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NEW QUESTION 55
When local rules and regulations conflict with the PRMIA Standards of Best Practice, Conduct and Ethics the PRMIA member should ...
- A. Seek advice from a qualified party, being mindful of legal and confidentiality requirements
- B. Modify the interpretation of local rules and regulations to meet the situation
- C. Ignore local rules and regulations
- D. Respect local rules and regulations
Answer: A
NEW QUESTION 56
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 57
John Smith wants to run for election to the Board of Directors of PRMIA. To be nominated, he needs:
- A. The backing of 6% of local members
- B. To go through a screening process conducted by the Nominations Committee
- C. The backing of three other members
- D. The backing of five other members and to be serving on at least one PRMIA Committee
Answer: C
NEW QUESTION 58
The problems at WorldCom can best be characterized as related to:
- A. Market Risk
- B. All of the Above
- C. Credit Risk
- D. Operational and Regulatory Compliance Risk
Answer: D
NEW QUESTION 59
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 60
The Fortress Re finite reinsurance model
- A. 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
- B. 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
- C. 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
- D. 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
Answer: B
NEW QUESTION 61
The steps which the US Treasury Department and the Federal Reserve took in July 2008 to boost confidence in both Fannie Mae and Freddie Mac did not include which one of the following:
- A. Restricting the sale of new Fannie Mae and Freddie Mac securities only to US citizens
- B. Reiterating their belief that both companies played a central role in the US housing finance system
- C. Access to the Federal Reserve discount window
- D. Removing the prohibition on the Treasury Department to buy both companies stock
Answer: B
NEW QUESTION 62
The problems which initiated the crisis at Northern Rock during the summer of 2007 were:
- A. Large customer withdrawals despite the UK regulator and the UK Treasury giving assurances that the bank was solvent
- B. 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
- C. Doubts arising about the viability of the business model which necessitated Bank of England intervention
- D. A depositor run on the bank, following doubts about the viability of the Northern Rock business model
Answer: B
NEW QUESTION 63
PRMIA Governance Principles
- A. must be adhered to by all PRMIA member organizations
- B. must be adhered to by all financial firms that are PRMIA members
- C. must be adhered to by all PRM charter holders
- D. is a set of recommendations based on research and best practice
Answer: D
NEW QUESTION 64
Which of the following regarding Orange County is FALSE?
- A. Citron's losses were eventually exposed by massive margin calls
- B. Bob Citron tried to "ride the yield curve"
- C. Bob Citron heavily leveraged his positions using repos
- D. Bob Citron engaged in risky strategies to benefit personally
Answer: D
NEW QUESTION 65
National Australia Bank and Barings cases are similar in that:
- A. Both A and B
- B. The back offices had inadequate procedures
- C. None of the above
- D. Losses kept increasing while rogue trader(s) hid their positions
Answer: A
NEW QUESTION 66
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 67
Zheng Zhu wants to open a new PRMIA Chapter in Wuhan, China. He can do this if:
- A. At least 100 members live within 50 miles
- B. All of the above
- C. Approved by the Board of Directors
- D. A local business sponsors the chapter
Answer: C
NEW QUESTION 68
MGRM's losses due to "stacking" started to increase when
- A. the oil market went from strong contango to weak contango
- B. the oil market went from backwardation to contango
- C. the oil market went from weak backwardation to strong backwardation
- D. the oil market went from contango to backwardation
Answer: B
NEW QUESTION 69
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 70
As a result of the US government's intervention, which of the following is true?
- A. The cost of borrowing for house buyers will rise because of the risk premium now built into the cost of such a government guarantee
- B. Foreign Central Banks will continue to sell their holdings of Fannie Mae and Freddie Mac securities
- C. The cost of borrowing for Fannie Mae and Freddie Mac should decline because the government will be standing behind their debts and the buying and selling of mortgage debt will continue
- D. The systemic risks still remain in the housing market because it increases the US government's debt
Answer: C
NEW QUESTION 71
Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:
I. competitive market conditions
II. ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders III. ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators IV. reporting all such personnel to the local regulator
- A. II, III and IV only
- B. I and II only
- C. All of the above
- D. I, II and IV only
Answer: B
NEW QUESTION 72
Which of the following CANNOT be counted as a reason why LTCM was given a rescue package and not left to default?
- A. Untimely unwinding of some LTCM positions would lead to large market fluctuations and possible turmoil
- B. The consortium wanted to keep this out of the regulators' eyes
- C. Some of the banks in the rescue consortium were LTCM investors
- D. Many of the banks in the rescue consortium were among LTCM's counterparties
Answer: B
NEW QUESTION 73
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