AI0-001 Practice Test 4 — 10 Questions

Question 1

A company is choosing between fine-tuning and RAG for a legal document assistant. Which TWO factors would MOST strongly favor RAG over fine-tuning?

Accepted Answer

The legal documents are updated frequently (weekly). RAG allows dynamic retrieval from a changing document base without retraining, and provides citation sources for transparency — critical in regulated domains like law.

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The model needs to understand complex legal terminology

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The queries require deep reasoning across multiple documents

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The company has limited compute budget for training

Question 2

A credit union uses an AI model to approve personal loans. The model was trained on historical data from the past five years. A recent internal review shows that the model approves loans predominantly for white applicants compared to other ethnicities, even when income and credit scores are similar. The credit union wants to comply with fair lending laws without significantly reducing overall approval rates. The data science team has access to the training data. What is the most appropriate remediation step?

Accepted Answer

Resample the training data to ensure balanced representation of ethnicities. Resampling the training data to ensure balanced representation of ethnicities directly addresses the root cause of the bias—skewed historical data—without altering the model's decision logic or approval thresholds. By rebalancing the dataset (e.g., oversampling underrepresented groups or undersampling the majority), the model learns from a more equitable distribution of features, reducing disparate impact while preserving overall approval rates. This approach aligns with fair lending laws by mitigating bias at the data level, which is the most fundamental and effective remediation step.

Answer

Apply a fairness constraint that penalizes the model for disparate impact

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Discontinue the AI model and use manual approval for all loans

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Adjust the approval threshold so that approval rates are equal across ethnic groups

Question 3

A financial institution wants to deploy an AI system that automates loan approvals. Under the EU AI Act, this system would be classified as high-risk. Which of the following is a MANDATORY requirement for high-risk AI systems before market placement?

Accepted Answer

Establishing a risk management system throughout the system lifecycle. The EU AI Act requires a conformity assessment (often including third-party involvement) for high-risk AI systems to ensure compliance with requirements such as data governance, transparency, and human oversight. The other options are either voluntary, not required, or apply to lower-risk tiers.

Answer

Obtaining a CE marking of conformity through self-assessment only

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Acquiring liability insurance for AI-related harms

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Publishing the training dataset in an open repository

Question 4

Which TWO techniques are commonly used to prevent overfitting in deep neural networks?

Accepted Answer

Dropout. Dropout is a regularization technique that randomly drops a fraction of neurons during training, which prevents the network from relying too heavily on any single neuron and forces it to learn more robust features. This reduces overfitting by introducing noise and effectively training an ensemble of sub-networks.

Answer

Using a larger learning rate

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L1 regularization

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Increasing the number of layers

Question 5

A company wants to generate realistic images of new product designs. They have a large dataset of existing product images. Which generative AI approach is MOST suitable for creating novel, high-quality images?

Accepted Answer

Generative adversarial network (GAN). GANs (Generative Adversarial Networks) consist of a generator and discriminator that compete, producing highly realistic images. Diffusion models are also good but GANs are historically the go-to for image generation. VAEs produce blurrier images; LLMs are for text.

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Large language model (LLM)

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Variational autoencoder (VAE)

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Diffusion model

Question 6

A large enterprise is developing an internal LLM-powered assistant that can access the internet and execute code. To mitigate risks from excessive agency (e.g., the model performing unauthorized actions), which THREE security measures should be implemented?

Accepted Answer

Require human-in-the-loop approval for code execution and write operations. Requiring human-in-the-loop approval for code execution and write operations directly enforces a control over the model's agency, preventing it from performing unauthorized actions such as modifying files or executing arbitrary commands. This measure ensures that any action with side effects is vetted by a human operator, mitigating the risk of excessive agency where the LLM could autonomously cause harm.

Answer

Deploy monitoring for anomalous input patterns

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Apply output filtering to block sensitive data in responses

Question 7

Under the GDPR, individuals have the right to not be subject to a decision based solely on automated processing if it produces legal effects. Which of the following is a typical safeguard that organisations must provide to comply with this right?

Accepted Answer

The right to obtain human intervention on the part of the controller. GDPR requires human intervention as a safeguard for automated decisions with legal effects. The right to explanation and human oversight are key. Deleting data is not a safeguard; consent is not sufficient; detailed explanations are part of transparency.

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The right to have all personal data deleted immediately

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The right to receive a detailed mathematical explanation of the model

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The right to demand a more favourable automated decision

Question 8

A team is building a regression model to predict house prices. The dataset includes numerical features (square footage, number of bedrooms) and categorical features (neighborhood, roof type). The categorical features have high cardinality (neighborhood has 200+ unique values). Which encoding strategy should the team use to avoid overfitting and maintain model interpretability?

Accepted Answer

Target encoding with regularization.. Target encoding with regularization is the best choice because it replaces each categorical value with the mean of the target variable for that category, which captures the relationship between the category and house prices. Regularization (e.g., adding a prior or using cross-validation) shrinks the encoded values toward the global mean, preventing overfitting on rare categories (e.g., neighborhoods with only a few houses). This maintains interpretability because each encoded value directly reflects the average price impact of that category, unlike black-box embeddings.

Answer

Label encoding.

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Binary encoding.

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One-hot encoding with feature selection.

Question 9

Which TWO statements correctly describe the difference between supervised and unsupervised learning?

Accepted Answer

Supervised learning requires labeled data. Supervised learning relies on labeled datasets where each training example is paired with an output label, enabling the model to learn a mapping from inputs to outputs. This is a fundamental distinction from unsupervised learning, which works with unlabeled data to find inherent structures or patterns.

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Supervised learning is only used for classification

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Unsupervised learning always requires a target variable

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Supervised learning is a subset of reinforcement learning

Question 10

A machine learning engineer is training a neural network for image classification. The training loss decreases slowly and the model accuracy improves only marginally each epoch. Which hyperparameter adjustment is MOST likely to accelerate convergence?

Accepted Answer

Increase the learning rate. The training loss decreasing slowly and accuracy improving marginally each epoch indicates that the learning rate is too small, causing the optimizer to take very small steps toward the minimum of the loss function. Increasing the learning rate allows the optimizer to take larger steps per update, which accelerates convergence. Option C is correct because adjusting the learning rate directly addresses the step size in gradient descent.

Answer

Add more hidden layers

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Increase the batch size

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Decrease the number of epochs