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CPCU 500 Exam Questions And Answers
2025 Update.
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
Probability - Answer✔the likelihood that an outcome or event will occur. Probabilities are
stated as a decimal figure, a percentage, or a fraction.
What are the 2 elements associated with risk? - Answer✔uncertainty of outcome + possibility
of negative outcome
Pure Risk - Answer✔a chance of loss or no loss, but no chance of gain.
Speculative Risk - Answer✔a chance of gain or loss (investment).
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)
Credit Risk - Answer✔the risk that customers and other debtors will fail to make promised
payments.
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.
What are the 4 quadrants of risk? - Answer✔Hazard, Operational, Financial, and Strategic risk
Hazard - Answer✔a condition that increases the frequency or severity of a loss.
What are the classifications of risk? - Answer✔pure vs. speculative. subjective vs. objective.
diversifiable vs. nondiversifiable.
The quadrants of risk focus on... - Answer✔the source of risk and who has traditionally
managed it
The classifications of risk focus on... - Answer✔some aspect of the risk itself
3 components of Financial consequences or risk? - Answer✔Expected cost of losses or gains.
Expenditures on risk mgmt. Cost of residual uncertainty.
1
CPCU 500 Exam Questions And Answers
2025 Update.
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
Probability - Answer✔the likelihood that an outcome or event will occur. Probabilities are
stated as a decimal figure, a percentage, or a fraction.
What are the 2 elements associated with risk? - Answer✔uncertainty of outcome + possibility
of negative outcome
Pure Risk - Answer✔a chance of loss or no loss, but no chance of gain.
Speculative Risk - Answer✔a chance of gain or loss (investment).
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)
Credit Risk - Answer✔the risk that customers and other debtors will fail to make promised
payments.
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.
What are the 4 quadrants of risk? - Answer✔Hazard, Operational, Financial, and Strategic risk
Hazard - Answer✔a condition that increases the frequency or severity of a loss.
What are the classifications of risk? - Answer✔pure vs. speculative. subjective vs. objective.
diversifiable vs. nondiversifiable.
The quadrants of risk focus on... - Answer✔the source of risk and who has traditionally
managed it
The classifications of risk focus on... - Answer✔some aspect of the risk itself
3 components of Financial consequences or risk? - Answer✔Expected cost of losses or gains.
Expenditures on risk mgmt. Cost of residual uncertainty.
1
