QN1: Suppose the project has many hazards that could easily injure one or more persons and there is no method of avoiding the potential for damages. The project manager should consider ___ as a means of deflecting the risk.
a) abandoning the project
b) buying insurance for personal bodily injury
c) establishing a contingency fund
d) establishing a management reserve
e) not acknowledging the potential for injury
Answer
Answer: c) establishing a contingency fund
QN2: Risk Management includes all of the following processes except:
a) Risk Monitoring and Control
b) Risk Identification
c) Risk Avoidance
d) Risk Response Planning
e) Risk Management Planning
Answer
Answer: d) Risk Response Planning
QN3: When should a risk be avoided?
a) When the risk event has a low probability of occurrence and low impact
b) When the risk event is unacceptable — generally one with a very high probability of occurrence and high impact
c) When it can be transferred by purchasing insurance
d) A risk event can never be avoided
Answer
Answer: c) When it can be transferred by purchasing insurance
QN4: All of the following are financial risks which may be faced by business organizations EXCEPT
a) interest rate risk.
b) commodity price risk.
c) product liability risk.
d) currency exchange rate risk.
Answer
Answer: d) currency exchange rate risk.
QN5: Which of the following is not an example of personal risk?
a) Earning risk
b) Medical expenses
c) Longevity risk
d) Worker Injury
Answer
Answer: c) Longevity risk
QN6: ___ risk refers to uncertainty over total of cash flows due to possible changes in output and input prices.
a) Personal
b) Pure
c) Price
d) Credit
Answer
Answer: c) Price
QN7: Which of the following is not an object of risk management?
a) Identify all potential risks.
b) Identify high-impact/high priority risks.
c) Document risk identification and analysis process.
d) Assume risk
Answer
Answer: d) Assume risk
QN8: All of the following are disadvantages of using insurance EXCEPT
a) There is an opportunity cost because premiums must be paid in advance.
b) Considerable time and effort must be spent selecting and negotiating coverages.
c) It results in considerable fluctuations in earnings after a loss occurs.
d) Attitudes toward loss control may become lax.
Answer
Answer: a) There is an opportunity cost because premiums must be paid in advance.
QN9: Which of the following types of loss exposures are best met by the use of avoidance?
a) low-frequency, low-severity
b) low-frequency, high-severity
c) high-frequency, low-severity
d) high-frequency, high-severity
Answer
Answer: d) high-frequency, high-severity
QN10: What is the method of handling risk?
a) avoidance
b) loss control
c) retention
d) noninsurance transfers
e) insurance
Answer
Answer: e) insurance
QN11: Which of the following is not part of risk management process?
a) identify and evaluate frequency and severity of losses
b) choosing and implementing risk management methods
c) Shelving a business plan due to high risk
d) monitoring the performance and suitability of the methods.
Answer
Answer: c) Shelving a business plan due to high risk
QN12: Risk avoidance means:
a) Measures are taken to eliminate loss exposure
b) Measures are taken to reduce loss severity
c) Insurance has been purchased and risk transferred to an insurance company
d) Is not a useful risk management tool.
Answer
Answer: c) Insurance has been purchased and risk transferred to an insurance company
QN13: Business firms face liability lawsuits when their:
a) Products injure consumers
b) Customers steal their inventory
c) Unions go on strike
d) Attorney fails to file legal document
Answer
Answer: d) Attorney fails to file legal document
QN14: The principle of indemnity provides that
a) Insurance premium rates must be neither too high nor too low
b) The insured should be paid for the loss he or she suffered and no more no less
c) The insured shall be paid exactly the face amount of the policy
d) People who cause accidents should pay for the loss that results
e) Only indemnity companies may issue contracts of indemnity
Answer
Answer: e) Only indemnity companies may issue contracts of indemnity
QN15: Principle of Insurable interest refers to
a) All facts should be disclosed to insurer
b) The amount of interest to be paid by the insurer
c) No person can enter into a valid contract of insurance unless he has insurable interest in the object
d) None of the above
Answer
Answer: b) The amount of interest to be paid by the insurer
QN16: Institute cargo Clause C covers loss of or damage to the goods caused by
a) Fire or explosion
b) Theft, pilferage and non-delivery
c) Fresh and/or rain and/or river water damage.
d) Hook, oil, mud, acid and damage by other cargo.
Answer
Answer: a) Fire or explosion
QN17: Which policy covers all risks of loss of or damage to the goods insured and is the widest cover
a) Institute Cargo Clause A
b) Institute Cargo Clause B
c) Institute Cargo Clause C
d) War and Strikes, Riots and Civil Commotion (SRCC) Clause
Answer
Answer: a) Institute Cargo Clause A
QN18: Principle of Causa Proxima implies that
a) the insurer becomes liable to pay for loss if the insured peril or risk is the proximate cause of loss
b) the contracts of insurance only indemnify a loss resulting from risk covered under the Policy
c) the insurer becomes liable to pay for loss if the insured peril or risk is the exact cause of loss
d) the insurer becomes liable to pay for loss irrespective of the cause of loss
Answer
Answer: a) the insurer becomes liable to pay for loss if the insured peril or risk is the proximate cause of loss
QN19: Maritime perils are cause due to
a) faults in loading, keeping, carrying and unloading of the cargo
b) acts of God or man made events
c) war including civil war, revolution, rebellion etc.
d) strikes, lock-outs, labour disturbances, riots, civil commotion
Answer
Answer: a) faults in loading, keeping, carrying and unloading of the cargo
QN20: Which document sets out all the terms and conditions of the contract between the insurer and the insured
a) Certificate of Insurance
b) Insurance Broker’s Note
c) Insurance Policy
d) None of the above
Answer
Answer: c) Insurance Policy
QN21: A country that analyzes the probability of: (1) an uprising, (2) the election of a socialist nationalizing government, and (3) the stability of per capita income, is engaging in:
a) factor risk analysis.
b) political situation analysis.
c) country risk analysis.
d) consumer purchasing power analysis.
Answer
Answer: b) political situation analysis.
QN22: Which of the following statements is true?
a) A tax increase is never the result of political forces and can therefore not be considered a political risk.
b) Political risk is confined to third world countries.
c) One form of political risk is government measures to improve the competitiveness of national companies.
d) All of the above.
Answer
Answer: c) One form of political risk is government measures to improve the competitiveness of national companies.
QN23: Which of the following statements is true?
a) Expropriation of assets by communist governments is a form of micro political risk.
b) In 2004, government X, which had been providing preferential treatment to countries in the A region, provided equal opportunities to manufacturers across the world. This is a case of micro-political risk.
c) In 2006, the producers of widgets in Germany lobbied their government to impose tariffs on imports of widgets. This is a case of macro political risk.
d) All of the above
QN24. Which of the following is not a factor that an MNE must be acquainted with when dealing with a foreign government?
a) Their culture.
b) Their policy objectives.
c) Their levers of power.
d) None of the above.
Answer
Answer: c) Their levers of power.
QN25: Which of the following is a Berlin-based organization that produces reports on corruption each year?
a) The Business Ethics Bureau.
b) Transparency International.
c) Corruption Watchdog.
d) Corruption Monitor.
Answer
Answer: b) Transparency International.
QN26: World Banks’ subsidiary that guarantees against non-commercial risks is
a) MIGA
b) IDA
c) IRBD
d) IFC
Answer
Answer: b) IDA
QN27: Which of the following is a ECA in Africa?
a) African Export-Import Bank
b) Arab Investment & Export Credit Guarantee Corporation
c) Corporación Andina de Fomento
d) European Bank for Reconstruction and Development
Answer
Answer: d) European Bank for Reconstruction and Development
QN28: Credit Insurance is beneficial to the exporter as it facilitates:
a) Effective management of interest rate fluctuations
b) Offering more competitive credit terms to new customers.
c) Effective management of foreign currency fluctuations
d) Offering more competitive credit terms to banks
Answer
Answer: a) Effective management of interest rate fluctuations
QN29: Which of the following tool will not help a company in minimizing its bad debt
a) Confirmed LC
b) debt purchase
c) credit insurance.
d) Hedging
Answer
Answer: a) Confirmed LC
QN30: In case of undisclosed factoring
a) client’s customers are not notified of the factoring arrangement.
b) client’s customers are notified of the factoring arrangement.
c) client is notified of the factoring arrangement.
d) Client is not customers are not notified of the factoring arrangement.
Answer
Answer: a) client’s customers are not notified of the factoring arrangement.
QN31: Purchasing of an exporter’s receivables at a discount price by paying cash is known as
a) Factoring
b) Forfeiting
c) Hedging
d) Arbitration
Answer
Answer: b) Forfeiting
QN32: Forfeiting is beneficial to banks because :
a) Lower credit administration and credit follow up
b) It helps in maintaining liquidity
c) It helps bank to offer competitive interest rates
d) Increases assets base
Answer
Answer: a) Lower credit administration and credit follow up
QN33: Which of the following is not characteristic of factoring
a) Factoring is possible in case of bad debts.
b) Credit rating is mandatory.
c) It is a method of offbalance sheet financing.
d) Cost of factoring is never equal
Answer
Answer: a) Factoring is possible in case of bad debts.
QN34: In case of Forfeiting exporter has to bear the following cost :
a) Commitment fee
b) Interest
c) Commission
d) Dividends
Answer
Answer: a) Commitment fee
QN35: Liquidity risk pertains to timing mismatches between cash inflows and outflows is known as
a) gap risk
b) Commercial risk
c) Personal risk
d) Business Risk
Answer
Answer: a) gap risk
QN36: In Gap Analysis If the difference between the assets and liabilities which mature or are re-priced during that interval is positive
e) there will be a net cash deficit
f) there will be no change in net cash
g) there will be a net cash surplus
h) None of the above
Answer
Answer: e) there will be a net cash deficit
QN37: A combination of interest rate puts is referred to as an
a) interest rate cap
b) interest rate floor
c) Call
d) Put
Answer
Answer: a) interest rate cap
QN38: LIBOR stands for
a) Liberal Interbank Offered Rate
b) London Interbank Offered Rate
c) Liberal Interbank Offered Ratio
d) Liberal Interbank Official Rate
Answer
Answer: b) London Interbank Offered Rate
QN39: Put option is considered the mirror image of a
a) call option
b) floor
c) cap
d) Collar
Answer
Answer: a) call option
QN40: In plain vanilla swap
a) one party paying a fixed interest rate and receiving a floating rate and the other party paying a floating rate and receiving a fixed rate.
b) one party pays and receives a fixed interest rate and the other party paying a floating rate and receiving a fixed rate
c) Both parties pay and receive fixed interest rate
d) Both parties pay and receive floating interest rate
Answer
Answer: a) one party paying a fixed interest rate and receiving a floating rate and the other party paying a floating rate and receiving a fixed rate.
