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Free PRMIA 8004 Exam Question Practice Exams
NEW QUESTION # 51
Which US regulatory authority resolved the restructuring of Washington Mutual?
- A. Federal Deposit Insurance Corporation
- B. The Federal Reserve Bank
- C. None of the above
- D. The Office of Thrift Supervision
Answer: D
NEW QUESTION # 52
The problems at Bankgesellschaft Berlin can best be characterized as failures related to:
- A. Operational Risk
- B. Both B and C
- C. Market Risk
- D. Credit Risk
Answer: B
NEW QUESTION # 53
The steps which the US Treasury Department and the Federal Reserve took in July 2008 to boost confidence in both Fannie Mae and Freddie Mac did not include which one of the following:
- A. Removing the prohibition on the Treasury Department to buy both companies stock
- B. Access to the Federal Reserve discount window
- C. Reiterating their belief that both companies played a central role in the US housing finance system
- D. Restricting the sale of new Fannie Mae and Freddie Mac securities only to US citizens
Answer: C
NEW QUESTION # 54
According to LTCM managers:
- A. Stress Testing was not necessary because their trades were hedged
- B. Stress Testing was not conducted
- C. Stress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations
- D. Stress Testing looked at the 12 biggest deals with each of their top 20 counterparties
Answer: D
NEW QUESTION # 55
Washington Mutual's acquisition of Long Beach Financial changed its business model and increased its credit loss profile because
- A. Long Beach Financial had losses which it hadn't realized at the time of the takeover
- B. The resulting loss rate for Washington Mutual was more than 3 times higher than other mortgage lenders tracked by the FDIC
- C. Of a general deterioration of credit quality generally
- D. the two banks were focussed in different markets
Answer: B
NEW QUESTION # 56
Up until 2006, which of the following was not a primary driver for Washington Mutual's earning?
- A. Complex derivative trades based on volatility indices.
- B. Deposit taking activities which generated net interest income.
- C. The provision of fee based services to its customers.
- D. Lending to consumers and small businesses.
Answer: A
NEW QUESTION # 57
Which of the following regarding Orange County is FALSE?
- A. Bob Citron tried to "ride the yield curve"
- B. Bob Citron engaged in risky strategies to benefit personally
- C. Bob Citron heavily leveraged his positions using repos
- D. Citron's losses were eventually exposed by massive margin calls
Answer: B
NEW QUESTION # 58
An Organization as a Whole must:
I Provide an environment in which an Escalation Policy can be effective II Commit itself to actual enforcement of corporate governance policies III Provide ongoing education and training to all employees on the role of risk management and corporate governance in the organization IV Publish an external auditor's opinion that the corporation is in compliance with the Board's publicly stated Standards of Corporate Governance
- A. All of these are expectations of the Organization as a Whole
- B. I, III and IV only
- C. I, II and IV only
- D. I, II and III only
Answer: A
NEW QUESTION # 59
Which of the following best characterize the problems that developed at Bankers Trust?
- A. A failure to try to protect their clients' interests
- B. Volume growth at the expense of margin
- C. Excessive reliance on volatile and sophisticated derivatives
- D. Over exposure to the property market
Answer: A
NEW QUESTION # 60
Which of the following was not received by Northern Rock as official support from the UK banking and government authorities?
- A. The UK government offered to guarantee all existing and new retail deposits, and to most other creditors
- B. The Bank of England's role as Lender-Of-Last-resort was activated at a penalty interest rate of 150 basis points above the Bank Rate
- C. A covert money market support operation designed to cover up the difficulties Northern Rock was facing
- D. The Bank of England provided an additional unlimited facility secured on the collateral of all Northern Rock assets
Answer: C
NEW QUESTION # 61
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:
- A. conferences, discussion groups, blog sites
- B. journals, courses, compliance mandates
- C. courses, educational certification, journals
- D. courses, conferences, journals
Answer: D
NEW QUESTION # 62
According to the Northern Rock Case Study, what is Forced Insolvency?
- A. The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors
- B. The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital
- C. The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)
- D. The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors
Answer: C
NEW QUESTION # 63
With a PRMIA member's need to reconcile their internal and external responsibility to perform their work in an independent and appropriate fiduciary manner, which of the following options must be taken into consideration when performing risk management duties?
- A. Internal controls, and the expectations of stakeholders, shareholders, and the general public
- B. The local regulator, internal controls, and shareholders
- C. Internal controls of the organization, and the local regulator
- D. Only the internal controls and compliance standards
Answer: A
NEW QUESTION # 64
The Basic Knowledge a PPRMIA member should comply with, as stipulated within the PRMIA Standards of Best Practice, Conduct & Ethics, is to
- A. maintains and improve their professional competence and strive to maintain and improve the competence of other risk professionals
- B. learn from a qualified risk management practitioner
- C. only improve their PERSONAL professional competence
- D. only possess the required skills and/or certification to complete the risk assessment / management work at hand
Answer: A
NEW QUESTION # 65
While doing a work assignment, a PRMIA member notices behaviour that is outside the ethical standards of their client organization and reports the matter to their immediate supervisor in the organization (if he or she wasn't the one engaging in such behaviour). The matter is neither progressed nor actioned.
The PRMIA member should:
- A. report the matter to the organization's Compliance Dept.
- B. stay silent on the basis that they have reported it
- C. report the matter to their PRMIA chapter
- D. contact the Whistle-Blowing Hotline of the organization or, if none exits, to the PRMIA Ethics Committee for guidance and assistance
Answer: D
NEW QUESTION # 66
The condition where futures prices of an underlying asset are lower than cash (spot) prices is known as:
- A. Backwardation
- B. Contango
- C. Reverse backwardation
- D. Conchacha
Answer: A
NEW QUESTION # 67
The "normal" credit loss profile of Washington Mutual was increased by which of the following?
- A. The general downturn in the economy of the US
- B. Catastrophic losses in its own credit card division
- C. Acquisitions like Long Beach and Providian
- D. By lowering its own credit underwriting standards
Answer: C
NEW QUESTION # 68
Which of the following CANNOT be counted as a reason why LTCM was given a rescue package and not left to default?
- A. Some of the banks in the rescue consortium were LTCM investors
- B. Many of the banks in the rescue consortium were among LTCM's counterparties
- C. The consortium wanted to keep this out of the regulators' eyes
- D. Untimely unwinding of some LTCM positions would lead to large market fluctuations and possible turmoil
Answer: C
NEW QUESTION # 69
The problems at WorldCom can best be characterized as related to:
- A. All of the Above
- B. Operational and Regulatory Compliance Risk
- C. Market Risk
- D. Credit Risk
Answer: B
NEW QUESTION # 70
The Financial Accounting and Reporting Infrastructure of any organization must:
I Accurately represent the corporation's current and known financial condition in a timely manner II Only use off-balance sheet transactions which have a legitimate economic, tax, risk transfer or risk mitigating purpose III Provide a detailed description of the Risk Management Infrastructure in the organization's Annual Report to Shareholders IV Provide an auditable Annual Statement of Compliance with the Board's publicly stated Standards of Corporate Governance to the Board and Audit Committee
- A. I, III and IV only
- B. All of these are expected of the Financial Accounting and Reporting Infrastructure
- C. I and III only
- D. I, II and III only
Answer: B
NEW QUESTION # 71
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