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PRMIA 8004 - PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics

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Total 110 questions

Employees shall be remunerated adequately for the roles that they perform, where 'adequately' is defined

A.

as being the market norm for similarly situated personnel in competitive organizations

B.

using external references and benchmarks, and in a framework which is consistent with the type of risk-taking behavior expected of employees

C.

using the risk reward profile for each business line in the organization

D.

as commensurate with policies to attract and retain high income / revenue earners

Which US regulatory authority resolved the restructuring of Washington Mutual?

A.

The Office of Thrift Supervision

B.

Federal Deposit Insurance Corporation

C.

The Federal Reserve Bank

D.

None of the above

What was the most important loss for Bankers Trust?

A.

Money due to unfavourable market moves

B.

Loss of its' reputation due to actions seen as detrimental to their clients

C.

Loss of market share due to their licenses being revoked

D.

Time spent on legal proceedings in courts

Which of the following was not cited within the chain of miscalculations and deferred decisions for the downfall of Fannie Mae and Freddie Mac

A.

Extreme exposure to foreign currency exposures and losses from non-US$ mortgages

B.

Lawmakers postponed strenghtening regulatory oversight due to partisan infighting

C.

Under-management and under-measurement of market and liquidity risk

D.

They did not raise enough capital to weather the storm as the housing slump expanded

According to the Group of 30 Report, deriving aggregate potential credit exposure for a counterparty by adding up the potential exposure of multiple transactions:

A.

Gives an accurate result in most cases

B.

Captures portfolio effects but not tenor differences

C.

Can easily reflect the impact of netting

D.

Overstates exposure in most cases

Bankgesellschaft Berlin's failures can be best characterised as

A.

credit risk caused by overexposure to the property market

B.

credit risk caused by a diversified portfolio of poor-quality loans

C.

both A and B

D.

none of the above

The Bankers Trust Case Study is about:

A.

overexposure to the real estate market

B.

large losses at the proprietary trading desk

C.

reliance on thinly traded derivatives to hedge

D.

failure to guard its clients' best interests

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 of the organization, and the local regulator

B.

Internal controls, and the expectations of stakeholders, shareholders, and the general public

C.

The local regulator, internal controls, and shareholders

D.

Only the internal controls and compliance standards

The financial intermediary services provided by Fannie Mae and Freddie Mac were designed to

A.

Offer loans directly to the consumer

B.

Compete directly with banks in selling mortgaged to would-be home owners

C.

Repackage mortgage loans made by banks and sell them on to investors as asset backed securities

D.

Buy mortgage-backed loans for banks and keep them all on their books, using them as collateral for the US government to borrow

As LTCM started to have major losses, it compounded its problems by doing what?

A.

Trying to borrow more money from major money centre banks

B.

Issuing Subordinated Debt

C.

Returning capital to the general partners before others

D.

Unwinding its' more liquid trades thereby creating more liquidity risk overall