[Oct 09, 2021] 8009 Ultimate Study Guide - ActualTestsQuiz
Ultimate Guide to Prepare 8009 Certification Exam for PRM in 2021
NEW QUESTION 42
As LTCM started to have major losses, it compounded its problems by doing what?
- A. Returning capital to the general partners before others
- B. Unwinding its' more liquid trades thereby creating more liquidity risk overall
- C. Issuing Subordinated Debt
- D. Trying to borrow more money from major money centre banks
Answer: B
NEW QUESTION 43
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. The local regulator, internal controls, and shareholders
- B. Internal controls, and the expectations of stakeholders, shareholders, and the general public
- C. Only the internal controls and compliance standards
- D. Internal controls of the organization, and the local regulator
Answer: B
NEW QUESTION 44
The failure of Washington Mutual was NOT due to which one of the following?
- A. Low lending standards and bad quality acquisitions
- B. A run on its deposits by bank customers
- C. It failed due to the poor quality of its assets
- D. Using a combination of subprime mortgage loans and credit cards
Answer: B
NEW QUESTION 45
Finite insurance is reinsurance which
- A. transfers the total risk at the usual reinsurance price
- B. transfers only a limited amount of risk at less cost than traditional reinsurance
- C. transfers the total risk at less cost than traditional reinsurance
- D. transfers only a limited amount of risk at the usual reinsurance price
Answer: B
NEW QUESTION 46
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 two banks were focussed in different markets
- C. The resulting loss rate for Washington Mutual was more than 3 times higher than other mortgage lenders tracked by the FDIC
- D. Of a general deterioration of credit quality generally
Answer: C
NEW QUESTION 47
Taisei Fire and Marine Insurance Co
- A. had a full understanding from other members of the pool of the pool's liabilities
- B. relied on the information it received from other members of the reinsurance pool to manage its risks
- C. had a full understanding from Fortress Re of the risks in the pool
- D. relied almost entirely on Fortress Re's management team for information on the risks in its portfolio
Answer: D
NEW QUESTION 48
When considering the performance of Northern Rock within its peer group of banks, which of the following is not correct?
- A. Only a few months previously it had reported record profits.
- B. The quality of its' assets was never in question.
- C. For many years it was regarded as a star-performer in the financial markets.
- D. Its' loan loss record was poor by industry standards.
Answer: D
NEW QUESTION 49
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 shorter maturities than the retail contracts
- C. unhedged
- D. hedged using exchange-traded futures with longer maturities than the retail contracts
Answer: B
NEW QUESTION 50
The Risk Management Infrastructure of an organization must:
I. To the extent possible, avoid silos of control and oversight
II. Have budgets set by the business unit leaders
III. Actively provide ongoing professional development for risk management staff and require them to be committed to standards of best practice, conduct and ethics in their work IV. Provide general risk management and related corporate governance training for employees of the organization as a Whole
- A. I and III only
- B. I, III and IV only
- C. All of these are expected of the Risk Management Infrastructure
- D. I only
Answer: B
NEW QUESTION 51
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. Report the findings immediately to authorities
- B. Report this conduct to their immediate supervisor
- C. Approach the client about the concern, regardless of what their reaction might be
- D. Respect the client's confidentiality as that takes precedence
Answer: B
NEW QUESTION 52
What was the most important loss for Bankers Trust?
- A. Time spent on legal proceedings in courts
- B. Money due to unfavourable market moves
- C. Loss of market share due to their licenses being revoked
- D. Loss of its' reputation due to actions seen as detrimental to their clients
Answer: D
NEW QUESTION 53
Which of the following was a key problem in the Barings Bank case?
- A. The different time zones that the office was trading in
- B. Difference in the contract sizes in the OSE and SIMEX
- C. Leeson was executing an arbitrage strategy even though he was not authorized to do so
- D. Having the back office and front office operations under the same person
Answer: D
NEW QUESTION 54
The hedging strategy employed by MG Refining & Marketing has been called:
- A. Dynamic hedging
- B. A differential hedge
- C. Nothing because MG Refining & Marketing did not hedge its position
- D. A stacked hedge
Answer: D
NEW QUESTION 55
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, II and III only
- C. I, III and IV only
- D. I, II and IV only
Answer: A
NEW QUESTION 56
According to the Group of 30 Report, option contracts:
- A. Create no credit risk, since the buyer need not exercise the option
- B. Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation
- C. Always generate credit risk to both counterparties
- D. Usually create credit risk only for the seller (to default by the buyer)
Answer: B
NEW QUESTION 57
Which is NOT part of the guidance on Professional Conduct in the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct)?
- A. Provide advice that is clear and accurate
- B. Report to the Regulator any departures from generally accepted methodology or practices
- C. Clearly inform all affected parties of any apparent or actual conflicts of interest
- D. Know and abide by applicable rules and regulations
Answer: B
NEW QUESTION 58
Which of the following best characterize the problems that developed at Bankers Trust?
- A. Over exposure to the property market
- B. A failure to try to protect their clients' interests
- C. Volume growth at the expense of margin
- D. Excessive reliance on volatile and sophisticated derivatives
Answer: B
NEW QUESTION 59
When Fannie Mae and Freddie Mac were taken under US government conservatorship, which of the following was not included within their operating mandate?
- A. Fannie Mae and Freddie Mac will continue to buy home loans from banks to repackage them as mortgage-backed securities
- B. The US government will provide capital as needed in return for preferred shares in the companies
- C. The US government will buy mortgage-backed securities in the open market as needed
- D. There was a 2 year limit to the conservatorship
Answer: D
NEW QUESTION 60
The "Renewing the Dream" program signed into law by President George W Bush in 2002 was designed to
- A. 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
- B. Provide grants of US$800 million to help home buyers with down-payment and closing costs
- C. Allow risky, high-cost loans to be credited towards affordable housing goals
- D. 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
Answer: A
NEW QUESTION 61
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. Ensures that reporting of risk and governance-related matters are produced in a timely and accurate manner
- B. 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
- C. 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
- D. Acts as sponsor for risk throughout the organization and ensures that a risk culture is implemented, and maintained
Answer: A
NEW QUESTION 62
Which items below were at the core of the problems at Bankgesellschaft Berlin?
- A. Over exposure to the property market
- B. All of the above
- C. Rash guarantees given to investors in property linked funds
- D. Political corruption and poor management
Answer: B
NEW QUESTION 63
Corporate Governance ...
- A. Is defined as that which is best practiced within an enterprise risk management framework, guided by the PRMIA Standards of Best Practice, Conduct and Ethics above all else
- B. Is defined as the assembled knowledge and wisdom of the collective stakeholders in the organization, set to maximize shareholder value
- C. Is defined as business decision making predicated on a belief in potential rewards, balanced with the knowledge, understanding and appreciation of the risk taken to pursue those potential rewards
- D. Eliminates risk to the greatest extent possible
Answer: C
NEW QUESTION 64
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