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PRMIA
PRM Certification
8004
PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Questions and Answers

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Questions # 11:

Unlike the case at Barings Bank, National Australia Bank:

Options:

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

Was not dealing in derivatives

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

Had a separation of duties between trading and back office

Answer

Questions # 12:

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

Options:

Recapitalise 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

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

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

Provide 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

Questions # 13:

In the case of National Australia Bank, which of the following was present?

Options:

A window of time between close of day for reporting purposes and back office checking that allowed traders to hide losses using fictitious trades

The Board received risk management information that was incorrect, incomplete or insufficiently detailed

Both A and B

Neither A nor B

Answer

Questions # 14:

What was the main type of risk that Metallgesellschaft was exposed to?

Options:

Basis Risk

Currency Settlement

Interest Rate

Inflation

Answer

Questions # 15:

For the sentence

"The organization shall encourage all employees to keep abreast of the latest developments in their particular areas of expertise, through ____________, _____________, and _____________ and shall make adequate resources available to enable this to occur,"

Choose the correct combinations of words from the following options:

Options:

courses, conferences, journals

conferences, discussion groups, blog sites

courses, educational certification, journals

journals, courses, compliance mandates

Answer

Questions # 16:

Zheng Zhu wants to open a new PRMIA Chapter in Wuhan, China. He can do this if:

Options:

At least 100 members live within 50 miles

A local business sponsors the chapter

Approved by the Board of Directors

All of the above

Answer

Questions # 17:

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

Options:

Incentive plans have risk management implications

Front and back offices need to be independent

Large profits can be an indicator of risk

All of the above

Answer

Questions # 18:

Which of the following best characterize the problems that developed at Bankers Trust?

Options:

Volume growth at the expense of margin

Excessive reliance on volatile and sophisticated derivatives

A failure to try to protect their clients' interests

Over exposure to the property market

Answer

Questions # 19:

The hedging strategy employed by MG Refining & Marketing has been called:

Options:

Dynamic hedging

A stacked hedge

A differential hedge

Nothing because MG Refining & Marketing did not hedge its position

Answer

Questions # 20:

According to LTCM managers:

Options:

Stress Testing looked at the 12 biggest deals with each of their top 20 counterparties

Stress Testing was not conducted

Stress Testing was not necessary because their trades were hedged

Stress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations

Answer

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