8009 Sample Questions Answers

I, II, III, and IV

IV, III, II, and I

II, I, IV, and III

III, II, IV, and I

Only a few months previously it had reported record profits.

The quality of its' assets was never in question.

For many years it was regarded as a star-performer in the financial markets.

Its' loan loss record was poor by industry standards.

The Board of Directors, but only if the Blue Ribbon Panel affirms the change

The Board of Directors and a majority of the Members

The Board of Directors alone

34 of all Members

Approach the client about the concern, regardless of what their reaction might be

Respect the client's confidentiality as that takes precedence

Report this conduct to their immediate supervisor

Report the findings immediately to authorities

Define the organization's definition of risk management as articulated by the Board in clear and uncertain terms

Include financial risk management, compliance and external reporting and, to the extent that resources allow, should exclude legal or accounting

Be independently staffed and report to an employee who is on the Executive Committee (Operating Committee) but who is NOT a business unit leader

Review continually the application of the Principles of Good Governance to the Risk Management Infrastructure, financial accounting and reporting infrastructure and the organization as a whole

Parliamentarian

Secretary

Vice Chair

Chair only

Eliminates risk to the greatest extent possible

Is defined as the assembled knowledge and wisdom of the collective stakeholders in the organization, set to maximize shareholder value

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

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

Using a combination of subprime mortgage loans and credit cards

It failed due to the poor quality of its assets

Low lending standards and bad quality acquisitions

A run on its deposits by bank customers

Fannie Mae and Freddie Mac will continue to buy home loans from banks to repackage them as mortgage-backed securities

The US government will provide capital as needed in return for preferred shares in the companies

The US government will buy mortgage-backed securities in the open market as needed

There was a 2 year limit to the conservatorship

allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability

allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid annual premiums to cover these policies, and as the risks were spread out over the year the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability

allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the future premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability

allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, but as the risks were spread out over time the future premiums were not accounted for as current liabilities on the books of the pool members, thus giving a false impression of profitability

Money due to unfavourable market moves

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

Loss of market share due to their licenses being revoked

Time spent on legal proceedings in courts

All PRMIA Fellow Members

The Regional Directors

The Blue Ribbon Advisory Panel

A two-thirds affirmative vote of all members

Bob Citron engaged in risky strategies to benefit personally

Bob Citron tried to "ride the yield curve"

Bob Citron heavily leveraged his positions using repos

Citron's losses were eventually exposed by massive margin calls

I, II and III only

I, III and IV only

I and III only

All of these are expected of the Financial Accounting and Reporting Infrastructure

I and II only

I, II and III only

I, II and IV only

All are PRMIA Governance Principles

A window of time between close of day for reporting purposes and back office checking that allowed traders to hide losses using fictitious trades

The Board received risk management information that was incorrect, incomplete or insufficiently detailed

Both A and B

Neither A nor B

30%

40%

50%

60%

Realized losses on short-term contracts against unrealized gains on the long-run contract

The final price of the underlying being higher than the initial price

The initial price of the underlying being higher than the final price

The short-term price of the underlying being higher than the long-run contract

overexposure to the real estate market

large losses at the proprietary trading desk

reliance on thinly traded derivatives to hedge

failure to guard its clients' best interests

Failed corporate governance

Accounting abuses

Unfair pricing to customers

Over stating actual sales

courses, conferences, journals

conferences, discussion groups, blog sites

courses, educational certification, journals

journals, courses, compliance mandates

Political corruption and poor management

Over exposure to the property market

Rash guarantees given to investors in property linked funds

All of the above

must be adhered to by all PRMIA member organizations

is a set of recommendations based on research and best practice

must be adhered to by all PRM charter holders

must be adhered to by all financial firms that are PRMIA members

Lending to consumers and small businesses.

Deposit taking activities which generated net interest income.

The provision of fee based services to its customers.

Complex derivative trades based on volatility indices.

PRMIA Standards

the standards of the organization where the work is being performed

his / her established personal standards of work approved in previous work situations

local regulatory authority standards which may be less onerous than PRMIA standards

Stress Testing looked at the 12 biggest deals with each of their top 20 counterparties

Stress Testing was not conducted

Stress Testing was not necessary because their trades were hedged

Stress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations

Basis Risk

Currency Settlement

Interest Rate

Inflation

fully aware of the uninsured risks Fortress Re were taking

absolutely unaware of their uninsured liabilities

aware that they had some uninsured liabilities but thought they had enough capital to withstand any uninsured losses

None of the above

Separation of front and back offices

More senior level involvement at Barings regarding use of derivatives

Recognition that large profits can be an indicator of higher risk

All of the above

to buy calls and sell puts

to buy puts and sell calls

to sell puts and buy calls

to sell calls and buy puts