CPCU 500 (BECOMING A LEADER IN RISK MANAGEMENT AND
INSURANCE) FINAL EXAM 2 QUESTIONS AND CORRECT VERIFIED
ANSWERS 2023-2024
A building contractor uses lower grade materials than called for in the
specifications for an office building. A year after the building was completed, a
balcony collapses, injuring several employees and customers and causing damage
to the building and contents. For the building construction company this is an
example of - Correct Answer ✅ - A completed operations liability exposure
A commercial building may contain furniture, machinery and equipment, raw
materials, and finished products. Which one of the following is the term generally
used in property insurance policies to refer to all types of property? - Correct
Answer ✅ - Business personal property
A company turnover rate well above company and industry average be a sign of -
Correct
Answer- Personnel problems that need to be addressed
A completed operations liability exposure differs from a products liability loss
exposure in that the completed operations liability loss exposure - Correct
pg. 1
,Answer ✅ - Arises out of the entity's completed work, including defective
parts or materials furnished with the work.
A licensed electrician completes the job of rewiring a house and returns to his
shop. With regard to this job, an electrician has a - Correct Answer ✅ -
Completed operations loss exposure
A neighbor has sued Andy for property damage that is potentially covered under
Andy's homeowners liability coverage. Even if this lawsuit is found to be
groundless, Andy's insurers will still probably be obligated to pay - Correct
Answer ✅ - Defense costs
A risk management plan that considers all of the risks that an organization faces,
including operational, financial, and strategic risks, is called - Correct Answer
✅ - An enterprise risk management plan.
A risk management program must be monitored and periodically revised, and that
revision involves four steps. Which one of the following is one of those four steps?
pg. 2
,- Correct Answer ✅ - Compare actual results with the established
performance standards.
A risk professional may use dispersion to compare the characteristics of probability
distributions. Which one of the following statements is true in this regard -
Correct Answer ✅ - When two or more distributions are plotted on a
graph, the one with the most sharply peaked curve has the smallest standard
deviation
A secured lender (secured creditor) - Correct Answer ✅ - Acquires
conditional rights to property, such as the right to repossess it if loan
payments are not made.
After identifying and analyzing loss exposures and evaluating and selecting the
appropriate risk management process is to - Correct Answer ✅ - Implement
the selected technique.
Aligning risks with the organization's risk appetite defines - Correct Answer ✅
- Tolerable uncertainty
pg. 3
, All for-profit organizations are exposed to net income losses. Net income is
defined as - Correct Answer ✅ - Total revenue minus total expenses.
All of the following are considered risk control techniques, Except: - Correct
Answer ✅ - Reinsurance
An emperical probability distribution is based on - Correct Answer ✅ -
Historical data
An example of an administrative expense that can minimize the cost of risk is -
Correct Answer ✅ - Outsourcing the claim function
An organization must meet the standard of care hat it owes to others in order to
ensure that -
Correct Answer ✅ - Legal obligations are satisfied
pg. 4
INSURANCE) FINAL EXAM 2 QUESTIONS AND CORRECT VERIFIED
ANSWERS 2023-2024
A building contractor uses lower grade materials than called for in the
specifications for an office building. A year after the building was completed, a
balcony collapses, injuring several employees and customers and causing damage
to the building and contents. For the building construction company this is an
example of - Correct Answer ✅ - A completed operations liability exposure
A commercial building may contain furniture, machinery and equipment, raw
materials, and finished products. Which one of the following is the term generally
used in property insurance policies to refer to all types of property? - Correct
Answer ✅ - Business personal property
A company turnover rate well above company and industry average be a sign of -
Correct
Answer- Personnel problems that need to be addressed
A completed operations liability exposure differs from a products liability loss
exposure in that the completed operations liability loss exposure - Correct
pg. 1
,Answer ✅ - Arises out of the entity's completed work, including defective
parts or materials furnished with the work.
A licensed electrician completes the job of rewiring a house and returns to his
shop. With regard to this job, an electrician has a - Correct Answer ✅ -
Completed operations loss exposure
A neighbor has sued Andy for property damage that is potentially covered under
Andy's homeowners liability coverage. Even if this lawsuit is found to be
groundless, Andy's insurers will still probably be obligated to pay - Correct
Answer ✅ - Defense costs
A risk management plan that considers all of the risks that an organization faces,
including operational, financial, and strategic risks, is called - Correct Answer
✅ - An enterprise risk management plan.
A risk management program must be monitored and periodically revised, and that
revision involves four steps. Which one of the following is one of those four steps?
pg. 2
,- Correct Answer ✅ - Compare actual results with the established
performance standards.
A risk professional may use dispersion to compare the characteristics of probability
distributions. Which one of the following statements is true in this regard -
Correct Answer ✅ - When two or more distributions are plotted on a
graph, the one with the most sharply peaked curve has the smallest standard
deviation
A secured lender (secured creditor) - Correct Answer ✅ - Acquires
conditional rights to property, such as the right to repossess it if loan
payments are not made.
After identifying and analyzing loss exposures and evaluating and selecting the
appropriate risk management process is to - Correct Answer ✅ - Implement
the selected technique.
Aligning risks with the organization's risk appetite defines - Correct Answer ✅
- Tolerable uncertainty
pg. 3
, All for-profit organizations are exposed to net income losses. Net income is
defined as - Correct Answer ✅ - Total revenue minus total expenses.
All of the following are considered risk control techniques, Except: - Correct
Answer ✅ - Reinsurance
An emperical probability distribution is based on - Correct Answer ✅ -
Historical data
An example of an administrative expense that can minimize the cost of risk is -
Correct Answer ✅ - Outsourcing the claim function
An organization must meet the standard of care hat it owes to others in order to
ensure that -
Correct Answer ✅ - Legal obligations are satisfied
pg. 4
