Question 1

Match the descriptions with their terms:
-Among other things, a _________________ analyzes past losses and forecasts future losses with the use of computers.

Accepted Answer

A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk 
A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk L

Question 2

Match the descriptions with their terms:
-The _________________ is another term that describes the mean of a group of values.

Accepted Answer

A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk 
A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk C

Question 3

Dawson Products had 20 losses in 1999, 21 in 2000, 43 in 2001, 38 in 2002, and 29 in 2003. What is the standard deviation of losses?

Accepted Answer

A)  20.37 
B)  333.56 
C)  414.8 
D)  151 
A)  20.37 
B)  333.56 
C)  414.8 
D)  151 A

Question 4

A financial statement analysis would include a review of a long range strategic plan.

Accepted Answer

A) True 
 B)False

Question 5

Loss exposure checklists cannot be tailored to specific industries.

Accepted Answer

A) True 
 B)False

Question 6

Which theoretical distribution would be most appropriate to use for a large number of exposure units (over 50) and the probability of loss is very small?

Accepted Answer

A)  normal distribution 
B)  binomial distribution 
C)  Poisson distribution 
D)  fourier distribution. 
A)  normal distribution 
B)  binomial distribution 
C)  Poisson distribution 
D)  fourier distribution.

Question 7

The Cookie Company (CC) has 1,200 employees and the chance of an injury to employees is 0.05. Suitmaker Lauren Alexander (LA) has 750 employees and the chance of an injury to employees is 0.08. The possible variation of losses for both are 34 and 40, respectively. What is the objective risk of both companies, and which is more risky?

Accepted Answer

A)  46.6% for CC, 56.7% for LA; LA is more risky 
B)  56.6% for CC, 66.7% for LA; LA is more risky 
C)  56.6% for CC, 46.7% for LA; CC is more risky 
D)  46.6% for CC, 66.7% for LA; CC is more risky 
A)  46.6% for CC, 56.7% for LA; LA is more risky 
B)  56.6% for CC, 66.7% for LA; LA is more risky 
C)  56.6% for CC, 46.7% for LA; CC is more risky 
D)  46.6% for CC, 66.7% for LA; CC is more risky

Question 8

The Goode Company has a plant in Newark, New Jersey, and a plant in upstate New York. The company has had many prior damage losses due to riots in the Newark plant in the past, but no similar losses in the New York plant. The possibility of the riot losses in the New York plant are considered remote. There have been reports of community tensions in Newark recently. What is the maximum probable loss due to riots to the plants?

Accepted Answer

A)  There is no maximum probable loss because nothing has happened yet 
B)  The maximum probable loss is complete damage to both plants 
C)  The maximum probable loss is minor damage to the plant in Newark 
D)  The maximum probable loss is complete destruction of the plant in Newark. 
A)  There is no maximum probable loss because nothing has happened yet 
B)  The maximum probable loss is complete damage to both plants 
C)  The maximum probable loss is minor damage to the plant in Newark 
D)  The maximum probable loss is complete destruction of the plant in Newark.

Question 9

Risk management information systems can analyze claim payments, accident causes, and safety programs. (The risk manager does these things, not the RMIS.)

Accepted Answer

A) True 
 B)False

Question 10

Match the descriptions with their terms:
-The _________________, which is the square root of the variance, is a measure of variability.

Accepted Answer

A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk 
A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk

Question 11

The main difference between the Poisson distribution and the normal distribution is that one involves continuous variables while the other involves discrete variables.

Accepted Answer

A) True 
 B)False

Question 12

Match the descriptions with their terms:
-The _________________ of a group of losses represents the average of all losses.

Accepted Answer

A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk 
A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk

Question 13

A loss exposure and a pure risk are the same thing.

Accepted Answer

A) True 
 B)False

Question 14

Risk managers should leave contract analysis for potential risks to the company's attorney.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following uses is not a usual function of a RMIS?

Accepted Answer

A)  claims management 
B)  report generation 
C)  catastrophe prediction 
D)  adjuster performance monitoring. 
A)  claims management 
B)  report generation 
C)  catastrophe prediction 
D)  adjuster performance monitoring.

Question 16

Outside suppliers can be added to a company's flowcharts.

Accepted Answer

A) True 
 B)False

Question 17

As the number of exposure units increases the loss exposure becomes less risky, all else the same.

Accepted Answer

A) True 
 B)False

Question 18

Risk mapping considers both risk frequency and risk severity.

Accepted Answer

A) True 
 B)False

Question 19

Match the descriptions with their terms:
-Under the concept of _________________, one's liability may be imputed to another by contract.

Accepted Answer

A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk 
A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk

Question 20

Match the descriptions with their terms:
-The _________________ states that the greater the number of exposure units insured, the greater the accuracy in the prediction of future losses by the insurer.

Accepted Answer

A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk 
A)  Adjusted return on capital 
B)  contractual liability 
C)  expected value 
D)  financial statement analysis 
E)  flowchart
F) law of large numbers
G) loss exposure checklist
H) maximum possible loss
I) mean
J) median
K) mode
L) risk management information system
M) standard deviation
N) Value at risk

Exam 2: Risk Identification and Evaluation

Match the descriptions with their terms: -Among other things, a _________________ analyzes past losses and forecasts future losses with the use of computers.

Match the descriptions with their terms: -The _________________ is another term that describes the mean of a group of values.

Dawson Products had 20 losses in 1999, 21 in 2000, 43 in 2001, 38 in 2002, and 29 in 2003. What is the standard deviation of losses?

A financial statement analysis would include a review of a long range strategic plan.

Loss exposure checklists cannot be tailored to specific industries.

Which theoretical distribution would be most appropriate to use for a large number of exposure units (over 50) and the probability of loss is very small?

Risk management information systems can analyze claim payments, accident causes, and safety programs. (The risk manager does these things, not the RMIS.)

Match the descriptions with their terms: -The _________________, which is the square root of the variance, is a measure of variability.

The main difference between the Poisson distribution and the normal distribution is that one involves continuous variables while the other involves discrete variables.

Match the descriptions with their terms: -The _________________ of a group of losses represents the average of all losses.

A loss exposure and a pure risk are the same thing.

Risk managers should leave contract analysis for potential risks to the company's attorney.

Which of the following uses is not a usual function of a RMIS?

Outside suppliers can be added to a company's flowcharts.

As the number of exposure units increases the loss exposure becomes less risky, all else the same.

Risk mapping considers both risk frequency and risk severity.

Match the descriptions with their terms: -Under the concept of _________________, one's liability may be imputed to another by contract.

Match the descriptions with their terms: -The _________________ states that the greater the number of exposure units insured, the greater the accuracy in the prediction of future losses by the insurer.

Introduction to Risk

Property and Liability Loss Exposures

Life, Health, and Loss of Income Exposures

Risk Management Techniques: Noninsurance Methods

Insurance As a Risk Management Technique: Principles

Insurance As a Risk Management Technique: Policy Provisions

Selecting and Implementing Risk Management Techniques

Risk Management and Commercial Propertypart I

Risk Management and Commercial Propertypart II

Risk Management and Commercial Liability Risk

Workers Compensation and Alternative Risk Financing

Risk Management for Auto Ownerspart I

Risk Management for Auto Ownerspart II

Risk Management for Homeowners

Loss of Life

Loss of Health

Retirement Planning and Annuities

Employee Benefits: Life and Health Benefits

Employee Benefits: Retirement Plans

Financial and Estate Planning

Risk Management and the Insurance Industry

Functions and Organization of Insurers

Government Regulation of Risk Management and Insurance

Filters