Which of the following statements is (are) true with regard to probability analysis? I. If two events are independent, the occurrence of one event does not affect the occurrence of the second event. II. If two events are dependent, the occurrence of one event affects the occurrence of the second event. A) I only B) […]
LMN Insurance Company is concerned about its exposure to hurricane losses for property risks it insured on the Gulf Coast. LMN borrowed money from investors by issuing financial securities. LMN promised to repay the money it borrowed with interest if hurricane losses do not exceed a specified level. If hurricane losses exceed the specified level, […]
Some events cannot occur together because the occurrence of one event makes the occurrence of the second event impossible. Such events are called A) dependent events. B) independent events. C) conditional events. D) mutually exclusive events. ANSWER Answer: D
Reasons to adopt an enterprise risk management plan include all of the following EXCEPT A) to increase earnings volatility. B) to treat risks facing the business in a more holistic way. C) to increase net income. D) to gain an advantage over competitors. ANSWER Answer: A
Jane is risk manager of ABC Manufacturing Company. She is trying to decide whether to self-insure her company’s workers compensation exposure or to purchase insurance. Jane would like to use regression analysis to predict the number of workers compensation claims that will occur next year. The number of claims will be the dependent variable in […]
Which of the following statements concerning the securitization of risk is (are) true? I. Securitization increases the capacity of the insurance industry. II. Securitization can be used to protect against catastrophic loss. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
Calculating the present value of a future amount is called A) interpolating. B) discounting. C) compounding. D) regression analysis. ANSWER Answer: B
Which of the following statements is (are) true with respect to the time value of money? I. Money received today is worth more than the same amount of money received in the future. II. The present value of a future amount is greater than the future amount A) I only B) II only C) both […]
A method of characterizing the relationship between two or more variables and then using the characterization to make a prediction is called A) loss analysis. B) time value of money analysis. C) regression analysis. D) capital budgeting analysis. ANSWER Answer: C
A table showing losses that could occur and the corresponding chance that each loss could occur is called a(n) A) underwriting cycle. B) capital budget. C) loss distribution. D) risk map. ANSWER Answer: C
