Chartered Property Casualty Underwriter (CPCU) 500 Practice Exam

Which term describes the numerical likelihood of an event used to quantify risk?

Feasibility Possibility Probability Risk measurement

Correct Answer:

Probability

Explanation:

Probability is the numerical measure of how likely an event is to occur, and it’s used to quantify risk by attaching a specific likelihood to potential outcomes. It expresses risk on a scale from 0 to 1 (or 0% to 100%), where 0 means impossible and 1 means certain. In risk work, you often combine probability with impact to gauge overall risk exposure, such as assessing the likelihood of a claim and its potential cost. Feasibility notes whether something can be done at all, without assigning a specific likelihood. Possibility is a broad notion that something could happen but doesn’t provide a precise probability. Risk measurement encompasses methods to quantify risk more generally, including how you determine and interpret the probability of events.

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