Question 1

What is the best number of exposure units for Cofield Drugs in estimating the actual loss frequency of their 100-vehicle automobile fleet?

Accepted Answer

A)  100 
B)  92 
C)  1,000 
D)  infinite. 
A)  100 
B)  92 
C)  1,000 
D)  infinite.

Question 2

Sharon, the risk manager of Tracie's Ceramics, wants to know more about the employee injuries at her firm. One loss was a wrist sprain that has a probability of 0.06. Another was a back sprain with a probability of 0.07. Yet another was overinhalation of a hazardous substance with a probability of 0.02. The other two were slips and falls with a probability of 0.13. If the amounts of the losses were $700, $3,000, $2,500, $950, and $950, respectively, what is the expected value of an employee injury loss for that year?

Accepted Answer

A)  $500 
B)  $749 
C)  $549 
D)  $1,249. 
A)  $500 
B)  $749 
C)  $549 
D)  $1,249.

Question 3

Risk managers can discover previously unidentified loss exposures from on-site inspections.

Accepted Answer

A) True 
 B)False

Question 4

In the past, Tracie's Ceramics has averaged 5 injuries among her 30 employees per year. What's the probability of an employee injury this year?

Accepted Answer

A)  0.1667 
B)  16.67 
C)  6.67 
D)  none of the above. 
A)  0.1667 
B)  16.67 
C)  6.67 
D)  none of the above.

Question 5

Consider the following numbers that range from 10 to 40 (10, 14, 23, 23, 30, 36, 40) and their probabilities (.20, .10, .05, .20). Name the median, mean, mode, and the expected value respectively.

Accepted Answer

A)  23, 23, 23, and 25 
B)  23, 24, 23, and 25.3 
C)  23, 24.3, 24, and 26 
D)  23, 25.3, 23, and 30. 
A)  23, 23, 23, and 25 
B)  23, 24, 23, and 25.3 
C)  23, 24.3, 24, and 26 
D)  23, 25.3, 23, and 30.

Question 6

Sharlene, the risk manager of Chief Rocking Records, has been asked to assist the corporate strategy team in planning a new compact disk factory. The team wants Sharlene's input on how many CDs they should produce. Sharlene knows the losses are distributed normally, and the probability of loss is 8%. She will use 2 standard deviations for the calculations. What is the number of exposure units needed for the actual loss to be within 10% of the expected?

Accepted Answer

A)  4,300 
B)  4,600 
C)  4,900 
D)  Infinite. 
A)  4,300 
B)  4,600 
C)  4,900 
D)  Infinite.

Question 7

Which combination of methods would be best to identify as many loss exposures as possible for an organization?

Accepted Answer

A)  flowcharts and contract analysis 
B)  on-site inspections, statistical analysis, and contract analysis 
C)  financial statement analysis, statistical analysis, and on-site inspections 
D)  all the methods combined. 
A)  flowcharts and contract analysis 
B)  on-site inspections, statistical analysis, and contract analysis 
C)  financial statement analysis, statistical analysis, and on-site inspections 
D)  all the methods combined.

Question 8

Match the descriptions with their terms:
-The _________________ of a collection of observations is defined as the observed value with the largest relative frequency.

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 9

Which method would be more useful to discover a dollar estimate of losses?

Accepted Answer

A)  flowcharts 
B)  financial statement analysis 
C)  contract analysis 
D)  statistical analysis. 
A)  flowcharts 
B)  financial statement analysis 
C)  contract analysis 
D)  statistical analysis.

Question 10

One method to identify loss exposures is the Poisson analysis.

Accepted Answer

A) True 
 B)False

Question 11

Match the descriptions with their terms:
-A/An _________________ enumerates various specific sources of loss.

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 12

If all risk identification methods are properly used, all loss exposures can be identified.

Accepted Answer

A) True 
 B)False

Question 13

Match the descriptions with their terms:
-A/An _________________ maps out the physical flow of goods and can be analyzed with respect to the types of risks that may affect the goods at each point.

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 14

Which approach is not used by risk managers to identify and evaluate risks?

Accepted Answer

A)  contract analysis 
B)  risk mapping 
C)  financial discrimination 
D)  on-site inspections. 
A)  contract analysis 
B)  risk mapping 
C)  financial discrimination 
D)  on-site inspections.

Question 15

Match the descriptions with their terms:
-By calculating the _________________, the firm can determine the extent to which the firm is exposed to a particular loss.

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 16

Which theoretical distribution would be most appropriate to use for a small number of exposure units (under 50) if there is no probability of a partial loss?

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 17

Match the descriptions with their terms:
-_________________ analysis constructs probability distributions of risks and combinations of risks to estimate the risk of loss at different probability levels.

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 18

Liability losses outside the United States are not as likely to happen as those inside the country

Accepted Answer

A) True 
 B)False

Question 19

Match the descriptions with their terms:
-_________________ involves analyzing each item on a firm's income statement and balance sheet regarding risks that may be present.

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:
-_________________ assesses how much capital would be required to keep the probability of bankruptcy below a specified level.

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

What is the best number of exposure units for Cofield Drugs in estimating the actual loss frequency of their 100-vehicle automobile fleet?

Risk managers can discover previously unidentified loss exposures from on-site inspections.

In the past, Tracie's Ceramics has averaged 5 injuries among her 30 employees per year. What's the probability of an employee injury this year?

Consider the following numbers that range from 10 to 40 (10, 14, 23, 23, 30, 36, 40) and their probabilities (.20, .10, .05, .20). Name the median, mean, mode, and the expected value respectively.

Which combination of methods would be best to identify as many loss exposures as possible for an organization?

Match the descriptions with their terms: -The _________________ of a collection of observations is defined as the observed value with the largest relative frequency.

Which method would be more useful to discover a dollar estimate of losses?

One method to identify loss exposures is the Poisson analysis.

Match the descriptions with their terms: -A/An _________________ enumerates various specific sources of loss.

If all risk identification methods are properly used, all loss exposures can be identified.

Match the descriptions with their terms: -A/An _________________ maps out the physical flow of goods and can be analyzed with respect to the types of risks that may affect the goods at each point.

Which approach is not used by risk managers to identify and evaluate risks?

Match the descriptions with their terms: -By calculating the _________________, the firm can determine the extent to which the firm is exposed to a particular loss.

Which theoretical distribution would be most appropriate to use for a small number of exposure units (under 50) if there is no probability of a partial loss?

Match the descriptions with their terms: -_________________ analysis constructs probability distributions of risks and combinations of risks to estimate the risk of loss at different probability levels.

Liability losses outside the United States are not as likely to happen as those inside the country

Match the descriptions with their terms: -_________________ involves analyzing each item on a firm's income statement and balance sheet regarding risks that may be present.

Match the descriptions with their terms: -_________________ assesses how much capital would be required to keep the probability of bankruptcy below a specified level.

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