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Latest PRMIA 8004 Practice Test Questions, PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Exam Dumps
NEW QUESTION # 42
With a PRMIA member's need to reconcile their internal and external responsibility to perform their work in an independent and appropriate fiduciary manner, which of the following options must be taken into consideration when performing risk management duties?
- A. Only the internal controls and compliance standards
- B. Internal controls of the organization, and the local regulator
- C. The local regulator, internal controls, and shareholders
- D. Internal controls, and the expectations of stakeholders, shareholders, and the general public
Answer: D
NEW QUESTION # 43
According to the Northern Rock Case Study, what is Forced Insolvency?
- A. The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)
- B. The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors
- C. The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital
- D. The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors
Answer: A
NEW QUESTION # 44
A risk manager finds that a client is engaged in a practice that looks like money laundering.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), the risk manager should:
- A. Approach the client about the concern, regardless of what their reaction might be
- B. Report this conduct to their immediate supervisor
- C. Respect the client's confidentiality as that takes precedence
- D. Report the findings immediately to authorities
Answer: B
NEW QUESTION # 45
When local rules and regulations conflict with the PRMIA Standards of Best Practice, Conduct and Ethics the PRMIA member should ...
- A. Seek advice from a qualified party, being mindful of legal and confidentiality requirements
- B. Modify the interpretation of local rules and regulations to meet the situation
- C. Ignore local rules and regulations
- D. Respect local rules and regulations
Answer: A
NEW QUESTION # 46
Which of the following was the key contributory risk factor to the problems at LTCM in the summer of 1998?
I.Model Risk II.Lack of Transparency III.Breakdown of Historical Correlations IV.Over Regulation by Federal Regulators
- A. III only
- B. All of these were key elements of the problems at LTCM
- C. III and IV only
- D. I and III only
Answer: A
NEW QUESTION # 47
MGRM's losses due to "stacking" started to increase when
- A. the oil market went from contango to backwardation
- B. the oil market went from weak backwardation to strong backwardation
- C. the oil market went from backwardation to contango
- D. the oil market went from strong contango to weak contango
Answer: C
NEW QUESTION # 48
Which of the following are PRMIA Governance Principles?
I Sufficiency of Key Resources and Process
II State of the Art Risk Management Technology
III Ongoing Education and Discernment
IV Sufficiency of Key Competencies
- A. I and II only
- B. All of these are PRMIA Governance Principles
- C. I, II and IV only
- D. I, III and IV only
Answer: D
NEW QUESTION # 49
The Q4 2003 trading strategy of China Aviation Oil was
- A. to sell calls and buy puts
- B. to buy calls and sell puts
- C. to sell puts and buy calls
- D. to buy puts and sell calls
Answer: A
NEW QUESTION # 50
Which is NOT part of the guidance on Professional Conduct in the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct)?
- A. Clearly inform all affected parties of any apparent or actual conflicts of interest
- B. Provide advice that is clear and accurate
- C. Know and abide by applicable rules and regulations
- D. Report to the Regulator any departures from generally accepted methodology or practices
Answer: D
NEW QUESTION # 51
A risk manager finds that a client is engaged in a practice that looks like money laundering.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), the risk manager should:
- A. Approach the client about the concern, regardless of what their reaction might be
- B. Report this conduct to their immediate supervisor
- C. Respect the client's confidentiality as that takes precedence
- D. Report the findings immediately to authorities
Answer: B
NEW QUESTION # 52
The sensitivity analysis required under IFRS would have done what for China Aviation Oil?
- A. Provided investors and analysts with insight into the dynamics of value changes, and the sensitivity of fair value to the underlying drivers of interest rates, exchange rates, and commodity prices
- B. Only provided the time value of its outstanding option position
- C. Only provided the intrinsic value of its outstanding option positions
- D. None of the above
Answer: A
NEW QUESTION # 53
For the sentence
"The organization shall encourage all employees to keep abreast of the latest developments in their particular areas of expertise, through ____________, _____________, and _____________ and shall make adequate resources available to enable this to occur," Choose the correct combinations of words from the following options:
- A. courses, educational certification, journals
- B. journals, courses, compliance mandates
- C. conferences, discussion groups, blog sites
- D. courses, conferences, journals
Answer: D
NEW QUESTION # 54
As a PRMIA member, you have certain responsibilities. Among these are the requirement(s) to:
- A. All of the above
- B. Attend at least one PRMIA chapter meeting per year
- C. Vote in Board elections
- D. Adhere to the PRMIA Standards of Best Practice, Conduct and Ethics
Answer: D
NEW QUESTION # 55
Which of the following was NOT a factor in the WorldCom collapse?
- A. Unfair pricing to customers
- B. Accounting abuses
- C. Failed corporate governance
- D. Over stating actual sales
Answer: A
NEW QUESTION # 56
Zheng Zhu wants to open a new PRMIA Chapter in Wuhan, China. He can do this if:
- A. All of the above
- B. At least 100 members live within 50 miles
- C. A local business sponsors the chapter
- D. Approved by the Board of Directors
Answer: D
NEW QUESTION # 57
A risk manager has just completed a risk assessment project. The report has been given to the risk manager's direct supervisor, who refuses to escalate the material issues raised in the report. Further, the direct supervisor edits the report to remove the section describing the material risk, who then submits it to the firm's Executive Committee.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), which of the following actions is most appropriate:
- A. The risk manager should attempt to resolve the conflict with the direct supervisor, but if that does not work, they should contact the Whistle-Blowing Hotline of the organization. If no such hot-line is in place, they should contact the PRMIA Ethics Committee
- B. If the risk manager deems it appropriate, he / she should send a copy of the original report to the CEO
- C. The risk manager has submitted the report to their direct supervisor and their obligation ends at this point, nothing further should be done
- D. Escalation of the issue is against the Code of Conduct because one should respect the administrative structure of the organization
Answer: A
NEW QUESTION # 58
Which of the following are PRMIA Governance Principles?
I Independence of Key Parties
II Disclosure and Transparency
III Internal Validation
IV Solvency
- A. I, II and III only
- B. All are PRMIA Governance Principles
- C. I and II only
- D. I, II and IV only
Answer: C
NEW QUESTION # 59
The Bankers Trust Case Study is about:
- A. large losses at the proprietary trading desk
- B. reliance on thinly traded derivatives to hedge
- C. failure to guard its clients' best interests
- D. overexposure to the real estate market
Answer: C
NEW QUESTION # 60
Bankgesellschaft Berlin's failures can be best characterised as
- A. none of the above
- B. credit risk caused by a diversified portfolio of poor-quality loans
- C. credit risk caused by overexposure to the property market
- D. both A and B
Answer: C
NEW QUESTION # 61
Which items below were at the core of the problems at Bankgesellschaft Berlin?
- A. Over exposure to the property market
- B. Rash guarantees given to investors in property linked funds
- C. All of the above
- D. Political corruption and poor management
Answer: C
NEW QUESTION # 62
Which of the following does NOT relate to the Orange County case?
- A. The Know Your Customer rule
- B. Strategies that are not possible to explain to third parties should not be employed by the risk averse
- C. Fractured organisational structure and poor risk oversight mechanism make it easy for powerful individuals to hide risk in the gaps
- D. Where there are excess rewards, there must be risks
Answer: A
NEW QUESTION # 63
When considering the performance of Northern Rock within its peer group of banks, which of the following is not correct?
- A. Its' loan loss record was poor by industry standards.
- B. Only a few months previously it had reported record profits.
- C. For many years it was regarded as a star-performer in the financial markets.
- D. The quality of its' assets was never in question.
Answer: A
NEW QUESTION # 64
A risk assessment report generated by a PRMIA member creates an apparent conflict of interest between the PRMIA standards and those of the client organization.
Of the following, which is the correct hierarchy to follow to resolve the conflict?
I The decision of a superior within the organization
II PRMIA Standards
III Guidelines from the regulators in which the organization operates
IV The laws of the country
- A. IV, III, II, and I
- B. III, II, IV, and I
- C. II, I, IV, and III
- D. I, II, III, and IV
Answer: A
NEW QUESTION # 65
The "Renewing the Dream" program signed into law by President George W Bush in 2002 was designed to
- A. Provide grants of US$800 million to help home buyers with down-payment and closing costs
- B. Recapitalise Fannie Mae and Freddie Mac with US$2.4 billion of additional capital to ensure they weathered the risks associated with any future downturn in the housing markets
- C. Allow risky, high-cost loans to be credited towards affordable housing goals
- D. Provide tax credits of nearly US$2.4 billion over the next 5 years to investors and builders who developed affordable single-family housing in poor and distressed areas
Answer: D
NEW QUESTION # 66
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