Risk Management Mcqs With Answers

The Insurance is a ___a___________
Uncertainty
Peril
Hazard
2. Losses arising due to a risk exposure retained or assured is known as ______c________
Risk Reduction
Risk Financing
Risk Retention
Risk Sharing
3. An alternative approach to the check list is _______a_______
Threat Analysis
Event Analysis
Operability Study
Minimum Level Analysis
4. The measures aimed at avoiding,eliminating or reducing the chances of loss production is covered by
______a________
Risk Control
Risk Retention
Risk Avoidance
Risk Financing
5. Insurance is best suited to risk with _____b_________.
high frequency and low loss severity.
low frequency and high loss severity.
minimum frequency and no loss severity.
high frequency and high loss severity.
6. The risk manager maybe able to identify the new ventures involved in ______a________.
Pure risk.
Group Risk.
Speculative risk.
Particular risk.
7. An instrument by which a pure risk is transferred by a party other than insurer is
Insurance
Retention.
Non Insurance Transfer.C
Reinsurance.
8. The Person whose risk is insured is called _____A_________.

Insured
merchandiser
marketer
Agents
9. That which is designed to improve the information on which decisions are take to reduce risk is
_____B_________.
Transfer
Research.
Costs.
Deflation.
10. Uncertain events are broadly classified as __A____________.
Predictable and Unpredictable.
Possible and Impossible
Natural and Artificial.
Rare and Continuous
11. The possibility that actual results may differ from predicted results is known as ______________.
Risk.
Uncertainty.
Peril.
Hazards.
Correct answer: (A)
Risk.
12. The success of whole process of risk management depends on its ______________.
Identification
Risk analysis
Assessment of risk
Evaluation of risk
Correct answer: (A)
Identification
13. That which covers the cost of self insurance, loading in insurance premiums and enforcing hedging
arrangements is ______________.
Cost of Loss Financing
Cost of Control of loss
Cost of Residual Uncertainty
Cost of Internal Risk Reduction
Correct answer: (A)
14. If RMIS has poor system documentation then the remedy is to provide ______________.
solid vendor account team
internal access to system expert
assessment in proper manner
clear and comprehensive specifications
Correct answer: (C)
15. The risk management can be done by ______________.
Insurance
Hedging
Derivatives
All of the above
Correct answer: (D)
All of the above
16. The installation of heat or smoke activated sprinkler systems that are designed to minimize fire
damage in the outbreak of a fire is an example of ______________.
Loss prevention
Loss reduction
Hedging
Insurance
Correct answer: (B)
Loss reduction
17. ______________ is the extra payment done for administrative and capital cost.
Premium
Premium loading
Interest
Contingency
Correct answer: (B)
Premium loading
18. Transfer of rights and remedies of the insured to the insurer after indemnity has been effected is
called ______________.
Insurable interest
Subrogation
Proximate clause
Money back policy
19. The principle of indemnity is applicable to ______________ only.
Life Insurance
Personal accident insurance

Proximate Cause
Property insurance
Correct answer: (D)
Property insurance
20. ______________ is those terms, which are implied in every contract of marine insurance unless they
are expressly excluded.
Guarantee
Express Warranties
Implied Warranties
Waiver Clause
Correct answer: (C)
Implied Warranties
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21. RiskManagement is a subject which falls under ______________.
production
HR
marketing
finance
Correct answer: (D)
finance
22. A person employed to do any act for another or to represent another in dealing with a third person
refers to ______________.
Principal
Employee
Agent
Development Officer
Correct answer: (C)
Agent
23. Insurance contract is sort of contract which is approved by ______________.
The Indian Contract Act
Indian Factory Act
Indian Companies Act
The Indian finance Act
Correct answer: (A)
The Indian Contract Act
24. The term Assurance refers to ______________.
Life Insurance Business
Marine Insurance Business

Fire Insurance Business
Motor Vehicle Business
Correct answer: (A)
Life Insurance Business
25. The first step in risk management process is ______________.
Riskavoidance
RiskIdentification
Insurance
RiskEvaluation
Correct answer: (B)
RiskIdentification
26. Which of the following is the last step in the risk management process?
Insurance
Review
Risk evaluation
Loss prevention
Correct answer: (A)
Insurance
27. Risk retention means ______________
Saving money to pay for the losses
Accepting and agreeing to finance the loss oneself
Not taking up any activity which is risky
Insuring the risk
Correct answer: (B)
Accepting and agreeing to finance the loss oneself
28. The risk which has three outcomes with possibility of gain is ______________
Pure
Speculative
Static
Dynamic
Correct answer: (B)
Speculative
29. The company doing the insurance business is called ______________.
Mutual funds
Non-banking firm
An insurance company
Banking company
Correct answer: (C)
An insurance company
30. The medias used for direct marketing are
Direct Mail
Telephone Contacts
Kiosks
All the above
Correct answer: (D)
All the above
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31. Pure Risk was grouped ______________.
Property Risk
.Personal Risk
Liability risk
All the above
Correct answer: (D)
All the above

32. A bancassurance started in India was ______________.
2002
2003
2001
2000
Correct answer: (A)
2002
33. ______________ refers to distribution of insurance products through
Bank
Company
Co-operatives
Sole trader
Correct answer: (A)
Bank
34. Risk Management process includes ______________
Risk Analysis
Risk Control
Risk Analysis and Control
Risk Reduction
Correct answer: (C)
Risk Analysis and Control
35. The foundation for risk Management is provided by ______________
Risk Control
Risk Analysis
Risk Identification
Risk Retention
Correct answer: (C)
Risk Identification
36. Insurance is a risk management technique involving
Risk Retention
Risk Avoidance
Loss Control
Risk Transfer
Correct answer: (D)
Risk Transfer
37. Restoring a policy holder to his pre-loss financial position means ______________.
Contribution
Indemnity
Goodwill
LiquidAsset
Correct answer: (B)
Indemnity
38. ______________ are the risk management methods
Insurance
Hedging
Derivatives
All the above
Correct answer: (D)
All the above
39. The strategy pursued by the business firms to tackle risk by spreading into a number of business is
______________.
Diversification
Centralisation
Risk Retention
Financing
Correct answer: (A)
Diversification
40. A firm may seek to minimize marketing risks by undertaking ______________.
Credit Facilities
Training Salesmen
Market Research
Branch Expansion
Correct answer: (C)
Market
41. The principles of indemnity does not apply to ______________.
Burglary insurance
Fire insurance
Marine insurance
Life and Personal Accident insurance
Correct answer: (D)
Life and Personal Accident insurance

42. The risk that arises because of magnitude of cash flow due to change in output and input prices is
known as ______________.
Credit risk
Particular risk
Business risk
Price risk
Correct answer: (D)
Price risk
43. Cost of risk has the following components ______________.
Cost of Expected Losses and Cost of Control of Loss
Cost of Expected Losses and Cost of Loss Financing
Cost of Control of Loss and Cost of Loss Financing
Cost of Expected Loss, Cost of Control of Loss Cost of Financing, Cost of Residual Uncertainity
Correct answer: (D)
Cost of Expected Loss, Cost of Control of Loss Cost of Financing, Cost of Residual Uncertainity
44. If RMIS has the problem of incompatibility of software then the remedy is to provide
______________.

financial check
Correct answer: (C)
45. To avoid RMIS being obsolete provide ______________.
standard software configuration
Correct answer: (C)
46. The process of reducing the level of risky activities firstly affect the frequency of losses is the strategy
of ______________.
Risk avoidance
Retention
Hedging
Other contractual risk transfer
Correct answer: (A)
Risk avoidance
47. Which of the statements is correct? a. Insurance is a transfer of risk mechanism. b. Insurance gives
physical protection to assets.
Statement A
Statement B
Both the statements
Neither of the statements
Correct answer: (A)
Statement A
48. A complete proposal form contains information about ______________.
Moral hazard
Physical hazard
Personal history of proposer and identify of the property insurance
All of the above
Correct answer: (B)
Physical hazard
49. This policy covers all risks to the ship and its cargo while the ship is at a particular port
______________.
Voyage policy
Floating policy
Time policy
Portrisk Policy
Correct answer: (D)
Portrisk Policy
50. _______________ policy matures on the assured death or on his attainment of a particular age
whichever occurs earlier.
Endowment
Money back
Joint life
Single premium
Correct answer: (A)
Endowment
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51. Assignment of life policy means ______________.
Transferring rights to the assignee
Policy holder is entitled to the paid up value
Paid up value is always higher than surrender value
Value payable on assured death or maturity
Correct answer: (A)

Transferring rights to the assignee
52. Risk insured against death is a contract of ______________.
Assurance
Agreement
Indemnity
Caveat Emptor
Correct answer: (A)
Assurance
53. The risk which arises because of change in major economic, social, cultural and political factors are
______________.
ParticularRisk
Fundamental Risk
Speculative Risk
Dynamic Risk
Correct answer: (B)
Fundamental Risk
54. When an event is stated to be possible, it has a probability between ______________.
Zero and One

Zero or One
None of these
Both of the above
Correct answer: (A)
Zero and One
55. If the premium loading is zero then purchasing insurance ______________
does not change the persons expected wealth
changes the persons expected wealth
increases the variability of wealth
no change in expected wealth
Correct answer: (A)
does not change the persons expected wealth
56. Insurance cover ______________.
Protect assets
Prevents loss
Reduces the impact of loss
Insurances immortality
Correct answer: (C)

Reduces the impact of loss
57. Taylor Tobacco Company is concerned that the company may be held liable in a court of law and
forced to pay a large damage award. The characteristics of the judicial system that increase the
frequency and severity of losses is known as ______________.
moral hazard
particular risk
speculative risk
legal hazard
Correct answer: (D)
legal hazard
58. Bancassurance means ______________.
Selling financial services
general liability insurance
Selling banking products
Selling Insurance Products
Correct answer: (D)
Selling Insurance Products
59. Credit Risk is high in case of ______________.

Companies
Partnership
Financial Institutions
None of these
Correct answer: (C)
Financial Institutions
60. A bancassurance concept originated in ______________.
England
Finland
France
Spain
Correct answer: (C)
France
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61. The cause of loss or a contingency that may cause a loss due to nature is known as ______________
Hazard
Peril
Risk
Uncertinity
Correct answer: (B)
Peril
62. The risk which directly affects the individual's capability to earn income is called ______________
Personal Risk
Risk Financing
Risk Retention
Risk Sharing
Correct answer: (A)
Personal Risk
63. Type of Risk Management are ______________
Risk Retention,Risk Analysis,Risk Financing
Risk Analysis,Risk Control,Risk Financing
Risk Control,Risk Retention,Risk Avoidance
Correct answer: (D)
64. The Risks which have some financial impact from the part of risk management are ______________
Dynamic and Speculative Risk
Pure and Speculative Risk
Pure and Static Risk
Personal and Static Risk
Correct answer: (B)
Pure and Speculative Risk
65. The measures aimed at avoiding, eliminating or reducing the chances of loss producing events is
covered by ______________.
Risk Avoidance
Risk Control
Risk Evaluation
Risk Financing
Correct answer: (B)
Risk Control
66. Identification of sources of hazard will have to be done by the ______________.
Production manager
Risk manager
Finance manager
General manager
Correct answer: (A)
Production manager
67. The expected value of losses varies directly with the ______________.
time period
financial period
fixed period
fluctuating period
Correct answer: (A)
time period
68. The number of elements of uncertainty in most type of events are ______________.
Three
Two
One
Five
Correct answer: (B)
Two
69. Personnel risk in a firm depends upon the ability integrity and enthusiasm of ______________.
Creditors
Debtors
Government
Management and Employees
Correct answer: (D)
70. Except life assurance the maximum term of other insurance is ______________.
twelve months
twenty four months
six months
thirty six months
Correct answer: (A)
twelve months
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71. The situation of doubt in mind about the happening or not happening of anything in future because
of lack of knowledge ______________.
Risk
Uncertainty
Loss
Hazards
Correct answer: (B)
Uncertainty
72. Transfer of risk to other party is done through ______________.
Reduction
Control
Retention
Insurance
Correct answer: (D)
Insurance
73. The cost of uncertainty that remains once the firm has selected and implemented loss control loss
financing and internal risk reduction is called ______________.
Cost of Expected Losses
Cost of Price Change
Cost of Loss Control
Correct answer: (A)
74. If RMIS shows lack of service then you need to provide ______________.
reference checks including on site
financial check
Correct answer: (C)
financial check
75. The methods of risk management are ______________.
Loss Control
Loss Financing
Internal Risk Reduction
All of the above
Correct answer: (D)
All of the above
76. Which of the following helps in risk improvement?
Fire brigade
Salvage corps
Engineers who survey property to be insured
Ambulance
Correct answer: (C)
77. The insurance plays a role in the economic development of the country in the following ways
______________.
Releases capital for new investments
The job potential increases
Money collected is invested in infrastructure
All of the above
78. Malhotra Commitee was appointed in
1993
1994
1999
2000
79. Fire insurance can be taken in respect of ______________
movable property only
immovable property only
both movable and immovable properties
persons only
Correct answer: (C)

both movable and immovable properties
80. ______________ is an agreement where by the insurer agrees to indemnity the insured against
marine losses.
Life insurance
Fire insurance
Marine insurance
Public liability insurance
Correct answer: (C)
Marine insurance
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81. When the subject matter insured is destroyed wholly refers to ______________.
Partial loss
Actual total loss
Constructive total loss
Maximum loss
Correct answer: (B)
Actual total loss
82. Marine perils is also called as ______________.
Perils of the Sea

Moral Hazards
MarineClause
Marinelaws
Correct answer: (A)
Perils of the Sea
83. ______________ is a document which provides evidence of the contract of insurance
Proposal form
Policy form
Cover note
Certificate of insurance
Correct answer: (B)
Policy form
84. Insurance is a risk management technique involving ______________.
Risktransfer
Riskretention
Riskavoidance
Losscontrol
Correct answer: (A)

Risktransfer
85. Which of the following helps in Risk improvement?
Fire brigade
Salvage crops
Ambulance
Correct answer: (C)
86. The business of insurance is related to protection of ______________.
Savings
Status
Profits
Economic value of assets
Correct answer: (D)
Economic value of assets
87. Loss control involves a combination of ______________.
effort and time

fund and time
funds effort or time
effort and fund
Correct answer: (C)
funds effort or time
88. An insurance company estimates its objective risk for 10,000 exposures at 10 Per cent. Assuming the
probability of loss remains the same, what would happen to the objective risk if the number of
exposures were to increase to 1 million?
It would decrease to 1 percent
It would remain the same
It would increase to 20 percent
Correct answer: (A)
89. All of the following are social costs associated with insurance Except ______________.
increased cost of capital
the expense of doing business
fraudulent claims
inflated claims
Correct answer: (A)
increased cost of capital
90. Risk of premature death is a ______________.
Financial Risk
Dynamic Risk
Subjective Risk
Personal Risk
Correct answer: (D)
Personal Risk
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91. All dynamic risks are ______________.
predictable
Unpredictable
Possibility
Judgement
Correct answer: (A)
predictable
92. The agreement refers to ______________.

Offer
Acceptance
Free Consent
All the above
Correct answer: (D)
All the above
93. The System that brings together the operative causes of perils is ______________
Risk Evaluation
Safety Audit
Risk Financing
Fault Tree Analysis
Correct answer: (B)
Safety Audit
94. The main aim of risk Financing is to ______________
Control the risk
Avoid the Risk
Spread the Risk
Financing the Risk

Correct answer: (C)
Spread the Risk
95. The claim amount received from insurer are treated as ______________.
Nontaxable Income
TaxableGain
Gains
Reserve
Correct answer: (B)
TaxableGain
96. Franchise and aggregate excess of loss are two variations of ______________.
Coinsurance
Excess of Loss
First Loss
Proximate Cause
Correct answer: (B)
Excess of Loss
97. The risk management which refers to the identification of pure risk faced by an individual or family is
______________.
Corporate
Individual
Joint Stock Companies
Partnership Firm
Correct answer: (B)
Individual
98. The 5th chapter of Factories Act deals with ______________.
Safety
Welfare
The Inspecting Staff
Marketing Manager
Correct answer: (B)
Welfare
99. Dynamic risks are closely related to ______________.
Speculative risks
Static Risks
Personal Risks
Particular
Correct answer: (A)
Speculative risks
100. In order to minimize the impact of uncertain events risk management is concerned with planning
arranging and controlling of ______________.
Men and Material
Resources and Market
Activities and Resources
Men and Activities
Correct answer: (B)
Resources and Market
Page 10 of 29
101. The number of prime elements of risk analysis is ______________.
one
Two
Three
Four
Correct answer: (B)
Two
102. The identification analysis and economic control of those risk which can threaten the assets or
earning capacity of an enterprise is known as ______________.
Business Management
Risk Management
Financial Management
Strategic Management
Correct answer: (B)
Risk Management
103. The uncertainty reduced through diversification and investing in information is known as
______________.
Cost of Loss Control
Correct answer: (D)
104. If RMIS shows inflexibility of system then provide ______________.

Correct answer: (C)
105. Risk management information is not useful in one of the following ______________.
Reporting
Hedging
Claim adjustment process reviews
Derivatives
Correct answer: (B)
Hedging
106. Which of the following is the last step in risk management process ______________.
Insurance
Review
Risk evaluation
Loss prevention
Correct answer: (A)
Insurance
107. The Principle of Indemnity does not apply to ______________.

Burglary Insurance
Fire Insurance
Marine Insurance
Life and personal accident insurance
Correct answer: (D)
Life and personal accident insurance
108. Except life assurance the maximum term of other insurance is ______________.
12 months
24 months
6 months
36 months
Correct answer: (A)
12 months
109. ______________ are those terms, which are written on the policy.
Express Warranties
Implied Warranties
Memorandum Warranties
Valuation Clause
Correct answer: (A)
Express Warranties
110. ______________ policy issued on the basis of the number of persons assured.
Annuity policy
Multiple life policy
Single life policy
Level of premium policy
Correct answer: (B)
Multiple life policy
Page 11 of 29
111. ______________ means a willful and intentional act on part of the self-destroyed.
Death
Suicide
Murder
Accident
Correct answer: (B)
Suicide
112. Which of the following contract is not legally enforceable?

Contract of insurance
Wagering contract
Contract of sale of goods
Contract of business
Correct answer: (B)
Wagering contract
113. Which of the statments are true?
Loss prevention and loss reduction mean different things
Risk may be transfered by contract
Both the statements
Neither is correct
Correct answer: (C)
Both the statements
114. If the most impossible event is assigned a value of zero, then most inevitable event is assigned a
value ______________.
one
Between Zero and one
Between Zero to 10
Between 10 to 10
Correct answer: (A)
one
115. Contractual risk transfers come under ______________
Cost of loss financing
Cost of internal risk reduction
Cost of control of loss
Cost of residual uncertainty
Correct answer: (B)
Cost of internal risk reduction
116. The risk management methods are ______________
Insurance
Hedging
Derivatives
All of the above
Correct answer: (D)
All of the above
117. The insurance plays a role in the economic development of the country in following ways:
Releases capital for new investment
The job potential increases
Money collected is invested in infrastructure
All of the above
Correct answer: (D)
All of the above
118. Which of the following types of risks best meets the requirements for being insurable by private
insurers?
market risks
property risks
financial risks
political risks
Correct answer: (B)
property risks
119. Risk and Premium are fixed on the basis of ______________.
strategic Methods
Survey Methods
Scientific Methods
Probability Methods
Correct answer: (C)
Scientific Methods
120. Medical Expenses Risk Comes under?
Business Risk
Price Risk
Credit Risk
Personal Risk
Correct answer: (D)
Personal Risk
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121. The premium implies ______________
Consideration by Service
Consideration by cash
Consideration by Kind
Speculative Cash
Correct answer: (B)
Consideration by cash
122. A risk manager should report to ______________

Managing Director
Company Secretary
Supervisor
General Manager
Correct answer: (C)
Supervisor
123. The Risk Evaluation breaks into two parts.They are ______________
The cause of loss and its affects
The probability of loss occurring and its severity
The loss due to any reasons
The risk and return
Correct answer: (B)
The probability of loss occurring and its severity
124. The condition for insurable interest is ______________.
Loss should be sufficiently in monetary terms
Loss potential should be sufficiently large
Interest on the subject matter of the insurance
Loss cannot be managed

Correct answer: (C)
Interest on the subject matter of the insurance
125. Having money available when it is needed is defined as the art of ______________.
Financial management
Risk management
Contingency fund
Surplus
Correct answer: (A)
Financial management
126. Risk management is concerned with ______________.
Planning
Arranging and controlling of activities
Managing of funds
Planning, arranging and controlling of activities
Correct answer: (D)
Planning, arranging and controlling of activities
127. In alike the risk of creditors and shareholders by High Capital Gearing ratio companies is
______________.
Increased
Decreased
Government
Correct answer: (A)
Increased
128. That which are not independent parts of the whole risk management process are ______________.
Risk Control and Risk Financing
Risk Retention and Risk Analysis
Risk Retention and Risk Financing
Risk Analysis and Risk Control
Correct answer: (A)
Risk Control and Risk Financing
129. That which helps to determine the accuracy and relevance of risk at each stage to which an
organization is exposed is known as ______________.
Principle of Identification
Principle of Risk Analysis
Principle of Assessment Risk
Principle of Corrective Decision

Correct answer: (B)
Principle of Risk Analysis
130. The cost of increased precautions and limits on risky activity to reduce the frequency and severity
of accidents and losses is covered by ______________.
Cost of Expected Losses
Cost of Control of Loss
Correct answer: (C)
Cost of Control of Loss
Page 13
131. If impurity of data is the problem that RMIS is showing then provide ______________.
reference checks, including on-site
Correct answer: (C)
reference checks, including on-site
132. The routine medical check up during a year is an example of ______________.

Loss prevention
Loss reduction
Risk avoidance
Retention
Correct answer: (A)
Loss prevention
133. Which of the statements is correct? a. The simplest way to deal with a risk to avoid it. b. This
technique is always possible and practical.
Statement A
Statement B
Both the statements
Correct answer: (D)
134. Insurance is based on the principle of ______________.
co-operation
Democracy
Equality
welfare
Correct answer: (A)
co-operation
135. The person who agrees to compensate the loss arising from the risk is called the ______________.
Insurer
Assurer
Underwriter
All the above
Correct answer: (D)
All the above
136. Notice of abandonment is necessary in the case of ______________.
Actual loss
Partial total loss
Minimum loss
Correct answer: (B)
137. ______________ policy is which covers the risk during all situations.
Floating
Wagering
Valued
Mixed
Correct answer: (D)
Mixed
138. ________________ provides evidence of insurance to the policies and Registration Authorities
under Motor Vehicle Act.
Cover note
Endorsements
Policy form
Correct answer: (C)
139. Which of the following steps in the risk management process helps in determining sum insured
under policies?
Risk identification
Risk Retention
Risk Evaluation
Risk Transfer
Correct answer: (C)
Risk Evaluation
140. Insurance business is based on ______________.
Parkinsons law
Newtons law
The theory of probability and law of large numbers
Boyles law
Correct answer: (C)
The theory of probability and law of large numbers
Page 14 of 29
141. A person who is risk averse ______________
accepts the risk no matter what
do not accept the risk as a loss hurts them more than gain benefits them
tries to control the loss
avoids insurance
Correct answer: (B)
do not accept the risk as a loss hurts them more than gain benefits them
142. The concept of insurance is ______________.
to share the losses by many
to make money out of death.
to earn interest
to earn a status
Correct answer: (A)
to share the losses by many
143. Insurance penetration in India in 2001 was
1.93
2.32
2.71
2.25
144. Risk means ______________
economy
possibility of loss
.reduction of anxiety
. meeting externally imposed obligations
Correct answer: (B)

possibility of loss
145. A person who dislikes risk is known as ______________
Risk lover
Risk Averse
Risk Neutral
Insurer
Correct answer: (B)
Risk Averse
146. The two Aspects of risk Managers are ______________
Record keeping and reporting of the activities
Maintaining accounts and reporting
Carry out analysis and control
Marketing
Correct answer: (A)
Record keeping and reporting of the activities
147. The type of reinsurance that forms individual large losses of risk is called as ______________.
Proportional quota share

Excess of loss per event basis
Stop loss
Facultative
Correct answer: (A)
Proportional quota share
148. Organisations are mainly concerned with managing
Pure Risk
Speculative Risk
Personal Risk
None of the above
Correct answer: (A)
Pure Risk
149. That which take advantage to the law of large numbers is ______________
Risk retention
Combination
Hedging
Inflation
Correct answer: (B)

Combination
150. Fire insurance can be taken in respect of ______________.
movable properties only
immovable properties
movable and immovable
persons only
Correct answer: (C)
movable and immovable
Page 15 of 29
Insurance and Risk Management
151. 'Accrued interest' is:
The interest on a bond, paid when it matures
The interest accumulated since the last coupon date, paid by the purchaser to the seller
The interest on a bond, paid every year
The interest paid by the issuer of the bond
The interest accumulated since the last coupon date, paid by the seller of the bond to the purchaser
Correct answer: (B)
The interest accumulated since the last coupon date, paid by the purchaser to the seller
152. 'Reinsurance' refers to the practice by insurance companies of:
Issuing new policies
Terminating existing policies
Renewing existing policies
Buying insurance from another firm
Insuring the same risk twice
Correct answer: (D)
Buying insurance from another firm
153. A 'pay as you go' pension system is unsuitable for a private firm because:
There is a disincentive effect for current workers
The benefits are insufficient
Employees are not willing to pay
The dependency ratio is too high
The firm may cease trading
Correct answer: (E)
The firm may cease trading
154. A 'Pay-As-You-Go' pension is one in which:
Pensioners are obliged to buy an annuity

Workers build up a fund of savings during their working life
Pension benefits are linked to a price index
Pension benefits are paid by the employer
Pension benefits are paid from the contributions of those in work
Correct answer: (E)
Pension benefits are paid from the contributions of those in work
155. A 'positive term premium' means:
Long term loans are riskier than short term loans
Short-term rates are likely to fall
Long-term interest rates are higher than short-term rates
Nominal interest rates are higher than real rates
Borrowers prefer to borrow for long periods
Correct answer: (C)
Long-term interest rates are higher than short-term rates
156. A bank with cash of 5, deposits at the central bank of 3, investments of 20, advances of 22 and
customer deposits of 50 has a reserve ratio of:
0.5
0.23
0.36
0.16
0.1
Correct answer: (D)
0.16
157. A bank's risk:asset ratio compares its capital with its:
Risk-adjusted assets
Reserves
Investments
Loans
Risk-adjusted liabilities
Correct answer: (A)
Risk-adjusted assets
158. A belief that expectations were exogenous could lead one to the view that judgements about the
future were likely to be based on:
The best available information
Past experience
The best available model
The forecasts of the person with the best forecasting record
Both the 1st and 3rd answer
Both the 1st and 2nd answer

Correct answer: (B)
Past experience
159. A bond issued in July 1997 will mature in July 2013 for £100. In July 2003, its original maturity and
residual maturity would be (respectively):
16 and 10
10 and 6
6 and 10
16 and 6
6 and 16
Correct answer: (A)
16 and 10
160. A central bank which sets the short-term rate of interest must:
Meet the resulting demand for reserves
Seek government approval
Change the reserve ratios
Sell government bonds
Buy treasury bills
Correct answer: (A)
Meet the resulting demand for reserves
Page 16 of 29
161. A central bank wishes to indicate that its official interest rate will be 4.5% from tomorrow. What
repurchase price should it set for 28 day repo deals in government bonds valued at £1m?
£1,045,000
£1,003,452
£1,003,000
£1,002,000
£955,000
162. A company has just declared a dividend of 8p per share on shares current valued at £1.50.
Dividends have been growing steadily at 5 per cent p.a. The dividend yield on these shares is is:
5.6%
5.3%
13%
10.6%
10.3%
163. A corporate bond paying an annual coupon of £9 matures for £100 on 30 September 2011. What is
its price on 1 October 2008 if interest rates are 8.5 per cent?
£102.56
£61.29
£101.28
£101.97
£102.26
164. A downward sloping yield curve most likely indicates:
The central bank has restricted short-term borrowing
Low prices for long-dated bonds
Investors have become capital risk averse
Markets expect short-term rates to fall
A strong demand for short-dated assets
Correct answer: (B)
Low prices for long-dated bonds
165. A firm announces that its next dividend payment will be 12p per share. The shares are currently
priced at £1. The firm's earnings have recently grown at a rate of 9 per cent per year and this is expected
to continue. The total annual return on these shares is:
21%
15%
9%
3%
12%
166. A government sale of treasury bills to the central bank is the nearest thing in a modern economy to:
Financing a government deficit
Reducing the national debt
Increasing the national debt

Printing money
Reducing liquidity
Correct answer: (A)
Financing a government deficit
167. A mutual fund manager shifts part of his portfolio from long-dated bonds to money market
instruments even though yields are unchanged. Most likely he is expecting:
A fall in the rate of inflation
A reduction in the riskiness of bonds
A rise in the exchange rate
A fall in short-term interest rates
A rise in long-term interest rates
Correct answer: (E)
A rise in long-term interest rates
168. A retirement annuity is particularly attractive to someone who has:
High longevity risk
A large family
Financial myopia
Low longevity risk
A severe illness
Correct answer: (A)
High longevity risk
169. A share with a β-coefficient of 0.9 has a rate of return of 16%, when the whole market return is
17%. What return should it produce if the risk free rate rises from 7% to 8%, ceteris paribus.
16%
17%
23.3%
16.1%
22.3%
170. A sudden demand by depositors for notes and coin is an example of:
Payment risk
Asset risk
Capital risk
Currency risk
Liquidity risk
Correct answer: (E)
Liquidity risk
Page 17 of 29

Risk Management Mcqs With Answers

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Risk Management Mcqs With Answers

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The Insurance is a ___a___________

2. Losses arising due to a risk exposure retained or assured is known as ______c________

3. An alternative approach to the check list is _______a_______

Minimum Level Analysis

5. Insurance is best suited to risk with _____b_________.

high frequency and low loss severity.

low frequency and high loss severity.

minimum frequency and no loss severity.

high frequency and high loss severity.

7. An instrument by which a pure risk is transferred by a party other than insurer is

Non Insurance Transfer.C

8. The Person whose risk is insured is called _____A_________.

10. Uncertain events are broadly classified as __A____________.

Predictable and Unpredictable.

Possible and Impossible

Natural and Artificial.

Rare and Continuous

Correct answer: (A)

Cost of Loss Financing

Cost of Control of loss

Cost of Residual Uncertainty

Cost of Internal Risk Reduction

Correct answer: (A)

Cost of Loss Financing

internal access to system expert

assessment in proper manner

clear and comprehensive specifications

Correct answer: (C)

assessment in proper manner

15. The risk management can be done by ______________.

All of the above

Correct answer: (D)

All of the above

Correct answer: (B)

Money back policy

19. The principle of indemnity is applicable to ______________ only.

Personal accident insurance

Correct answer: (D)

Correct answer: (C)

21. RiskManagement is a subject which falls under ______________.

Correct answer: (D)

Correct answer: (C)

23. Insurance contract is sort of contract which is approved by ______________.

The Indian Contract Act

Indian Factory Act

Indian Companies Act

The Indian finance Act

Correct answer: (A)

The Indian Contract Act

24. The term Assurance refers to ______________.

Life Insurance Business

Marine Insurance Business

Motor Vehicle Business

Correct answer: (A)

Life Insurance Business

25. The first step in risk management process is ______________.

Correct answer: (B)

Correct answer: (A)

Saving money to pay for the losses

Accepting and agreeing to finance the loss oneself

Not taking up any activity which is risky

Insuring the risk

The Insurance is a _a_________

2. Losses arising due to a risk exposure retained or assured is known as c__

3. An alternative approach to the check list is _a_

5. Insurance is best suited to risk with _b_____.

8. The Person whose risk is insured is called _A_____.

10. Uncertain events are broadly classified as A__________.