PRMIA 8004 Dumps - 100% Cover Real Exam Questions (Updated 112 Questions)
Real 8004 dumps - Real PRMIA dumps PDF
NEW QUESTION # 24
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 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)
- C. 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
- D. 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
Answer: B
NEW QUESTION # 25
According to the Group of 30 Report, option contracts:
- A. Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation
- B. Always generate credit risk to both counterparties
- C. Usually create credit risk only for the seller (to default by the buyer)
- D. Create no credit risk, since the buyer need not exercise the option
Answer: A
NEW QUESTION # 26
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. only improve their PERSONAL professional competence
- C. learn from a qualified risk management practitioner
- D. only possess the required skills and/or certification to complete the risk assessment / management work at hand
Answer: A
NEW QUESTION # 27
Metallgesellschaft's retail contracts were
- A. fully hedged using exchange-traded futures of the same maturities as the retail contracts
- B. hedged using exchange-traded futures with longer maturities than the retail contracts
- C. hedged using exchange-traded futures with shorter maturities than the retail contracts
- D. unhedged
Answer: C
NEW QUESTION # 28
The problems which initiated the crisis at Northern Rock during the summer of 2007 were:
- A. A depositor run on the bank, following doubts about the viability of the Northern Rock business model
- B. Large customer withdrawals despite the UK regulator and the UK Treasury giving assurances that the bank was solvent
- C. A general lack of confidence in mortgage backed securities associated in large part with developments in the US sub-prime mortgage market, and doubts emerging about the viability of the Northern Rock business model
- D. Doubts arising about the viability of the business model which necessitated Bank of England intervention
Answer: C
NEW QUESTION # 29
According to the G-30 Study, the risk management infrastructure's funding must be
- A. determined by the regulators
- B. determined by business-unit leaders
- C. determined at the Board level with inputs from business unit leaders
- D. determined at the Board level without influence by business unit leaders
Answer: D
NEW QUESTION # 30
Which of the following best characterize the problems that developed at Bankers Trust?
- A. Volume growth at the expense of margin
- B. Excessive reliance on volatile and sophisticated derivatives
- C. Over exposure to the property market
- D. A failure to try to protect their clients' interests
Answer: D
NEW QUESTION # 31
Select the one correct statement relative to Barings Bank.
- A. Proprietary and agency trading were separate and therefore did not increase risk.
- B. Proprietary and agency trading were combined and therefore did not increase risk.
- C. Proprietary and agency trading were combined and therefore did increase risk.
- D. Proprietary and agency trading were separate and did increase risk.
Answer: C
NEW QUESTION # 32
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. I, II and IV only
- B. I, III and IV only
- C. All of these are expectations of the Organization as a Whole
- D. I, II and III only
Answer: C
NEW QUESTION # 33
A PRMIA member is offered a highly paid work assignment on the condition that some aspects of assignment are not to be done according to PRMIA standards.
What should they do?
- A. Accept the assignment, and prior to doing any work, report the conflict of interest to the organization's compliance department
- B. The PRMIA member should place the integrity of the risk management profession and users of risk management above their own personal interests, and refuse the work
- C. Accept the assignment, produce and deliver two reports according to both standards
- D. Perform the assignment, noting in the final report the standards to which the assignment was done
Answer: B
NEW QUESTION # 34
Up until 2006, which of the following was not a primary driver for Washington Mutual's earning?
- A. Deposit taking activities which generated net interest income.
- B. Complex derivative trades based on volatility indices.
- C. The provision of fee based services to its customers.
- D. Lending to consumers and small businesses.
Answer: B
NEW QUESTION # 35
Which of the following is part of the Group of 30 Report's market risk and stress testing recommendations?
- A. Historic simulations are not effective methods of stress testing
- B. To be consistent with regulatory capital measures, 10-day holding periods should be standardized for VaR reporting
- C. Market risk VaR measures should be multiplied by 3 to get to a stress test figure, as long as the VaR model has been back-tested
- D. Stress tests should incorporate changes in liquidity
Answer: D
NEW QUESTION # 36
According to PRMIA governance principles, boards and audit committees should ...
- A. Collectively assume responsibility of understanding and reporting the effectiveness of the firm risk management infrastructure
- B. Be composed of key business unit representatives
- C. Leave shareholder accountability to senior management who decides strategic direction
- D. Review compensation plans to ensure consistency with corporate risk appetite, competitive market conditions, and fiduciary responsibility to shareholders
Answer: D
NEW QUESTION # 37
As LTCM started to have major losses, it compounded its problems by doing what?
- A. Unwinding its' more liquid trades thereby creating more liquidity risk overall
- B. Trying to borrow more money from major money centre banks
- C. Returning capital to the general partners before others
- D. Issuing Subordinated Debt
Answer: A
NEW QUESTION # 38
Taisei Fire and Marine Insurance Co
- A. had a full understanding from Fortress Re of the risks in the pool
- B. had a full understanding from other members of the pool of the pool's liabilities
- C. relied on the information it received from other members of the reinsurance pool to manage its risks
- D. relied almost entirely on Fortress Re's management team for information on the risks in its portfolio
Answer: D
NEW QUESTION # 39
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 # 40
Which US regulatory authority resolved the restructuring of Washington Mutual?
- A. The Federal Reserve Bank
- B. Federal Deposit Insurance Corporation
- C. None of the above
- D. The Office of Thrift Supervision
Answer: D
NEW QUESTION # 41
PwC concluded that the accounting policy adopted by China Aviation Oil was incorrect because it
- A. 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
- B. used neither the intrinsic value nor the time value
- C. 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)
- D. took into account both the intrinsic value and the time value
Answer: A
NEW QUESTION # 42
A risk manager has just completed a risk assessment project. The report has been given to the risk manager's direct supervisor, who refuses to escalate the material issues raised in the report. Further, the direct supervisor edits the report to remove the section describing the material risk, who then submits it to the firm's Executive Committee.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), which of the following actions is most appropriate:
- A. If the risk manager deems it appropriate, he / she should send a copy of the original report to the CEO
- B. The risk manager has submitted the report to their direct supervisor and their obligation ends at this point, nothing further should be done
- C. Escalation of the issue is against the Code of Conduct because one should respect the administrative structure of the organization
- D. The risk manager should attempt to resolve the conflict with the direct supervisor, but if that does not work, they should contact the Whistle-Blowing Hotline of the organization. If no such hot-line is in place, they should contact the PRMIA Ethics Committee
Answer: D
NEW QUESTION # 43
How much of Washington Mutual's assets were funded by customer deposits for the decade ending in 2006?
- A. 50%
- B. 40%
- C. 60%
- D. 30%
Answer: C
NEW QUESTION # 44
When supervising others, a PRMIA member must comply with
- A. the standards of the organization where the work is being performed
- B. PRMIA Standards
- C. his / her established personal standards of work approved in previous work situations
- D. local regulatory authority standards which may be less onerous than PRMIA standards
Answer: B
NEW QUESTION # 45
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