Question

1. Which type of risk is related to damages arising from a natural disaster?

a.Financial risk

b.Strategic risk

c.Hazard risk

d.Occupational risk

e.Operational risk

2. The first step in risk management is to:

a.purchase liability insurance.

b.create an emergency cash fund.

c.establish prevention programs.

d.eliminate all international risks.

e.identify and eliminate all strategic risks.

3. Which type of insurance protects against the risks related to a defective manufactured product?

a.Business interruption insurance

b.Employer's liability insurance

c.Property insurance

d.Vehicle insurance

e.Commercial liability insurance

4.Which type of insurance helps replace a company's income during the time period the company is closed due to a major hurricane?

• Business interruption insurance

• Employer's liability insurance

• Property insurance

• Vehicle insurance

• Commercial liability insurance

5. Which one of the following will be least helpful in offsetting a company's costs from a loss event?

• Self-insurance pool of cash

• Insurance policy exclusion

• Abidance with policy notification provisions

• Currently paid insurance premiums

• Low insurance deductible

6. Farmer Jones raises several hundred acres of corn and would suffer a significant loss should the price of corn decline at harvest time. Which one of the following would he be doing if he purchased financial securities to offset this price risk?

• Insuring

• Deriving

• Hedging

• Forwarding

• Manipulating

7. The value of a stock option is dependent upon the value of the underlying stock. Thus, a stock option is a:

• forward agreement.

• derivative security.

• mezzanine asset.

• contingent security.

• junior security.

8. Farmer Mac owns a large orange grove in Florida. The value of his business is directly related to the price of oranges. Which one of the following is a graphical representation of this price-value relationship?

• Exchange line

• Net present value profile

• Risk profile

• Market line

• Return grid

Answer 1

Ans:

1. Option C

Reason : Any type of natural disaster is related to hazard risk.

Financial risk is business related and strategic risk is long term planning related and occupational risk is any type of injury or illness happen within workplace. Operational risk is related to system failure in the internal management of the organization.

2. Option e

Reason : risk management 5 stages are - identifying the risk , analyzing the risk , evalute the risk , treat the risk and monitor and review the risk.

3. Option b

Reason : if any type of accident happens due to defective manufactured product employer is liable for insurance for employee.

4. Option a

Reason: in case a company has to close for natural disaster then company can get the help of business interruption insurance because here normal business work is interrupted by natural disaster.