ARM 401 Exam Test Bank 2 Latest 214 Questions and
Correct Answers / ARM 401 Holistically Assessing
Risk Exam 2025-2026 Prep Qs and As
A risk manager for an organization has proposed a meeting to ask a series of "What
if?" questions to project the consequences for implementing alternative processes
under consideration. Which one of the following system safety analysis techniques
is the risk manager proposing?
A. Technique of operations review approach
B. Job safety analysis
C. Change analysis
D. Sequence of events theory - ANSWER-C
To accurately determine its level of risk, an organization must examine the
effectiveness of its efforts to prevent losses from occurring and to reduce the
severity of losses that do occur. An organization's efforts in this area are called
A. Risk identification.
B. Risk control.
C. Risk transfer.
D. Risk retention. - ANSWER-B
Vandenberg Company retains workers compensation medical expenses. The risk
manager ran a regression using workers compensation medical costs as the
dependent variable and company payroll (in actual dollars) as the independent
variable. Results of the regression were:
A. $372,227
B. $404,256
C. $409,970
pg. 1
,D. $416,540 - ANSWER-B: y = mx + b, where b = y-intercept and m = slope.
Payroll is the independent variable x axis and WC medical costs are the dependent
variable y axis. y = .098 (3,750,000) + 5.20, y = 367,505.20; 367,505.20 × 1.10 =
404,255.72.
The number of auto physical damage claims for fleet vehicles at Right-a-Way
Delivery Service in any year is normally distributed. Next year, the expected
number of fleet vehicle physical damage claims is expected to be 712 with a
standard deviation of 25. Based on this information, what is the probability that
between 737 and 762 auto physical damage claims will occur next year?
A. 2.2%
B. 13.6%
C. 24.3%
D. 27.2% - ANSWER-B: In a normal distribution, the percent of all outcomes
falling within 1 and 2 standard deviations is 13.59%.
Which one of the following statements is correct with respect to empirical
probability distributions?
A. Any given event can fall into one or more categories of event (bins).
B. Event categories (bins) are designed so that only the most probable events are
included.
C. The sum of all empirical probabilities in a distribution can be any number.
D. They provide a mutually exclusive, collectively exhaustive list of outcomes. -
ANSWER-D
In using the coefficient of variation when comparing two distributions, if both
distributions have the same mean, then the distribution with the larger standard
deviation will have
A. Greater variability.
B. Less variability.
pg. 2
,C. More skew.
D. Less skew. - ANSWER-A
Insurance and risk management professionals use measures of dispersion of the
distributions of potential outcomes to gain a better understanding of loss exposures
being analyzed. Which one of the following is true regarding the standard
deviation of a distribution?
A. It is the average value of predicted losses estimated from an empirical
distribution.
B. It indicates how widely dispersed the values in a distribution are.
C. It can only be calculated when the probability of each outcome in a sample of
data is known.
D. It is the probability of each possible outcome in a sample of data. - ANSWER-
B
The property damage claims experienced by Runyon Company are normally
distributed. The mean of the distribution of property claims is $620 and the
coefficient of variation is .75. What is the standard deviation of the property
damage claim distribution?
A. 155
B. 250
C. 333
D. 465 - ANSWER-D: Coefficient of variation = standard deviation ÷ mean; .75 =
x ÷ 620; x = 465. The standard deviation of the property damage claim distribution
is 465.
In flipping a coin, each of the two possible outcomes, heads or tails, has an equal
probability of 50%. Because on a particular flip of a coin, only one outcome is
possible, these outcomes are
A. Collectively exhaustive.
pg. 3
, B. Empirical.
C. Mutually exclusive.
D. Skewed. - ANSWER-C
Maria is a risk management professional trying to analyze workers compensation
loss frequency by cause of loss. Which one of the following forms of probability
distribution would be most appropriate for her to use?
A. Continuous
B. Theoretical
C. Cumulative
D. Discrete - ANSWER-D
In analyzing Partridge's three year loss data for forecasting purposes, what is the
mean loss value?
A. $1,500
B. $1,590
C. $2,400
D. $2,472 - ANSWER-D: In analyzing Partridge's data for forecasting purposes,
the mean value for Partridge's losses is $2,472 (the sum of all losses for the three
years divided by the total number of claims, 37,080 ÷ 15 = 2,472)
A group of large life insurance companies pooled their mortality data over the past
25 years. Based on the pooled mortality data, a mortality table showing the
probability of death at specified ages was developed. The insurers used these
probabilities in pricing life insurance products. The probabilities developed from
the pooled mortality experience of the insurers are best described as
A. Dependent probabilities.
B. Empirical probabilities.
pg. 4
Correct Answers / ARM 401 Holistically Assessing
Risk Exam 2025-2026 Prep Qs and As
A risk manager for an organization has proposed a meeting to ask a series of "What
if?" questions to project the consequences for implementing alternative processes
under consideration. Which one of the following system safety analysis techniques
is the risk manager proposing?
A. Technique of operations review approach
B. Job safety analysis
C. Change analysis
D. Sequence of events theory - ANSWER-C
To accurately determine its level of risk, an organization must examine the
effectiveness of its efforts to prevent losses from occurring and to reduce the
severity of losses that do occur. An organization's efforts in this area are called
A. Risk identification.
B. Risk control.
C. Risk transfer.
D. Risk retention. - ANSWER-B
Vandenberg Company retains workers compensation medical expenses. The risk
manager ran a regression using workers compensation medical costs as the
dependent variable and company payroll (in actual dollars) as the independent
variable. Results of the regression were:
A. $372,227
B. $404,256
C. $409,970
pg. 1
,D. $416,540 - ANSWER-B: y = mx + b, where b = y-intercept and m = slope.
Payroll is the independent variable x axis and WC medical costs are the dependent
variable y axis. y = .098 (3,750,000) + 5.20, y = 367,505.20; 367,505.20 × 1.10 =
404,255.72.
The number of auto physical damage claims for fleet vehicles at Right-a-Way
Delivery Service in any year is normally distributed. Next year, the expected
number of fleet vehicle physical damage claims is expected to be 712 with a
standard deviation of 25. Based on this information, what is the probability that
between 737 and 762 auto physical damage claims will occur next year?
A. 2.2%
B. 13.6%
C. 24.3%
D. 27.2% - ANSWER-B: In a normal distribution, the percent of all outcomes
falling within 1 and 2 standard deviations is 13.59%.
Which one of the following statements is correct with respect to empirical
probability distributions?
A. Any given event can fall into one or more categories of event (bins).
B. Event categories (bins) are designed so that only the most probable events are
included.
C. The sum of all empirical probabilities in a distribution can be any number.
D. They provide a mutually exclusive, collectively exhaustive list of outcomes. -
ANSWER-D
In using the coefficient of variation when comparing two distributions, if both
distributions have the same mean, then the distribution with the larger standard
deviation will have
A. Greater variability.
B. Less variability.
pg. 2
,C. More skew.
D. Less skew. - ANSWER-A
Insurance and risk management professionals use measures of dispersion of the
distributions of potential outcomes to gain a better understanding of loss exposures
being analyzed. Which one of the following is true regarding the standard
deviation of a distribution?
A. It is the average value of predicted losses estimated from an empirical
distribution.
B. It indicates how widely dispersed the values in a distribution are.
C. It can only be calculated when the probability of each outcome in a sample of
data is known.
D. It is the probability of each possible outcome in a sample of data. - ANSWER-
B
The property damage claims experienced by Runyon Company are normally
distributed. The mean of the distribution of property claims is $620 and the
coefficient of variation is .75. What is the standard deviation of the property
damage claim distribution?
A. 155
B. 250
C. 333
D. 465 - ANSWER-D: Coefficient of variation = standard deviation ÷ mean; .75 =
x ÷ 620; x = 465. The standard deviation of the property damage claim distribution
is 465.
In flipping a coin, each of the two possible outcomes, heads or tails, has an equal
probability of 50%. Because on a particular flip of a coin, only one outcome is
possible, these outcomes are
A. Collectively exhaustive.
pg. 3
, B. Empirical.
C. Mutually exclusive.
D. Skewed. - ANSWER-C
Maria is a risk management professional trying to analyze workers compensation
loss frequency by cause of loss. Which one of the following forms of probability
distribution would be most appropriate for her to use?
A. Continuous
B. Theoretical
C. Cumulative
D. Discrete - ANSWER-D
In analyzing Partridge's three year loss data for forecasting purposes, what is the
mean loss value?
A. $1,500
B. $1,590
C. $2,400
D. $2,472 - ANSWER-D: In analyzing Partridge's data for forecasting purposes,
the mean value for Partridge's losses is $2,472 (the sum of all losses for the three
years divided by the total number of claims, 37,080 ÷ 15 = 2,472)
A group of large life insurance companies pooled their mortality data over the past
25 years. Based on the pooled mortality data, a mortality table showing the
probability of death at specified ages was developed. The insurers used these
probabilities in pricing life insurance products. The probabilities developed from
the pooled mortality experience of the insurers are best described as
A. Dependent probabilities.
B. Empirical probabilities.
pg. 4
