8004 Practice Exams and Training Solutions for Certifications
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NEW QUESTION # 20
Which is NOT part of the guidance on Professional Conduct in the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct)?
- A. Know and abide by applicable rules and regulations
- B. Clearly inform all affected parties of any apparent or actual conflicts of interest
- C. Report to the Regulator any departures from generally accepted methodology or practices
- D. Provide advice that is clear and accurate
Answer: C
NEW QUESTION # 21
While doing a work assignment, a PRMIA member notices behaviour that is outside the ethical standards of their client organization and reports the matter to their immediate supervisor in the organization (if he or she wasn't the one engaging in such behaviour). The matter is neither progressed nor actioned.
The PRMIA member should:
- A. report the matter to the organization's Compliance Dept.
- B. report the matter to their PRMIA chapter
- C. contact the Whistle-Blowing Hotline of the organization or, if none exits, to the PRMIA Ethics Committee for guidance and assistance
- D. stay silent on the basis that they have reported it
Answer: C
NEW QUESTION # 22
How much of Washington Mutual's assets were funded by customer deposits for the decade ending in 2006?
- A. 40%
- B. 30%
- C. 50%
- D. 60%
Answer: D
NEW QUESTION # 23
Which of the following does NOT relate to the Orange County case?
- A. The Know Your Customer rule
- B. Where there are excess rewards, there must be risks
- C. Fractured organisational structure and poor risk oversight mechanism make it easy for powerful individuals to hide risk in the gaps
- D. Strategies that are not possible to explain to third parties should not be employed by the risk averse
Answer: A
NEW QUESTION # 24
For the sentence
"The organization should have at its disposal employees who have adequate _________, ________ and _______ to perform the tasks assigned to them", Choose the correct combination of words from the following options:
- A. track record, expertise, skills
- B. risk appetite, knowledge, expertise
- C. experience, skills, previous successes
- D. knowledge, skills, expertise
Answer: D
NEW QUESTION # 25
Up until 2006, which of the following was not a primary driver for Washington Mutual's earning?
- A. Lending to consumers and small businesses.
- B. The provision of fee based services to its customers.
- C. Complex derivative trades based on volatility indices.
- D. Deposit taking activities which generated net interest income.
Answer: C
NEW QUESTION # 26
Up until 2006, which of the following was not a primary driver for Washington Mutual's earning?
- A. Lending to consumers and small businesses.
- B. The provision of fee based services to its customers.
- C. Complex derivative trades based on volatility indices.
- D. Deposit taking activities which generated net interest income.
Answer: C
NEW QUESTION # 27
What is (are) the lesson(s) of the Barings' failure?
- A. Front and back offices need to be independent
- B. All of the above
- C. Large profits can be an indicator of risk
- D. Incentive plans have risk management implications
Answer: B
NEW QUESTION # 28
According to the PwC report China Aviation Oil, in order to avoid recording and reporting losses, the company adopted which approach covering up its losses?
- A. selling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- B. selling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- C. selling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- D. selling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
Answer: A
NEW QUESTION # 29
The Basic Knowledge a PPRMIA member should comply with, as stipulated within the PRMIA Standards of Best Practice, Conduct & Ethics, is to
- A. only possess the required skills and/or certification to complete the risk assessment / management work at hand
- B. learn from a qualified risk management practitioner
- C. only improve their PERSONAL professional competence
- D. maintains and improve their professional competence and strive to maintain and improve the competence of other risk professionals
Answer: D
NEW QUESTION # 30
The hedging strategy employed by MG Refining & Marketing has been called:
- A. A stacked hedge
- B. A differential hedge
- C. Dynamic hedging
- D. Nothing because MG Refining & Marketing did not hedge its position
Answer: A
NEW QUESTION # 31
What is (are) the lesson(s) of the Barings' failure?
- A. Front and back offices need to be independent
- B. All of the above
- C. Large profits can be an indicator of risk
- D. Incentive plans have risk management implications
Answer: B
NEW QUESTION # 32
Boards, including Audit and Risk Committees must:
I.Clearly articulate the corporate risk appetite to senior management
II.Thoroughly review compensation plans of potentially "highly compensated positions" for consistency with corporate risk appetite, competitive market conditions and fiduciary responsibility to shareholders
III.Have a single member formally given responsibility for understanding and reporting the effectiveness of the corporation's risk management infrastructure
IV.Be fully accountable to shareholders and work to the benefit of public good and financial stability
- A. I, II and III only
- B. I and II only
- C. I, II and IV only
- D. All of these are responsibilities of Board and Audit Committees
Answer: D
NEW QUESTION # 33
According to LTCM managers:
- A. Stress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations
- B. Stress Testing was not necessary because their trades were hedged
- C. Stress Testing looked at the 12 biggest deals with each of their top 20 counterparties
- D. Stress Testing was not conducted
Answer: C
NEW QUESTION # 34
As a PRMIA member, you have certain responsibilities. Among these are the requirement(s) to:
- A. Adhere to the PRMIA Standards of Best Practice, Conduct and Ethics
- B. All of the above
- C. Vote in Board elections
- D. Attend at least one PRMIA chapter meeting per year
Answer: A
NEW QUESTION # 35
Bankgesellschaft Berlin's failures can be best characterised as
- A. credit risk caused by a diversified portfolio of poor-quality loans
- B. none of the above
- C. both A and B
- D. credit risk caused by overexposure to the property market
Answer: D
NEW QUESTION # 36
The problems at WorldCom can best be characterized as related to:
- A. Credit Risk
- B. Market Risk
- C. Operational and Regulatory Compliance Risk
- D. All of the Above
Answer: C
NEW QUESTION # 37
According to the PwC report China Aviation Oil, in order to avoid recording and reporting losses, the company adopted which approach covering up its losses?
- A. selling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- B. selling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- C. selling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- D. selling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
Answer: A
NEW QUESTION # 38
In the case of National Australia Bank, which of the following was present?
- A. Neither A nor B
- B. Both A and B
- C. A window of time between close of day for reporting purposes and back office checking that allowed traders to hide losses using fictitious trades
- D. The Board received risk management information that was incorrect, incomplete or insufficiently detailed
Answer: B
NEW QUESTION # 39
Mary Jones wants the Bylaws of PRMIA to be changed so that people can't join PRMIA unless they meet a set of criteria she has devised with her colleagues. She can do this by getting which of the following approvals:
- A. The Board of Directors alone
- B. 34 of all Members
- C. The Board of Directors, but only if the Blue Ribbon Panel affirms the change
- D. The Board of Directors and a majority of the Members
Answer: D
NEW QUESTION # 40
Which of the following was NOT a factor in the WorldCom collapse?
- A. Accounting abuses
- B. Failed corporate governance
- C. Over stating actual sales
- D. Unfair pricing to customers
Answer: D
NEW QUESTION # 41
Which of the following would have contributed to noticing and preventing Leeson's violations at Barings?
- A. Separation of front and back offices
- B. All of the above
- C. More senior level involvement at Barings regarding use of derivatives
- D. Recognition that large profits can be an indicator of higher risk
Answer: B
NEW QUESTION # 42
Several clients, including Procter and Gamble took legal action against Bankers Trust, claiming Bankers Trust
- A. did not honour its contractual obligations to pay
- B. was involved in accounting fraud
- C. sold them derivative products without properly advising them of the relevant risks
- D. hid profits
Answer: C
NEW QUESTION # 43
As a PRMIA member, you have certain responsibilities. Among these are the requirement(s) to:
- A. Adhere to the PRMIA Standards of Best Practice, Conduct and Ethics
- B. All of the above
- C. Vote in Board elections
- D. Attend at least one PRMIA chapter meeting per year
Answer: A
NEW QUESTION # 44
The condition where futures prices of an underlying asset are lower than cash (spot) prices is known as:
- A. Conchacha
- B. Backwardation
- C. Contango
- D. Reverse backwardation
Answer: B
NEW QUESTION # 45
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