PRMIA 8004 Exam Practice Test Instant Access

Question 1

The multi-dimensional risk problem at Northern Rock did not include which one of the combinations of the following?

ALPHI Risk; Business Model; Solvency vs. Liquidity: and Deposit Protection

BCorporate Governance; Moral Hazard; Role of Government; and Credit Risk

CDeposit Protection; Moral Hazard; Business Model; and LPHI Risk

DBusiness Model; Corporate Governance; Moral Hazard; and Deposit Protection

Answer : B

Question 2

The sensitivity analysis required under IFRS would have done what for China Aviation Oil?

AProvided 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

BOnly provided the intrinsic value of its outstanding option positions

COnly provided the time value of its outstanding option position

DNone of the above

Answer : A

Question 3

The financial intermediary services provided by Fannie Mae and Freddie Mac were designed to

AOffer loans directly to the consumer

BCompete directly with banks in selling mortgaged to would-be home owners

CRepackage mortgage loans made by banks and sell them on to investors as asset backed securities

DBuy mortgage-backed loans for banks and keep them all on their books, using them as collateral for the US government to borrow

Answer : C

Question 4

What was the main risk scenario on the Metallgesellschaft trading strategy?

ARealized losses on short-term contracts against unrealized gains on the long-run contract

BThe final price of the underlying being higher than the initial price

CThe initial price of the underlying being higher than the final price

DThe short-term price of the underlying being higher than the long-run contract

Answer : A

Question 5

The "Renewing the Dream" program signed into law by President George W Bush in 2002 was designed to

ARecapitalise 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

BProvide grants of US$800 million to help home buyers with down-payment and closing costs

CAllow risky, high-cost loans to be credited towards affordable housing goals

DProvide 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

Question 6

Unlike the case at Barings Bank, National Australia Bank:

AHad a risk management infrastructure that was credited with doing its' job well, despite the losses

BWas not dealing in derivatives

CHad a Board of Directors that was unaware of the true nature of trading activities

DHad a separation of duties between trading and back office

Answer : D

Question 7

Which of the following are PRMIA Governance Principles?

I Independence of Key Parties

II Disclosure and Transparency

III Internal Validation

IV Solvency

AI and II only

BI, II and III only

CI, II and IV only

DAll are PRMIA Governance Principles

Answer : A

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