PRMIA 8004 Exam Questions Instant Access - No Installation Required

Question 1

Up until 2006, which of the following was not a primary driver for Washington Mutual's earning?

ALending to consumers and small businesses.

BDeposit taking activities which generated net interest income.

CThe provision of fee based services to its customers.

DComplex derivative trades based on volatility indices.

Answer : D

Question 2

Which of the following was the key contributory risk factor to the problems at LTCM in the summer of 1998?

I Model Risk

II Lack of Transparency

III Breakdown of Historical Correlations

IV Over Regulation by Federal Regulators

AI and III only

BIII only

CIII and IV only

DAll of these were key elements of the problems at LTCM

Answer : B

Question 3

The Bankers Trust Case Study is about:

Aoverexposure to the real estate market

Blarge losses at the proprietary trading desk

Creliance on thinly traded derivatives to hedge

Dfailure to guard its clients' best interests

Answer : D

Question 4

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

Question 5

According to the PwC report China Aviation Oil, in order to avoid recording and reporting losses, the company adopted which approach covering up its losses?

Aselling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

Bselling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

Cselling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

Dselling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

Answer : D

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

The condition where futures prices of an underlying asset are lower than cash (spot) prices is known as:

ABackwardation

BContango

CReverse backwardation

DConchacha

Answer : A

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