PRMIA 8004 Exam Practice Test Instant Access

Question 1

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 2

National Australia Bank and Barings cases are similar in that:

ALosses kept increasing while rogue trader(s) hid their positions

BThe back offices had inadequate procedures

CBoth A and B

DNone of the above

Answer : C

Question 3

How much of Washington Mutual's assets were funded by customer deposits for the decade ending in 2006?

A30%

B40%

C50%

D60%

Answer : D

Question 4

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 5

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 6

What is (are) the lesson(s) of the Barings' failure?

AIncentive plans have risk management implications

BFront and back offices need to be independent

CLarge profits can be an indicator of risk

DAll of the above

Answer : D

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