Question 1

Examples of physical hazards include

Accepted Answer

A)   a building fire
B)   a building fire, oily rags, and a dishonest employee
C)   oily rags and a gas leak
D)   a dishonest employee.

Question 2

Match the descriptions with their terms:
-_________________ are conditions that introduce or increase the probability of a loss stemming from the existence of a given peril.

Accepted Answer

A)   Dynamic risks
B)   Financial risk
C)   Hazards
D)   Integrated risk management
E)   moral hazardF)  morale hazardG)  objective riskH)  PerilI)  Pure riskJ)  RiskK)  Risk managementL)  Speculative riskM)  Static riskN)  Subjective risk

Question 3

Match the descriptions with their terms:
-_________________ is uncertainty regarding loss.

Accepted Answer

A)   Dynamic risks
B)   Financial risk
C)   Hazards
D)   Integrated risk management
E)   moral hazardF)  morale hazardG)  objective riskH)  PerilI)  Pure riskJ)  RiskK)  Risk managementL)  Speculative riskM)  Static riskN)  Subjective risk

Question 4

Which of the following are steps in the four-step risk management process described in the text?

Accepted Answer

A)   select risk management techniques and purchase insurance on selected risks
B)   select risk management techniques and identify risks
C)   select risk management techniques, purchase insurance on selected risks, and identify risks
D)   identify risks and analyze severity of expected losses.

Question 5

As the chance of loss increases, the variation of actual from expected losses tends to increase if the number of exposures remains the same.

Accepted Answer

A) True 
 B)False

Question 6

If two companies have the same number of exposure units and experience the same average number of losses, then the degree of risk for each company tends to be equal.

Accepted Answer

A) True 
 B)False

Question 7

Which one of the following is not a risk management technique that a risk manager will typically choose for managing pure risks?

Accepted Answer

A)   purchase insurance to cover a risk exposure
B)   do nothing about a risk exposure
C)   sell a high risk investment to purchase one of lower risk
D)   establish a reserve fund.

Question 8

The degree of subjective risk is easily measured.

Accepted Answer

A) True 
 B)False

Question 9

The formula used to calculate the degree of objective risk is

Accepted Answer

A)   probable variation of actual from expected losses divided by the expected loss
B)   expected loss multiplied by the quantity 1 minus variance divided by expected loss
C)   range of reasonable loss expectation divided by actual loss experience
D)   expected losses minus probable losses divided by the range of actual losses experienced.

Question 10

Match the descriptions with their terms:
-A/An _________________ is associated with intentional actions designed to either cause a loss or increase the severity of a loss.

Accepted Answer

A)   Dynamic risks
B)   Financial risk
C)   Hazards
D)   Integrated risk management
E)   moral hazardF)  morale hazardG)  objective riskH)  PerilI)  Pure riskJ)  RiskK)  Risk managementL)  Speculative riskM)  Static riskN)  Subjective risk

Question 11

Enterprise risk management is concerned solely with the management of exposures to pure risks.

Accepted Answer

A) True 
 B)False

Question 12

A peril that involves pure risk is

Accepted Answer

A)   a building fire that burns one of several company owned office buildings
B)   the purchase of a stock with a high degree of price fluctuation
C)   a competitor's attempt to take market share from a business
D)   betting that the Dallas Cowboys will win the Super Bowl at the beginning of the football season.

Question 13

Risk can be categorized as

Accepted Answer

A)   objective-subjective and perils-hazards
B)   objective-subjective, physical-moral-morale, and pure-speculative
C)   objective-subjective and pure-speculative
D)   objective-subjective, physical-moral-morale, pure-speculative, and perils-hazards.

Question 14

Doing nothing about a risk exposure is a viable risk management technique.

Accepted Answer

A) True 
 B)False

Question 15

Risk is defined as

Accepted Answer

A)   uncertainty concerning loss
B)   the probable variation of actual from expected experience
C)   the long-run chance of occurrence or relative frequency of loss
D)   a specific contingency that may cause loss.

Question 16

Match the descriptions with their terms:
-Probable variation of actual from expected losses divided by the expected loss is the _________________.

Accepted Answer

A)   Dynamic risks
B)   Financial risk
C)   Hazards
D)   Integrated risk management
E)   moral hazardF)  morale hazardG)  objective riskH)  PerilI)  Pure riskJ)  RiskK)  Risk managementL)  Speculative riskM)  Static riskN)  Subjective risk

Question 17

The long-run chance of occurrence or relative frequency of a loss is defined to be the degree of risk.

Accepted Answer

A) True 
 B)False

Question 18

A peril that relates to a dynamic risk is

Accepted Answer

A)   an earthquake
B)   a riot
C)   death
D)   an increase in the consumption of cholesterol by society.

Question 19

If a loss is certain to occur, objective risk is zero.

Accepted Answer

A) True 
 B)False

Question 20

Match the descriptions with their terms:
-Credit risk, commodities, and interest rate risks are all examples of _________________.

Accepted Answer

A)   Dynamic risks
B)   Financial risk
C)   Hazards
D)   Integrated risk management
E)   moral hazardF)  morale hazardG)  objective riskH)  PerilI)  Pure riskJ)  RiskK)  Risk managementL)  Speculative riskM)  Static riskN)  Subjective risk

Exam 1: Introduction to Risk

Risk can be categorized as

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Examples of physical hazards include

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -_________________ are conditions that introduce or increase the probability of a loss stemming from the existence of a given peril.

Correct AnswerverifiedShow Answer

The formula used to calculate the degree of objective risk is

Correct AnswerverifiedShow Answer

The degree of subjective risk is easily measured.

Correct AnswerverifiedShow Answer

The long-run chance of occurrence or relative frequency of a loss is defined to be the degree of risk.

Correct AnswerverifiedShow Answer

If two companies have the same number of exposure units and experience the same average number of losses, then the degree of risk for each company tends to be equal.

Correct AnswerverifiedShow Answer

A peril that relates to a dynamic risk is

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -A/An _________________ is associated with intentional actions designed to either cause a loss or increase the severity of a loss.

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -Probable variation of actual from expected losses divided by the expected loss is the _________________.

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Which of the following are steps in the four-step risk management process described in the text?

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Which one of the following is not a risk management technique that a risk manager will typically choose for managing pure risks?

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Match the descriptions with their terms: -_________________ is uncertainty regarding loss.

Correct AnswerverifiedShow Answer

Risk is defined as

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If a loss is certain to occur, objective risk is zero.

Correct AnswerverifiedShow Answer

Doing nothing about a risk exposure is a viable risk management technique.

Correct AnswerverifiedShow Answer

A peril that involves pure risk is

Correct AnswerverifiedShow Answer

As the chance of loss increases, the variation of actual from expected losses tends to increase if the number of exposures remains the same.

Correct AnswerverifiedShow Answer

Enterprise risk management is concerned solely with the management of exposures to pure risks.

Correct AnswerverifiedShow Answer

Match the descriptions with their terms: -Credit risk, commodities, and interest rate risks are all examples of _________________.

Correct AnswerverifiedShow Answer

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