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NEW QUESTION # 19
The "Renewing the Dream" program signed into law by President George W Bush in 2002 was designed to
- A. Allow risky, high-cost loans to be credited towards affordable housing goals
- B. 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
- C. 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
- D. Provide grants of US$800 million to help home buyers with down-payment and closing costs
Answer: B
NEW QUESTION # 20
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. courses, educational certification, journals
- C. journals, courses, compliance mandates
- D. courses, conferences, journals
Answer: D
NEW QUESTION # 21
The condition where futures prices of an underlying asset are lower than cash (spot) prices is known as:
- A. Contango
- B. Conchacha
- C. Reverse backwardation
- D. Backwardation
Answer: D
NEW QUESTION # 22
A risk assessment report generated by a PRMIA member creates an apparent conflict of interest between the PRMIA standards and those of the client organization.
Of the following, which is the correct hierarchy to follow to resolve the conflict?
I The decision of a superior within the organization
II PRMIA Standards
III Guidelines from the regulators in which the organization operates
IV The laws of the country
- A. II, I, IV, and III
- B. I, II, III, and IV
- C. III, II, IV, and I
- D. IV, III, II, and I
Answer: D
NEW QUESTION # 23
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 with inputs from business unit leaders
- C. determined by the regulators
- D. determined at the Board level without influence by business unit leaders
Answer: D
NEW QUESTION # 24
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, II and III only
- C. All of these are expectations of the Organization as a Whole
- D. I, III and IV only
Answer: C
NEW QUESTION # 25
How much of Washington Mutual's assets were funded by customer deposits for the decade ending in 2006?
- A. 40%
- B. 60%
- C. 30%
- D. 50%
Answer: B
NEW QUESTION # 26
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 # 27
The problems in the Orange County case can best be characterized as failures related to:
- A. Market Risk
- B. All of the Above
- C. Operational and Regulatory Compliance Risk
- D. Credit Risk
Answer: A
NEW QUESTION # 28
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 # 29
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 separate trading agreements for interest rate derivatives, equity derivatives and foreign exchange transactions.
- D. Use a common trading agreement for interest rate and equity derivatives but a separate agreement for foreign exchange transactions.
Answer: B
NEW QUESTION # 30
Unlike the case at Barings Bank, National Australia Bank:
- A. Had a separation of duties between trading and back office
- B. Had a Board of Directors that was unaware of the true nature of trading activities
- C. Was not dealing in derivatives
- D. Had a risk management infrastructure that was credited with doing its' job well, despite the losses
Answer: A
NEW QUESTION # 31
According to LTCM managers:
- A. Stress Testing was not conducted
- B. Stress Testing was not necessary because their trades were hedged
- 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 # 32
The Fortress Re accounting risk transfer procedures
- A. made it difficult for TFMI to determine whether risk had actually been transferred and whether it had sufficient catastrophe insurance cover
- B. made it difficult for TFMI to determine whether risk had actually been transferred so they had to take out additional catastrophe insurance cover
- C. made it straightforward for TFMI to determine when the risk had been transferred and to take out additional catastrophe insurance cover
- D. made it straightforward for TFMI to determine whether risk had actually been transferred and they decided not to take out more catastrophe insurance cover
Answer: A
NEW QUESTION # 33
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, II and III
- B. I and II
- C. I only
- D. I, II and IV
Answer: B
NEW QUESTION # 34
The condition where futures prices of an underlying asset are lower than cash (spot) prices is known as:
- A. Contango
- B. Conchacha
- C. Reverse backwardation
- D. Backwardation
Answer: D
NEW QUESTION # 35
Washington Mutual's acquisition of Long Beach Financial changed its business model and increased its credit loss profile because
- A. Of a general deterioration of credit quality generally
- B. The resulting loss rate for Washington Mutual was more than 3 times higher than other mortgage lenders tracked by the FDIC
- C. Long Beach Financial had losses which it hadn't realized at the time of the takeover
- D. the two banks were focussed in different markets
Answer: B
NEW QUESTION # 36
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 only
- B. I, III and IV only
- C. All of these are expected of the Risk Management Infrastructure
- D. I and III only
Answer: B
NEW QUESTION # 37
Corporate Governance ...
- A. Is defined as the assembled knowledge and wisdom of the collective stakeholders in the organization, set to maximize shareholder value
- B. Eliminates risk to the greatest extent possible
- C. 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
- D. 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
Answer: D
NEW QUESTION # 38
With respect to the Purpose of Professional Standards, in the event of any difference in standards between local laws/rules and those of PRMIA, members must
- A. refer the matter to their supervisor
- B. use their best judgment
- C. comply with the higher standard under all circumstances
- D. abide by the applicable laws, rules, and regulations of PRMIA and any government and/or regulatory bodies
Answer: C
NEW QUESTION # 39
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, II and III only
- B. All of these are expected of the Financial Accounting and Reporting Infrastructure
- C. I, III and IV only
- D. I and III only
Answer: B
NEW QUESTION # 40
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