BFF5902 Introduction to risk management 6 – Semester 2 2024Haskell

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Introduction to risk management – Semester 2, 2024

1. A company can invest in a new project and earn $100,000. It might also earn nothing. The probability of the project’s success is 10%. The company invests $90,000 in the project.

Which of the following statements is TRUE?

A. The certainty equivalent amount of the project is $10,000.

B. The relative risk premium is 10%

C. The company is risk-seeking.

D. The absolute risk premium is $10,000.

2. Under the Three Lines of Defence risk accountability model, internal audit must treat risks that have not been adequately controlled by the first and second lines.

Select one:

True

False

3. A city suffers a 1 in 100 year flood event. City engineers delay further flood proofing because experiencing two 1 in 100 year floods within two consecutive years is judged impossible.

Which of the following statements BEST describes a possible cognitive bias in the likelihood estimate?

A. The engineers are correct and there is no chance of BFF5902 Introduction to risk management 6 – Semester 2, 2024Haskell a repeat.

B. The engineers may have underestimated the risk of flooding because of gambler’s fallacy.

C. The engineers may have underestimated the risk of flooding because of the short-series problem.

D. The engineers may have underestimated the risk of flooding because of reversion to mean bias.

4. Which of the following statements is FALSE? According to the AS ISO 31000:2018:

A. Choosing the best risk treatment option occurs after risk assessment.

B. Risk is the positive and negative effect of uncertainty on the organisation’s objectives.

C. Risk assessment is the process of risk identification, risk analysis and risk evaluation.

D. Developing the risk criteria occurs after risk evaluation.

5. Bank reports a one-day Var (99)of $100000, which of the following statement is true?

A. One-day changes in the value is treated as normally distributed

B. There is a 1% probability that financial losses over 1 day will be greater than $100000

C. There is a 99% probability that financial losses over 1 day will be less than $100000

D