PRMIA 8004 Exam Questions Instant Access - No Installation Required

Question 1

Barings failed to recognize that Nick Leeson's losses were increasing because:

ALeeson ran the front office

BThe London office did not ask for any reports

CLeeson hid his trades in a suspense account

DThe margin report sent to London did not show the true margin needs

Answer : C

Question 2

The "normal" credit loss profile of Washington Mutual was increased by which of the following?

AThe general downturn in the economy of the US

BBy lowering its own credit underwriting standards

CAcquisitions like Long Beach and Providian

DCatastrophic losses in its own credit card division

Answer : C

Question 3

Taisei Fire and Marine Insurance Co

Arelied almost entirely on Fortress Re's management team for information on the risks in its portfolio

Brelied on the information it received from other members of the reinsurance pool to manage its risks

Chad a full understanding from Fortress Re of the risks in the pool

Dhad a full understanding from other members of the pool of the pool's liabilities

Answer : A

Question 4

Metallgesellschaft's retail contracts were

Aunhedged

Bhedged using exchange-traded futures with longer maturities than the retail contracts

Chedged using exchange-traded futures with shorter maturities than the retail contracts

Dfully hedged using exchange-traded futures of the same maturities as the retail contracts

Answer : C

Question 5

The problems which initiated the crisis at Northern Rock during the summer of 2007 were:

ALarge customer withdrawals despite the UK regulator and the UK Treasury giving assurances that the bank was solvent

BDoubts arising about the viability of the business model which necessitated Bank of England intervention

CA general lack of confidence in mortgage backed securities associated in large part with developments in the US sub-prime mortgage market, and doubts emerging about the viability of the Northern Rock business model

DA depositor run on the bank, following doubts about the viability of the Northern Rock business model

Answer : C

Question 6

Which of the following was not considered to be a positive outcome of the Northern Rock Case Study?

AThe role of the UK government and the possible underwriting of risks by tax-payers, and the general question of Moral Hazard

BThe reform of the Deposit Protection Scheme because of its internal inconsistencies

CIt emphasised the importance of effective governance arrangements within financial firms

DThe original successful business model had not stress tested sufficiently for the incidence of Low Probability, High Impact incidents

Answer : D

Question 7

The problems at Bankers Trust can best be characterized as failures related to:

AMarket Risk

BCredit Risk

COperational and Regulatory Compliance Risk

DAll of the Above

Answer : C

PRMIA Case Studies; Standards: Governance, Best Practices and Ethics 8004 Exam Questions