CPCU 500 Exam Questions and Answers Graded A+

CPCU 500 Exam Questions and Answers Graded A+ 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