Question 1

Selecting a particular deductible level is one way of mixing

Accepted Answer

A)   risk retention and risk transfer,
B)   risk avoidance and risk retention,
C)   risk avoidance and risk transfer,
D)   loss control and risk transfer.

Question 2

The best method for handling a particular exposure today will be the best method a year from now because relevant factors do not change.

Accepted Answer

A) True 
 B)False

Question 3

Risk transfer is the best choice for risks that have a low expected frequency and a high potential severity.

Accepted Answer

A) True 
 B)False

Question 4

The first step in selecting available risk management techniques is to

Accepted Answer

A)   implement appropriate loss control measures,
B)   select the optimal mix of risk retention and risk transfer,
C)   avoid risks if possible,
D)   determine the availability of risk management tools.

Question 5

Which statement is true?

Accepted Answer

A)   Capital budgeting and statistical analysis cannot be used to select the best mix of risk retention and transfer,
B)   Deductibles and self-insurance cannot be used together,
C)   Capital budgeting and statistical analysis can be used to select the best mix of risk retention and transfer,
D)   Risk transfer is the same thing as insurance. C

Question 6

"High" and "low" loss frequency and severity are

Accepted Answer

A)   considered the same for all firms,
B)   defined differently for different firms,
C)   identifiable by industry standards,
D)   unimportant when considering risk avoidance.

Question 7

As a general rule, how often should loss control be considered when analyzing the costs and benefits of risk retention or transfer techniques?

Accepted Answer

A)   always,
B)   most of the time,
C)   some of the time,
D)   never.

Question 8

Group discussion is commonly known to increase the amount of subjective risk.

Accepted Answer

A) True 
 B)False

Question 9

Matching :
-A firm holding an emergency fund in a low interest-bearing account when the funds could have been invested in a project offering a higher return would result in a/an _________________ to the firm.

Accepted Answer

A)   present value
B)   third-party administrator
C)   net present value
D)   opportunity cost
E)   risk management policy

Question 10

The Lippert Companies have been given a choice of deductibles for their auto fleet coverage. The probability of a loss over $500 is minimal for the company, and the premium per car without any deductible is $2,500. Which deductible and premium combination is optimal? (Each amount is on a per car basis.)

Accepted Answer

A)   deductible $200, premium $2,000,
B)   deductible $250, premium $1,700,
C)   deductible $1,000, premium $1,350,
D)   not enough information to answer.

Question 11

Enterprise risk management is limited to the management of pure risk.

Accepted Answer

A) True 
 B)False

Question 12

Insurance should be purchased for losses in excess of the firm's

Accepted Answer

A)   risk avoidance level,
B)   short-term assets,
C)   expected losses,
D)   retention level.

Question 13

A captive insurance company is owned by

Accepted Answer

A)   banks,
B)   one non-insurance company,
C)   an association of companies with similar risks,
D)   any of the these could own a captive insurer.

Question 14

If P = principal, i = interest, and N = number of years in the future, the correct formula to calculate future value is

Accepted Answer

A)   P(1 + i) N,
B)   P / (1 + i) N,
C)   (P × i) N,
D)   P(N) i. A

Question 15

In dealing with a particular risk, it is common practice among risk managers to use a combination of risk management techniques instead of only one.

Accepted Answer

A) True 
 B)False

Question 16

Deductibles help lower the cost of insurance as well as increase its availability.

Accepted Answer

A) True 
 B)False  True

Question 17

The present value of $600,000 in 3 years at 8 percent is $476,299.34.

Accepted Answer

A) True 
 B)False

Question 18

If $100,000 is invested at an annual interest rate of 7 percent for 4 years, it will grow to a value of $131,079.60.

Accepted Answer

A) True 
 B)False

Question 19

The results of financial calculations are the only considerations needed when analyzing loss control decisions.

Accepted Answer

A) True 
 B)False

Question 20

Matching :
-If the _________________ of a project is positive, the project probably should be undertaken.

Accepted Answer

A)   present value
B)   third-party administrator
C)   net present value
D)   opportunity cost
E)   risk management policy

Exam 8: Selecting and Implementing Risk Management Techniques

Selecting a particular deductible level is one way of mixing

Correct Answer
verified

The best method for handling a particular exposure today will be the best method a year from now because relevant factors do not change.

Correct Answer
verified

Risk transfer is the best choice for risks that have a low expected frequency and a high potential severity.

Correct Answer
verified

The first step in selecting available risk management techniques is to

Correct Answer
verified

Which statement is true?

Correct Answer
verified
C

"High" and "low" loss frequency and severity are

Correct Answer
verified

As a general rule, how often should loss control be considered when analyzing the costs and benefits of risk retention or transfer techniques?

Correct Answer
verified

Group discussion is commonly known to increase the amount of subjective risk.

Correct Answer
verified

Matching : -A firm holding an emergency fund in a low interest-bearing account when the funds could have been invested in a project offering a higher return would result in a/an _________________ to the firm.

Correct Answer
verified

Correct Answer
verified

Enterprise risk management is limited to the management of pure risk.

Correct Answer
verified

Insurance should be purchased for losses in excess of the firm's

Correct Answer
verified

A captive insurance company is owned by

Correct Answer
verified

If P = principal, i = interest, and N = number of years in the future, the correct formula to calculate future value is

Correct Answer
verified
A

In dealing with a particular risk, it is common practice among risk managers to use a combination of risk management techniques instead of only one.

Correct Answer
verified

Deductibles help lower the cost of insurance as well as increase its availability.

Correct Answer
verified
True

The present value of $600,000 in 3 years at 8 percent is $476,299.34.

Correct Answer
verified

If $100,000 is invested at an annual interest rate of 7 percent for 4 years, it will grow to a value of $131,079.60.

Correct Answer
verified

The results of financial calculations are the only considerations needed when analyzing loss control decisions.

Correct Answer
verified

Matching : -If the _________________ of a project is positive, the project probably should be undertaken.

Correct Answer
verified

Exam 8: Selecting and Implementing Risk Management Techniques

Selecting a particular deductible level is one way of mixing

Correct AnswerverifiedShow Answer

The best method for handling a particular exposure today will be the best method a year from now because relevant factors do not change.

Correct AnswerverifiedShow Answer

Risk transfer is the best choice for risks that have a low expected frequency and a high potential severity.

Correct AnswerverifiedShow Answer

The first step in selecting available risk management techniques is to

Correct AnswerverifiedShow Answer

Which statement is true?

Correct AnswerverifiedC

"High" and "low" loss frequency and severity are

Correct AnswerverifiedShow Answer

As a general rule, how often should loss control be considered when analyzing the costs and benefits of risk retention or transfer techniques?

Correct AnswerverifiedShow Answer

Group discussion is commonly known to increase the amount of subjective risk.

Correct AnswerverifiedShow Answer

Matching : -A firm holding an emergency fund in a low interest-bearing account when the funds could have been invested in a project offering a higher return would result in a/an _________________ to the firm.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Enterprise risk management is limited to the management of pure risk.

Correct AnswerverifiedShow Answer

Insurance should be purchased for losses in excess of the firm's

Correct AnswerverifiedShow Answer

A captive insurance company is owned by

Correct AnswerverifiedShow Answer

If P = principal, i = interest, and N = number of years in the future, the correct formula to calculate future value is

Correct AnswerverifiedA

In dealing with a particular risk, it is common practice among risk managers to use a combination of risk management techniques instead of only one.

Correct AnswerverifiedShow Answer

Deductibles help lower the cost of insurance as well as increase its availability.

Correct AnswerverifiedTrue

The present value of $600,000 in 3 years at 8 percent is $476,299.34.

Correct AnswerverifiedShow Answer

If $100,000 is invested at an annual interest rate of 7 percent for 4 years, it will grow to a value of $131,079.60.

Correct AnswerverifiedShow Answer

The results of financial calculations are the only considerations needed when analyzing loss control decisions.

Correct AnswerverifiedShow Answer

Matching : -If the _________________ of a project is positive, the project probably should be undertaken.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified