Password file generation

This is regarding the password file generation using ORAPWD utility under Windows. My sys login password is light007
oracle

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Version : 9.0.1
OS : Windows 2000

I have generated the password file using the follwing command.

orapwd file=d:oracleora81dbsorapwdnets.pwd password=san123 entires=10;

I just went through OCP exam guides in which a question is shown below.

You execute the ORAPWD utility to generate your password file in Oracle, specifying password=fritz26. Which of the following users will have his or her password set to fritz26?

A. OUTLN
B. SYS
C. SYSTEM
D. None, the password parameter is used for authentication of the use running ORAPWS to create the password file.

Answer mentioned was B.

Accordingly the password of SYS should be changed to san123 & I should connect to Oracle as "connect sys/san123 as sysdba" but when trying this command to connect to Oracle getting ORA-01031:

Insufficient privileges error. Where I can connect with my old password such as connect sys/light007 as sysdba. Can you please clarify exactly how the password file is used?
The password file will not be used unless you also set the REMOTE_LOGIN_PASSWORDFILE parameter to EXCLUSIVE and bounce your database. The default is NONE, in which case, Oracle isn't using a password file at all.

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