8004 Exam Training Practice Tests (PRMIA PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics)]

Question 1

When Fannie Mae and Freddie Mac were taken under US government conservatorship, which of the following was not included within their operating mandate?

A. There was a 2 year limit to the conservatorship 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. Fannie Mae and Freddie Mac will continue to buy home loans from banks to repackage them as mortgage-backed securities

Correct Answer: A

Question 2

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

A. Compete directly with banks in selling mortgaged to would-be home owners B. Buy mortgage-backed loans for banks and keep them all on their books, using them as collateral for the US government to borrow C. Offer loans directly to the consumer D. Repackage mortgage loans made by banks and sell them on to investors as asset backed securities

Correct Answer: D

Question 3

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. Approach the client about the concern, regardless of what their reaction might be B. Respect the client's confidentiality as that takes precedence C. Report this conduct to their immediate supervisor D. Report the findings immediately to authorities

Correct Answer: C

Question 4

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. A depositor run on the bank, following doubts about the viability of the Northern Rock business model D. Doubts arising about the viability of the business model which necessitated Bank of England intervention

Correct Answer: B

Question 5

According to the G-30 Study, the risk management infrastructure's funding must be

A. determined at the Board level without influence by business unit leaders B. determined by the regulators C. determined by business-unit leaders D. determined at the Board level with inputs from business unit leaders

Correct Answer: A

Question 6

Every PRMIA chapter is designed to serve the local needs of members, so they often have fairly independent planning structures and ideas. According to the PRMIA Bylaws, Regional Chapters and Regional Directors:

A. Can have meetings that only local members are allowed to attend B. Can have their own offices, bylaws and regulations provided they do not conflict with those of PRMIA C. Can sign contracts on behalf of PRMIA without prior approval from the Board of Directors D. All of the above

Correct Answer: B

Question 7

Finite insurance is reinsurance which

A. transfers only a limited amount of risk at the usual reinsurance price B. transfers the total risk at less cost than traditional reinsurance C. transfers only a limited amount of risk at less cost than traditional reinsurance D. transfers the total risk at the usual reinsurance price

Correct Answer: C

Question 8

The early 2003 trading strategy of China Aviation oil was

A. to sell calls and buy puts B. to buy calls and sell puts C. to sell puts and buy calls D. to buy puts and sell calls

Correct Answer: B

Question 9

Which of the following best characterize the problems that developed at Bankers Trust?

A. Over exposure to the property market B. Volume growth at the expense of margin C. Excessive reliance on volatile and sophisticated derivatives D. A failure to try to protect their clients' interests

Correct Answer: D

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