PRMIA 8009 Exam Questions Instant Access - No Installation Required

Question 1

Which of the following was NOT a factor in the Long Term Capital Management case?

AInadequate separation of front and back offices

BModel risk

CChanges/breakdowns in historical correlations

DUnwinding of liquid positions at the beginning of major losses

Answer : A

Question 2

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 3

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 4

The Fortress Re accounting risk transfer procedures

Amade it straightforward for TFMI to determine whether risk had actually been transferred and they decided not to take out more catastrophe insurance cover

Bmade it difficult for TFMI to determine whether risk had actually been transferred so they had to take out additional catastrophe insurance cover

Cmade it straightforward for TFMI to determine when the risk had been transferred and to take out additional catastrophe insurance cover

Dmade it difficult for TFMI to determine whether risk had actually been transferred and whether it had sufficient catastrophe insurance cover

Answer : D

Question 5

Which of the following was not considered to be a positive outcome of the Northern Rock Case Study?

AThe role of the UK government and the possible underwriting of risks by tax-payers, and the general question of Moral Hazard

BThe reform of the Deposit Protection Scheme because of its internal inconsistencies

CIt emphasised the importance of effective governance arrangements within financial firms

DThe original successful business model had not stress tested sufficiently for the incidence of Low Probability, High Impact incidents

Answer : D

Question 6

According to the Group of 30 Report, option contracts:

AAlways generate credit risk to both counterparties

BCreate credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation

CCreate no credit risk, since the buyer need not exercise the option

DUsually create credit risk only for the seller (to default by the buyer)

Answer : B

Question 7

Boards, including Audit and Risk Committees must:

I, Clearly articulate the corporate risk appetite to senior management

II. Thoroughly review compensation plans of potentially "highly compensated positions" for consistency with corporate risk appetite, competitive market conditions and fiduciary responsibility to shareholders

III. Have a single member formally given responsibility for understanding and reporting the effectiveness of the corporation's risk management infrastructure

IV. Be fully accountable to shareholders and work to the benefit of public good and financial stability

AI and II only

BI, II and IV only

CI, II and III only

DAll of these are responsibilities of Board and Audit Committees

Answer : D

PRMIA Case Studies; Standards: Governance, Best Practices and Ethics â€“ 2015 Edition 8009 Exam Questions