FSU - Nyce RMI 2302- Exam 1 Review + Modules 1-5 Chapter Quizzes
What effect do political incentives have on the discount rate used to make governmental decisions?
A) Increase the discount rate
B) Decrease the discount rate
C) The discount rate is unaffected
D) There is no way of know...
FSU - Nyce RMI 2302- Exam 1 Review +
Modules 1-5 Chapter Quizzes
What effect do political incentives have on the discount rate used to make governmental decisions?
A) Increase the discount rate
B) Decrease the discount rate
C) The discount rate is unaffected
D) There is no way of knowing the effect on the discount rate - Answer- A) Increase the discount rate
True or False: Normative Questions ask what "should" be. - Answer- True.
Callie is a supervisor at a firm, and wants to spend $1.2 million on a new building. The owners are furious,
they don't believe they need a new building. Which term best describes the situation?
A) Principal-Agent problem
B) Abusive Management
C) Superiority Complex
D) Adverse Selection
E) Moral Hazard - Answer- A) Principal-Agent problem
Which of the following is the best measure of risk:
A) Frequency
B) Severity
C) Expected value
D) Standard Deviation
E) All of the above - Answer- D) Standard Deviation
The possibility of an organization being sued because of a product injuring a customer is an example of
which of the following sources of risk:
A) Personal
B) Property
C) Liability
D) Financial - Answer- C) Liability
The likelihood of an earthquake is an example of which category of risk:
A) core
B) speculative
C) dynamic
D) static
E) none of the above - Answer- D) static
True or False: A regret table represents the amount of profit earned by adopting the optimal course of
action. - Answer- False.
Which is an advantage of a corporation?
A) Unlimited liability
,B) Life dependent on owners
C) Ability to issue stock
D) Both B and C - Answer- C) Ability to issue stock.
When measuring risk, impact is synonymous with:
A) frequency
B) likelihood
C) severity
D) Expected value
E) Standard deviation - Answer- C) severity
The immediate cause of a loss is:
A) Exposure
B) Peril
C) Hazard
D) Adverse Selection - Answer- B) Peril
Which of the following categories of risk represent the risks that are NOT inherent in an organization's
operations:
A) secondary
B) static
C) fundamental
D) core - Answer- A) secondary
Possible illness and premature death are examples of which of the following sources of risk:
A) Personal
B) Property
C) Liability
D) Financial - Answer- A) Personal
Cole fails to be careful with his cell phone because he purchased the insurance coverage on it. Cole's
behavior is an example of:
A) Physical hazard
B) Moral hazard
C) Adverse Selection
D) Genetic Predisposition - Answer- B) Moral hazard
Changes to the law, such as the legalization of drinking and driving, are examples of:
A) Physical hazard
B) Moral hazard
C) Societal hazard
D) Liability hazard - Answer- C) Societal hazard
Which of the following is NOT a step in the risk management process:
A) Determine objectives
B) Identify risks
C) Evaluate risks
D) Implement the decision
, E) All of the above are steps in the risk management process - Answer- E) All of the above are steps in
the risk management process
Common pitfalls in decision making include:
I. Ignoring Implicit Costs
II. Failing to Ignore Sunk Costs
III. Miscalculating the reservation price
A) I only
B) II only
C) III only
D) I and II
E) I, II, and III - Answer- D) I and II
John Stuart Mill was a child prodigy and protégé of ______?
A) James Mill
B) Bentham
C) Ed Diener
D) None of the above - Answer- A) James Mill or
B) Bentham
Which of the following is a rule of risk management
A) Don't risk more than you can afford to lose
B) Consider marginal benefits
C) Maximize reward whenever possible
D) Minimize risk whenever possible
E) All of the above are rules of risk management - Answer- A) Don't risk more than you can afford to
lose
Which of the following represents the "worst case scenario":
A) Maximum possible loss
B) Mean
C) Standard Deviation
D) Probable maximum loss
E) Law of Large Losses - Answer- A) Maximum possible loss
Investments in Information is a method of:
A) Risk (loss) control
B) Risk (loss) financing
C) Internal risk reduction
D) Diversification
E) None of the above - Answer- C) Internal risk reduction
In layman's terms, what does it mean when we say "the utility is increasing at a decreasing rate?"
A) When I have more wealth, each additional dollar means less to me
B) When I have less wealth, each additional dollar means less to me
C) I am indifferent between less wealth and more wealth
D) None of the above - Answer- A) When I have more wealth, each additional dollar means less to me
True or False: According to the reading "Innovation Risk: How to Make Smarter Decisions", innovation
changes the trade-off between risk and reward. - Answer- True.
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