2023 ExamsReviews PRMIA 8004 Dumps and Exam Test Engine
PRMIA 8004 DUMPS WITH REAL EXAM QUESTIONS
NEW QUESTION # 13
A risk manager finds that a client is engaged in a practice that looks like money laundering.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), the risk manager should:
- A. Respect the client's confidentiality as that takes precedence
- B. Approach the client about the concern, regardless of what their reaction might be
- C. Report the findings immediately to authorities
- D. Report this conduct to their immediate supervisor
Answer: D
NEW QUESTION # 14
PwC concluded that the accounting policy adopted by China Aviation Oil was incorrect because it
- A. used neither the intrinsic value nor the time value
- B. only regarded the intrinsic value (i.e. the difference between the strike price and the forward price of the underlying commodity) as the fair value of its options
- C. took into account both the intrinsic value and the time value
- D. only took into account the time value of the option (which includes recognizing the time left to maturity of the option, the volatility of the spot price of the underlying commodity, interest rates and other factors)
Answer: B
NEW QUESTION # 15
The failure of Washington Mutual was NOT due to which one of the following?
- A. Low lending standards and bad quality acquisitions
- B. Using a combination of subprime mortgage loans and credit cards
- C. It failed due to the poor quality of its assets
- D. A run on its deposits by bank customers
Answer: D
NEW QUESTION # 16
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 provided an additional unlimited facility secured on the collateral of all Northern Rock assets
- C. 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
- D. A covert money market support operation designed to cover up the difficulties Northern Rock was facing
Answer: D
NEW QUESTION # 17
A risk manager is asked to analyze the credit risk of a convertible bond. The risk manager has never analyzed convertible bonds, but does have significant expertise in credit risk. The risk manager accepts the assignment, finds a paper on the subject through the PRMIA web site and copies the method used there. The risk manager completes the assignment and delivers a report to his or her direct supervisor and the supervisor is quite pleased.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), this was acceptable behavior if the following conditions were met:
I The risk manager disclosed the lack of knowledge about convertible bonds II The methodology employed is disclosed and explained III The report was just to be used for analysis and not in practice IV The risk manager was sure of his/her understanding of the paper found on the web
- A. I and II
- B. I, II and III
- C. I only
- D. I, II and IV
Answer: A
NEW QUESTION # 18
Which of the following CANNOT be counted as a reason why LTCM was given a rescue package and not left to default?
- A. Many of the banks in the rescue consortium were among LTCM's counterparties
- B. Some of the banks in the rescue consortium were LTCM investors
- 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 # 19
MGRM's losses due to "stacking" started to increase when
- A. the oil market went from backwardation to contango
- B. the oil market went from contango to backwardation
- C. the oil market went from weak backwardation to strong backwardation
- D. the oil market went from strong contango to weak contango
Answer: A
NEW QUESTION # 20
According to the Group of 30 Report, dealers and end-users are encouraged to:
- A. Use one trading agreement for foreign exchange forwards and another for foreign exchange options.
- B. Use a single master trading agreement as widely as possible with each counter party.
- C. Use a common trading agreement for interest rate and equity derivatives but a separate agreement for foreign exchange transactions.
- D. Use separate trading agreements for interest rate derivatives, equity derivatives and foreign exchange transactions.
Answer: B
NEW QUESTION # 21
Barings failed to recognize that Nick Leeson's losses were increasing because:
- A. The margin report sent to London did not show the true margin needs
- B. Leeson hid his trades in a suspense account
- C. The London office did not ask for any reports
- D. Leeson ran the front office
Answer: B
NEW QUESTION # 22
According to the G-30 Study, the risk management infrastructure's funding must be
- A. determined by business-unit leaders
- B. determined at the Board level without influence by business unit leaders
- C. determined by the regulators
- D. determined at the Board level with inputs from business unit leaders
Answer: B
NEW QUESTION # 23
Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:
I competitive market conditions
II ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders III ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators IV reporting all such personnel to the local regulator
- A. All of the above
- B. I and II only
- C. I, II and IV only
- D. II, III and IV only
Answer: B
NEW QUESTION # 24
Bankgesellschaft Berlin's failures can be best characterised as
- A. none of the above
- B. both A and B
- C. credit risk caused by a diversified portfolio of poor-quality loans
- D. credit risk caused by overexposure to the property market
Answer: D
NEW QUESTION # 25
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. All of these are expected of the Financial Accounting and Reporting Infrastructure
- B. I and III only
- C. I, III and IV only
- D. I, II and III only
Answer: A
NEW QUESTION # 26
Washington Mutual's acquisition of Long Beach Financial changed its business model and increased its credit loss profile because
- A. the two banks were focussed in different markets
- 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. Long Beach Financial had losses which it hadn't realized at the time of the takeover
Answer: B
NEW QUESTION # 27
The Chair of the PRMIA Board of Directors may hold the following offices:
- A. Vice Chair
- B. Secretary
- C. Parliamentarian
- D. Chair only
Answer: D
NEW QUESTION # 28
Which of the following was NOT a factor in the National Australia Bank case?
- A. Money laundering using foreign exchange trades for political leaders
- B. Improper or insufficient Board-level communication regarding the importance of risk management and oversight
- C. Inadequate back office procedures
- D. Rogue traders
Answer: A
NEW QUESTION # 29
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?
- A. selling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- B. selling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- C. selling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
- D. selling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
Answer: D
NEW QUESTION # 30
Which of the following does NOT relate to the Orange County case?
- A. Where there are excess rewards, there must be risks
- B. The Know Your Customer rule
- C. Fractured organisational structure and poor risk oversight mechanism make it easy for powerful individuals to hide risk in the gaps
- D. Strategies that are not possible to explain to third parties should not be employed by the risk averse
Answer: B
NEW QUESTION # 31
In the case of National Australia Bank, which of the following was present?
- A. A window of time between close of day for reporting purposes and back office checking that allowed traders to hide losses using fictitious trades
- B. Both A and B
- C. The Board received risk management information that was incorrect, incomplete or insufficiently detailed
- D. Neither A nor B
Answer: B
NEW QUESTION # 32
Mary Jones wants the Bylaws of PRMIA to be changed so that people can't join PRMIA unless they meet a set of criteria she has devised with her colleagues. She can do this by getting which of the following approvals:
- A. The Board of Directors, but only if the Blue Ribbon Panel affirms the change
- B. 34 of all Members
- C. The Board of Directors and a majority of the Members
- D. The Board of Directors alone
Answer: C
NEW QUESTION # 33
Which US regulatory authority resolved the restructuring of Washington Mutual?
- A. The Federal Reserve Bank
- B. None of the above
- C. Federal Deposit Insurance Corporation
- D. The Office of Thrift Supervision
Answer: D
NEW QUESTION # 34
When describing the reasons for the collapse of China Aviation Oil, which of the following was not cited?
- A. Senior management in China were aware of the positions but did not understand the complexities of risk managing them
- B. No properly defined risk management policies in place and general lack of oversight by senior management
- C. Loss generating positions were rolled over by selling options on larger positions to generate cash premiums' to settle existing position losses
- D. Time value was not taken into account during the contract valuation process
Answer: A
NEW QUESTION # 35
According to the G-30 Study, the risk management infrastructure's funding must be
- A. determined by business-unit leaders
- B. determined at the Board level without influence by business unit leaders
- C. determined by the regulators
- D. determined at the Board level with inputs from business unit leaders
Answer: B
NEW QUESTION # 36
Which items below were at the core of the problems at Bankgesellschaft Berlin?
- A. Political corruption and poor management
- B. Over exposure to the property market
- C. All of the above
- D. Rash guarantees given to investors in property linked funds
Answer: C
NEW QUESTION # 37
The Chief Risk Officer is responsible for the management of the Risk Management Infrastructure, and as such helps the Board define, and then implements throughout the organization, the risk appetite of the organization.
Which of the following is also the responsibility of the Chief Risk Officer?
- A. Acts as sponsor for risk throughout the organization and ensures that a risk culture is implemented, and maintained
- B. Maintaining appropriate assurance measures to ensure that the Governance and Risk framework of the organization is effective, and, if any shortcomings are discovered, to escalate these to the Board so that remedial action can be taken in an appropriate and timely manner
- C. Ensures that reporting of risk and governance-related matters are produced in a timely and accurate manner
- D. ensuring that all employees understand the rules and regulations (both internal and external) with which they must comply and the implications, for them and for the organization, of non-compliance
Answer: C
NEW QUESTION # 38
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