Question 1

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. 
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 2

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. 
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 3

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 hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk 
A)  Dynamic risks 
B)  Financial risk 
C)  Hazards 
D)  Integrated risk management 
E)  moral hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk

Question 4

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 hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk 
A)  Dynamic risks 
B)  Financial risk 
C)  Hazards 
D)  Integrated risk management 
E)  moral hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk

Question 5

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

Question 6

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. 
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 7

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. 
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 8

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 hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk 
A)  Dynamic risks 
B)  Financial risk 
C)  Hazards 
D)  Integrated risk management 
E)  moral hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk

Question 9

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 hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk 
A)  Dynamic risks 
B)  Financial risk 
C)  Hazards 
D)  Integrated risk management 
E)  moral hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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. 
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 12

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 13

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 hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk 
A)  Dynamic risks 
B)  Financial risk 
C)  Hazards 
D)  Integrated risk management 
E)  moral hazard
F) morale hazard
G) objective risk
H) Peril
I) Pure risk
J) Risk
K) Risk management
L) Speculative risk
M) Static risk
N) Subjective risk

Question 14

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. 
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 15

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 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

The degree of subjective risk is easily measured.

Accepted Answer

A) True 
 B)False

Question 19

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. 
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 20

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

Accepted Answer

A) True 
 B)False

Exam 1: Introduction to Risk

A peril that involves pure risk is

The formula used to calculate the degree of objective risk is

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.

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

A peril that relates to a dynamic risk is

Risk can be categorized as

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

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.

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

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

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

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

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

Examples of physical hazards include

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

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.

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

The degree of subjective risk is easily measured.

Risk is defined as

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

Risk Identification and Evaluation

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

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