Question 1

The definitions of "high" and "low" loss frequency and severity may differ by company.

Accepted Answer

A) True 
 B)False

Question 2

All of the following represent alternative risk transfer tools except:

Accepted Answer

A)   captives,
B)   finite risk insurance,
C)   traditional insurance,
D)   multiple-trigger insurance policies.E) A) and D)
F) B) and C)

Question 3

All of the following conditions are suggestive of the types of situations where self-insurance by a business is both possible and feasible except:

Accepted Answer

A)   objects at risk are not subject to simultaneous destruction,
B)   the firm must administer the plan with existing, in-house personnel,
C)   the firm has accurate records or has access to satisfactory statistics regarding the probability of loss,
D)   the firm is in satisfactory financial condition.E) C) and D)
F) All of the above

Question 4

Subjective and objective risks can be reduced with research and training.

Accepted Answer

A) True 
 B)False

Question 5

If it could be conclusively proven to management that a self-insurance program could be started that would reduce costs in the long run, management would always choose to self-insure.

Accepted Answer

A) True 
 B)False

Question 6

Loss control equipment with a positive net present value should be purchased.

Accepted Answer

A) True 
 B)False

Question 7

If a company sets aside a sum of money in a reserve fund to pay any possible loss that could occur due to a fire in the main offices of the company, it is involved in self-insurance.

Accepted Answer

A) True 
 B)False

Question 8

A tool that generally is not used to manage subjective risk is

Accepted Answer

A)   obtaining more information,
B)   group discussion,
C)   systematically identifying and analyzing appropriate methods for dealing with risks,
D)   severity reduction.E) All of the above
F) B) and C)

Question 9

A captive insurer is a company that insures against the risks of kidnap and ransom.

Accepted Answer

A) True 
 B)False

Question 10

Matching :
-In nominal terms, the _________________ of a positive stream of income is typically less than the future value.

Accepted Answer

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

Question 11

Matching :
-A firm with a self-insured major medical plan might find the services of a/an _________________ helpful.

Accepted Answer

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

Question 12

Matching :
-Firms should establish a/an _________________ so that their procedures for dealing with actual and potential losses are consistent over time.

Accepted Answer

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

Question 13

An IRS auditor visits the main offices of Sharon's Secret (SS) . SS has put $150,000 into a 9 percent interest-bearing account a year ago to start a shoplifting training program for its employees. The auditor finds out that the SS account has earned interest in the amount of

Accepted Answer

A)   $109,000,
B)   $163,500,
C)   $13,500,
D)   $9,000.E) A) and D)
F) All of the above

Question 14

A loss that will occur with certainty is still considered a risk to the firm.

Accepted Answer

A) True 
 B)False

Question 15

A deductible should only be accepted if

Accepted Answer

A)   the firm can afford the associated losses,
B)   the firm will experience sufficient savings,
C)   the firm is already in a self-insurance program,
D)   both a. and b. are correct.E) A) and D)
F) B) and C)

Question 16

Risk retention is optimal for losses that have

Accepted Answer

A)   high expected severity,
B)   low expected frequency but high severity,
C)   low expected severity,
D)   high frequency and high severity.E) A) and D)
F) B) and C)

Question 17

Risk transfer is most likely ideal for a risk with

Accepted Answer

A)   a high degree of separation and a low potential severity,
B)   a high expected frequency and a low potential severity,
C)   a high expected frequency and a high potential severity,
D)   a low expected frequency and a high potential severity.E) All of the above
F) A) and C)

Exam 8: Selecting and Implementing Risk Management Techniques

Subjective and objective risks can be reduced with research and training.

Correct Answer
verified

Loss control equipment with a positive net present value should be purchased.

Correct Answer
verified

All of the following represent alternative risk transfer tools except:

Correct Answer
verified

A deductible should only be accepted if

Correct Answer
verified

Matching : -In nominal terms, the _________________ of a positive stream of income is typically less than the future value.

Correct Answer
verified

Matching : -A firm with a self-insured major medical plan might find the services of a/an _________________ helpful.

Correct Answer
verified

If it could be conclusively proven to management that a self-insurance program could be started that would reduce costs in the long run, management would always choose to self-insure.

Correct Answer
verified

An IRS auditor visits the main offices of Sharon's Secret (SS) . SS has put $150,000 into a 9 percent interest-bearing account a year ago to start a shoplifting training program for its employees. The auditor finds out that the SS account has earned interest in the amount of

Correct Answer
verified

If a company sets aside a sum of money in a reserve fund to pay any possible loss that could occur due to a fire in the main offices of the company, it is involved in self-insurance.

Correct Answer
verified

A captive insurer is a company that insures against the risks of kidnap and ransom.

Correct Answer
verified

The definitions of "high" and "low" loss frequency and severity may differ by company.

Correct Answer
verified

Risk retention is optimal for losses that have

Correct Answer
verified

A tool that generally is not used to manage subjective risk is

Correct Answer
verified

All of the following conditions are suggestive of the types of situations where self-insurance by a business is both possible and feasible except:

Correct Answer
verified

Risk transfer is most likely ideal for a risk with

Correct Answer
verified

A loss that will occur with certainty is still considered a risk to the firm.

Correct Answer
verified

Matching : -Firms should establish a/an _________________ so that their procedures for dealing with actual and potential losses are consistent over time.

Correct Answer
verified

Exam 8: Selecting and Implementing Risk Management Techniques

Subjective and objective risks can be reduced with research and training.

Correct AnswerverifiedShow Answer

Loss control equipment with a positive net present value should be purchased.

Correct AnswerverifiedShow Answer

All of the following represent alternative risk transfer tools except:

Correct AnswerverifiedShow Answer

A deductible should only be accepted if

Correct AnswerverifiedShow Answer

Matching : -In nominal terms, the _________________ of a positive stream of income is typically less than the future value.

Correct AnswerverifiedShow Answer

Matching : -A firm with a self-insured major medical plan might find the services of a/an _________________ helpful.

Correct AnswerverifiedShow Answer

If it could be conclusively proven to management that a self-insurance program could be started that would reduce costs in the long run, management would always choose to self-insure.

Correct AnswerverifiedShow Answer

An IRS auditor visits the main offices of Sharon's Secret (SS) . SS has put $150,000 into a 9 percent interest-bearing account a year ago to start a shoplifting training program for its employees. The auditor finds out that the SS account has earned interest in the amount of

Correct AnswerverifiedShow Answer

If a company sets aside a sum of money in a reserve fund to pay any possible loss that could occur due to a fire in the main offices of the company, it is involved in self-insurance.

Correct AnswerverifiedShow Answer

A captive insurer is a company that insures against the risks of kidnap and ransom.

Correct AnswerverifiedShow Answer

The definitions of "high" and "low" loss frequency and severity may differ by company.

Correct AnswerverifiedShow Answer

Risk retention is optimal for losses that have

Correct AnswerverifiedShow Answer

A tool that generally is not used to manage subjective risk is

Correct AnswerverifiedShow Answer

All of the following conditions are suggestive of the types of situations where self-insurance by a business is both possible and feasible except:

Correct AnswerverifiedShow Answer

Risk transfer is most likely ideal for a risk with

Correct AnswerverifiedShow Answer

A loss that will occur with certainty is still considered a risk to the firm.

Correct AnswerverifiedShow Answer

Matching : -Firms should establish a/an _________________ so that their procedures for dealing with actual and potential losses are consistent over time.

Correct AnswerverifiedShow Answer

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