A strong risk management system will eradicate risk.

True

False

Clear selection

Question 2

Question 21 Point

If a financial institution considers a loan applicant risky, what action are they likely to undertake when making the loan?

Charge a higher interest rate.

Charge a lower interest rate.

Get additional liability insurance.

Simply make the loan since all loans are the same.

Question 3

Question 31 Point

As risk increases in business, what is the anticipated return?

An increase in risk merits a decrease in returns.

An increase in risk merits an increase of the return.

An increase in risk results in higher demand.

None of the above.

Question 4

Question 41 Point

What is a risk management method investors use to optimize asset allocation?

Simplification

Diversification

Outsourcing

Insourcing

Question 5

Question 51 Point

Employees tend to use which method to allocate their retirement assets?

Conservative investment strategies

Moderate investment strategies

Aggressive investment strategies

All of the above

Question 6

Question 61 Point

What investment strategies is a person most likely to use if the person plans to retire within a year?

Conservative investment strategies

Moderate investment strategies

Aggressive investment strategies

None of the above

Question 7

Question 71 Point

What investment strategies is a person most likely to use if they are young and starting an investment portfolio?

Conservative investment strategies

Moderate investment strategies

Aggressive investment strategies

All of the above

Question 8

Question 81 Point

How can a risk manager benefit by performing a cost benefit analysis?

To determine the cost of a failure

To determine the rewards

To determine if the return exceeds the downside of the risk

All of the above

Question 9

Question 91 Point

Investment portfolios with a high degree of variation are less predictable and therefore, more risky.

True

False

Clear selection

Question 10

Question 101 Point

Who wrote in his dissertation that "risk is the primary evaluation criteria for the selection of an investment portfolio?"

Milton Friedman

Peter Drucker

Michael Brady

Harry Markowitz

Question 11

Question 111 Point

Which assessment tool outlines the interaction between diversifiable risk and systematic risk which cannot be eliminated through diversification?

Black-Scholes Model

The Arbitrage Pricing Model

The Capital Asset Pricing Model

The Milton Friedman Prediction Model

Question 12

Question 121 Point

Which model provides investors with a practical formula for pricing and leveraging the flexibility of options in the market?

CAPM

ABT

B-S

M&M

Question 13

Question 131 Point

Which risk management theory attempts to quantify risk into five areas of interest?

The Modigliani Theory

Asset Liability Management

Portfolio Assessment

Arbitrage Pricing Theory

Question 14

Question 141 Point

Which term that describes the percentage of the principal charged by the lender to the borrower?

Revenue

Profit

Interest

Arbitrage

Question 15

Question 151 Point

What is a risk that changes the value of an investment as a result of changes in interest rates?

Revenue change risk

Internal investment risk

Interest rate risk

Equity rate risk

Question 16

Question 161 Point

Which risk is especially associated with bond owners?

IRR

IRS

ALM

CAPM

Question 17

Question 171 Point

Which agreement provides the buyer with the ability to purchase or sell an asset at a specific price during a specific period or date?

Arbitrage

Hedge

Option

None of the above

Question 18

Question 181 Point

In which process does a bond investor buy a portfolio of bonds that mirror an overall structure of a market index?

Hedging

Indexing

Projecting

Prospecting

Question 19

Question 191 Point

What is a debt instrument used by the investor to lend money to an entity such as a government or corporation?

Bill

Letter of credit

Bond

Check

Question 20

Question 201 Point

Which is not one of the five areas of interest in Asset Liability Management?

Liquidity

Interest rates

Liability insurance

Funding for capital projects