Question 1

Some events cannot occur together because the occurrence of one event makes the occurrence of the second event impossible. Such events are called

Accepted Answer

A)  dependent events. 
B)  independent events. 
C)  conditional events. 
D)  mutually exclusive events. 
A)  dependent events. 
B)  independent events. 
C)  conditional events. 
D)  mutually exclusive events.

Question 2

Which statement is (are) true with respect to enterprise risk management programs?
I.They address traditional property, liability, and personnel loss exposures.
II.They do not address financial risks.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 3

Two buildings are located close together at a production facility. The probability that either of these buildings will experience a fire loss is 4 percent. However, if one building has a fire, the probability that the second building will have a fire is 60 percent. What is the probability that both buildings will have a fire?

Accepted Answer

A)  1.6 percent 
B)  2.4 percent 
C)  8.0 percent 
D)  64.0 percent 
A)  1.6 percent 
B)  2.4 percent 
C)  8.0 percent 
D)  64.0 percent

Question 4

The terrorism risk in the United States

Accepted Answer

A)  is of no concern to private companies. 
B)  is limited to attacks by foreign nationals. 
C)  can be addressed through risk control and insurance. 
D)  is an uninsurable risk. 
A)  is of no concern to private companies. 
B)  is limited to attacks by foreign nationals. 
C)  can be addressed through risk control and insurance. 
D)  is an uninsurable risk.

Question 5

An emerging concern for risk managers is the greater volatility that has been observed in weather patterns-higher high temperatures, lower low temperatures, record rainfall, drought, etc. Collectively, this risk is called

Accepted Answer

A)  seismic risk. 
B)  hurricane risk. 
C)  speculative risk. 
D)  climate change risk. 
A)  seismic risk. 
B)  hurricane risk. 
C)  speculative risk. 
D)  climate change risk.

Question 6

Millie is risk manager of JKL Company. She is considering an investment in a loss control project. The project will cost $40,000. Assuming a 10 percent discount rate, the present value of the future net cash flows that this project will generate is $60,000. What is the net present value (NPV) of this project?

Accepted Answer

A)  $20,000 
B)  $26,000 
C)  $60,000 
D)  $100,000 
A)  $20,000 
B)  $26,000 
C)  $60,000 
D)  $100,000

Question 7

Which of the following is a financial derivative that derives value from specific insurable losses or from an index of values?

Accepted Answer

A)  commodity futures contract 
B)  corporate bond 
C)  catastrophe bond 
D)  insurance option 
A)  commodity futures contract 
B)  corporate bond 
C)  catastrophe bond 
D)  insurance option

Question 8

Jane is risk manager of ABC Manufacturing Company. She is trying to decide whether to self-insure her company's workers compensation exposure or to purchase insurance. Jane would like to use regression analysis to predict the number of workers compensation claims that will occur next year. The number of claims will be the dependent variable in the regression. All of the following would be reasonable independent variables to use EXCEPT

Accepted Answer

A)  number of employees. 
B)  number of hours worked. 
C)  total assets. 
D)  payroll. 
A)  number of employees. 
B)  number of hours worked. 
C)  total assets. 
D)  payroll.

Question 9

ABC Company in considering a loss control investment. The project will cost $100,000. It will generate an after-tax net cash flow of $60,000 one year after investment and an after-tax net cash flow of $60,000 two years after investment. The present value of $1 received one year from today assuming a 6 percent rate is .9434. The present value of $1 received two years from today assuming a 6 percent interest rate is .8900. Assuming a discount rate of 6 percent, what is the net present value (NPV) of this project?

Accepted Answer

A)  $10,004 
B)  $13,195 
C)  $16,604 
D)  $20,000 
A)  $10,004 
B)  $13,195 
C)  $16,604 
D)  $20,000

Question 10

The property and liability insurance industry is characterized by a repetitive pattern of loose underwriting standards with low premiums followed by tight underwriting standards with high premiums. This repetitive pattern is called the

Accepted Answer

A)  underwriting by exception method. 
B)  business cycle. 
C)  underwriting cycle. 
D)  account underwriting method. 
A)  underwriting by exception method. 
B)  business cycle. 
C)  underwriting cycle. 
D)  account underwriting method.

Question 11

Which of the following statements concerning the securitization of risk is (are) true?
I.Securitization increases the capacity of the insurance industry.
II.Securitization can be used to protect against catastrophic loss.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 12

Which of the following statements about the risk of terrorism in the United States is (are) true?
I.Congress created a federal backstop for terrorism claims.
II. Coverage for losses attributable to terrorism is not marketed by private insurers in the U.S.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 13

RST Company has production facilities in Salt Lake City and Cleveland. The probability that in any given year a fire will damage the production facility in Salt Lake City is 5 percent. The probability that in any given year a fire will damage the Cleveland production facility is 4 percent. What is the probability that AT LEAST ONE of the production facilities will be damaged by fire in any given year?

Accepted Answer

A)  0.20 percent 
B)  2.00 percent 
C)  8.80 percent 
D)  9.00 percent 
A)  0.20 percent 
B)  2.00 percent 
C)  8.80 percent 
D)  9.00 percent

Question 14

Which of the following is a financial risk that may be faced by a business organization?

Accepted Answer

A)  injuries suffered by employees at the workplace 
B)  lost income after a fire loss 
C)  product liability risk 
D)  currency exchange rate risk 
A)  injuries suffered by employees at the workplace 
B)  lost income after a fire loss 
C)  product liability risk 
D)  currency exchange rate risk

Question 15

A computerized data base that permits risk managers to store and analyze risk management data is called a

Accepted Answer

A)  risk management information system. 
B)  risk management Intranet. 
C)  risk management web site. 
D)  risk map. 
A)  risk management information system. 
B)  risk management Intranet. 
C)  risk management web site. 
D)  risk map.

Question 16

A table showing losses that could occur and the corresponding chance that each loss could occur is called a(n)

Accepted Answer

A)  underwriting cycle. 
B)  capital budget. 
C)  loss distribution. 
D)  risk map. 
A)  underwriting cycle. 
B)  capital budget. 
C)  loss distribution. 
D)  risk map.

Some events cannot occur together because the occurrence of one event makes the occurrence of the second event impossible. Such events are called

Which statement is (are) true with respect to enterprise risk management programs? I.They address traditional property, liability, and personnel loss exposures. II.They do not address financial risks.

The terrorism risk in the United States

An emerging concern for risk managers is the greater volatility that has been observed in weather patterns-higher high temperatures, lower low temperatures, record rainfall, drought, etc. Collectively, this risk is called

Which of the following is a financial derivative that derives value from specific insurable losses or from an index of values?

The property and liability insurance industry is characterized by a repetitive pattern of loose underwriting standards with low premiums followed by tight underwriting standards with high premiums. This repetitive pattern is called the

Which of the following statements concerning the securitization of risk is (are) true? I.Securitization increases the capacity of the insurance industry. II.Securitization can be used to protect against catastrophic loss.

Which of the following statements about the risk of terrorism in the United States is (are) true? I.Congress created a federal backstop for terrorism claims. II. Coverage for losses attributable to terrorism is not marketed by private insurers in the U.S.

Which of the following is a financial risk that may be faced by a business organization?

A computerized data base that permits risk managers to store and analyze risk management data is called a

A table showing losses that could occur and the corresponding chance that each loss could occur is called a(n)

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Types of Insurers and Marketing Systems

Insurance Company Operations

Financial Operations of Insurers

Government Regulation of Insurance

Fundamental Legal Principles

Analysis of Insurance Contracts

Life Insurance

Life Insurance Contractual Provisions

Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform; Individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

The Liability Risk

Auto Insurance

Auto Insurance (continued)

Homeowners Insurance, Section I

Homeowners Insurance, Section II

Other Property and Liability Insurance Coverages

Commercial Property Insurance

Commercial Liability Insurance

Crime Insurance and Surety Bonds

Filters

Exam 4: Enterprise Risk Management and Related Topics

Some events cannot occur together because the occurrence of one event makes the occurrence of the second event impossible. Such events are called

Which statement is (are) true with respect to enterprise risk management programs? I.They address traditional property, liability, and personnel loss exposures. II.They do not address financial risks.

The terrorism risk in the United States

An emerging concern for risk managers is the greater volatility that has been observed in weather patterns-higher high temperatures, lower low temperatures, record rainfall, drought, etc. Collectively, this risk is called

Which of the following is a financial derivative that derives value from specific insurable losses or from an index of values?

The property and liability insurance industry is characterized by a repetitive pattern of loose underwriting standards with low premiums followed by tight underwriting standards with high premiums. This repetitive pattern is called the

Which of the following statements concerning the securitization of risk is (are) true? I.Securitization increases the capacity of the insurance industry. II.Securitization can be used to protect against catastrophic loss.

Which of the following statements about the risk of terrorism in the United States is (are) true? I.Congress created a federal backstop for terrorism claims. II. Coverage for losses attributable to terrorism is not marketed by private insurers in the U.S.

Which of the following is a financial risk that may be faced by a business organization?

A computerized data base that permits risk managers to store and analyze risk management data is called a

A table showing losses that could occur and the corresponding chance that each loss could occur is called a(n)

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Types of Insurers and Marketing Systems

Insurance Company Operations

Financial Operations of Insurers

Government Regulation of Insurance

Fundamental Legal Principles

Analysis of Insurance Contracts

Life Insurance

Life Insurance Contractual Provisions

Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform; Individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

The Liability Risk

Auto Insurance

Auto Insurance (continued)

Homeowners Insurance, Section I

Homeowners Insurance, Section II

Other Property and Liability Insurance Coverages

Commercial Property Insurance

Commercial Liability Insurance

Crime Insurance and Surety Bonds

Filters