step 3: Analyze and evaluate the information to identify risk exposures
Step 4: Develop a risk management plan
Step 5: Communicate the Recommendations
Step 6: Implement the recommendations
Step 7: Monitor the recommendations for needed changes
Question:
Asset related risk exposure -
Answer:
loss of the asset itself, loss of use of
the asset, and other associated losses.
, Question:
Contract Law -
Answer:
the risk of liability in acquisition of an asset based
on law: acquisition of an asset resulting in liability to a lender, a club membership contract
putting certain responsibilities on the client, etc.
Question:
Tort Law -
Answer:
Liability for a loss resulting from the use of an asset or
from an activity-a boating accident, practicing one's profession, etc.
Question:
Risk Control -
Answer:
Is a risk management technique that seeks to
minimize the risk of loss.
Question:
Risk Avoidance -
Answer:
If a business wants to ensure that it will not have
windows broken by vandals, it can avoid the risk by not having windows... What kind of risk
method does this describe?
Question:
Risk Reduction -
Answer:
If the same business wants windows but is still
concerned about vandals, it may choose to have windows made of a material that is very difficult
to break... What kind of risk method does this describe?
Question:
Risk Financing -
Answer:
is a risk management technique that pays the costs
of losses incurred
Verified Exam Questions and Answers Latest update 2026/2027
Question:
Abandonment -
Answer:
Represents the possibility of a loss-or a negative
deviation from a desired outcome.
Question:
Peril -
Answer:
is the cause of a loss
Question:
Hazard -
Answer:
Increases the potential for loss
Question:
Static Risks -
Answer:
Such as earthquakes and floods, result from factors
other than changes in the economy. They tend to occur with regularity and can be insured.
Question:
Dynamic Risks -
Answer:
Are the result of changes in the economy, such as
changes in the business cycle or inflation. Insurance does not typically cover these types of risks.
Question:
Fundamental Risks -
Answer:
affect a large group of people. Examples
include recessions and earthquakes.
Question:
Particular Risks -
,Answer:
affect individuals or small groups of people
Question:
Pure risk -
Answer:
Involves only the chance of loss or no loss; in other
words, there is no chance of gain. The possibility that a person's home will burn represents this
type of risk because there is no chance of gain but only the chance of loss or no loss.
Question:
Speculative Risk -
Answer:
Involves both the chance of loss and the chance
of gain. Gambling is a classic example of this risk because it presents both the chance of loss and
the chance of gain.
Question:
Risk Management Process -
Answer:
Step 1: Identify and Establish Risk
Management Goals
Step 2: Gather pertinent data to determine risk exposures
Step 3: Analyze and evaluate the information to identify risk exposures
Step 4: Develop a risk management plan
Step 5: Communicate the Recommendations
Step 6: Implement the recommendations
Step 7: Monitor the recommendations for needed changes
Question:
Asset related risk exposure -
Answer:
loss of the asset itself, loss of use of
the asset, and other associated losses.
, Question:
Contract Law -
Answer:
the risk of liability in acquisition of an asset based
on law: acquisition of an asset resulting in liability to a lender, a club membership contract
putting certain responsibilities on the client, etc.
Question:
Tort Law -
Answer:
Liability for a loss resulting from the use of an asset or
from an activity-a boating accident, practicing one's profession, etc.
Question:
Risk Control -
Answer:
Is a risk management technique that seeks to
minimize the risk of loss.
Question:
Risk Avoidance -
Answer:
If a business wants to ensure that it will not have
windows broken by vandals, it can avoid the risk by not having windows... What kind of risk
method does this describe?
Question:
Risk Reduction -
Answer:
If the same business wants windows but is still
concerned about vandals, it may choose to have windows made of a material that is very difficult
to break... What kind of risk method does this describe?
Question:
Risk Financing -
Answer:
is a risk management technique that pays the costs
of losses incurred
