PRMIA 8004 Exam Practice Test Instant Access

Question 1

When Fannie Mae and Freddie Mac were taken under US government conservatorship, which of the following was not included within their operating mandate?

AFannie Mae and Freddie Mac will continue to buy home loans from banks to repackage them as mortgage-backed securities

BThe US government will provide capital as needed in return for preferred shares in the companies

CThe US government will buy mortgage-backed securities in the open market as needed

DThere was a 2 year limit to the conservatorship

Answer : D

Question 2

TMFI's internal procedures and management were

Afully aware of the uninsured risks Fortress Re were taking

Babsolutely unaware of their uninsured liabilities

Caware that they had some uninsured liabilities but thought they had enough capital to withstand any uninsured losses

DNone of the above

Answer : B

Question 3

PRMIA Governance Principles

Amust be adhered to by all PRMIA member organizations

Bis a set of recommendations based on research and best practice

Cmust be adhered to by all PRM charter holders

Dmust be adhered to by all financial firms that are PRMIA members

Answer : B

Question 4

Which of the following does NOT relate to the Orange County case?

AWhere there are excess rewards, there must be risks

BThe Know Your Customer rule

CStrategies that are not possible to explain to third parties should not be employed by the risk averse

DFractured organisational structure and poor risk oversight mechanism make it easy for powerful individuals to hide risk in the gaps

Answer : B

Question 5

Which of the following best characterize the problems that developed at Bankers Trust?

AVolume growth at the expense of margin

BExcessive reliance on volatile and sophisticated derivatives

CA failure to try to protect their clients' interests

DOver exposure to the property market

Answer : C

Question 6

Which of the following was NOT a factor in the National Australia Bank case?

ARogue traders

BImproper or insufficient Board-level communication regarding the importance of risk management and oversight

CInadequate back office procedures

DMoney laundering using foreign exchange trades for political leaders

Answer : D

Question 7

Which of the following was a key problem in the Barings Bank case?

AHaving the back office and front office operations under the same person

BDifference in the contract sizes in the OSE and SIMEX

CThe different time zones that the office was trading in

DLeeson was executing an arbitrage strategy even though he was not authorized to do so

Answer : A

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