PRMIA 8004 Exam Practice Test Instant Access

Question 1

According to PRMIA governance principles, boards and audit committees should ...

AReview compensation plans to ensure consistency with corporate risk appetite, competitive market conditions, and fiduciary responsibility to shareholders

BCollectively assume responsibility of understanding and reporting the effectiveness of the firm risk management infrastructure

CBe composed of key business unit representatives

DLeave shareholder accountability to senior management who decides strategic direction

Answer : A

Question 2

The early 2003 trading strategy of China Aviation oil was

Ato buy calls and sell puts

Bto buy puts and sell calls

Cto sell puts and buy calls

Dto sell calls and buy puts

Answer : A

Question 3

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 4

According to the Group of 30 Report, dealers and end-users are encouraged to:

AUse separate trading agreements for interest rate derivatives, equity derivatives and foreign exchange transactions.

BUse a common trading agreement for interest rate and equity derivatives but a separate agreement for foreign exchange transactions.

CUse one trading agreement for foreign exchange forwards and another for foreign exchange options.

DUse a single master trading agreement as widely as possible with each counter party.

Answer : D

Question 5

The steps which the US Treasury Department and the Federal Reserve took in July 2008 to boost confidence in both Fannie Mae and Freddie Mac did not include which one of the following:

AAccess to the Federal Reserve discount window

BRemoving the prohibition on the Treasury Department to buy both companies stock

CRestricting the sale of new Fannie Mae and Freddie Mac securities only to US citizens

DReiterating their belief that both companies played a central role in the US housing finance system

Answer : D

Question 6

The problems at WorldCom can best be characterized as related to:

AMarket Risk

BCredit Risk

COperational and Regulatory Compliance Risk

DAll of the Above

Answer : C

Question 7

Which of the following is FALSE?

ANick Leeson also ran the back office for his trading area

BNick Leeson dealt in complex derivatives lacking transparency of pricing

CSIMEX made inquiries to Barings Bank about large margin calls on its positions

DNick Leeson claimed to be running an arbitrage book

Answer : B

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