CIMA Risk Management - P3 Exam Practice Test

Laura is an accounts clerk. She is supposed to sign each invoice as evidence that she has conducted checks against supporting documents. Sometimes Laura signs invoices without making these checks.
Terry is a member of the internal audit team. Terry has been told to conduct compliance tests on whether Laura is checking the invoices properly.
Which of the following would give Terry a false sense of assurance that Laura's checks have been operating?

RFD, a listed company, is considering making an investment in a risky new venture. RFD has a substantial cash surplus that will be used to acquire the necessary resources. It is unlikely that RFD would have been able to raise finance for this investment because the company is already highly geared.
Which of the following statements about stakeholders' conflicting interests are true?

K is a manufacturing company. It has sourced new equipment from the US to equip a new production facility.
It has to make a payment of USD1,000,000 in 3 months' time.
K's production manager needs to know whether it is cheaper to use a forward contract or a money market hedge.
Current spot and forward exchange rates are as follows:
Current mid-point money market rates (annual) are as follows:
Ignoring taxation, which of the following statements is correct?

A has an opportunity to invest $90,000 in a project that is expected to generate annual cash inflows of $60,000 for each of the next three years. The project's beta coefficient implies a discount rate of 12% for this project, based on a risk-free rate of return of 3%.
A is prepared to forego the expected cash flows from this project in return for a guaranteed payment of
$50,000 at the end of year 1, $42,000 at the end of year 2 and $30,000 at the end of year 3.
What is the certainty equivalent value of this opportunity to A?

A UK manufacturing company has simultaneously:
* purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65
* sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61 (this option has the same maturity date as the put).
Which of the following is a valid explanation for entering into these option positions?

RFG is considering a major expansion that will result in a more diversified business model.
At present, RFG's market capitalisation is $240 million. This is based on a beta of 1.6. The risk free rate is 4% and the market rate of return is 9%. RFG is financed entirely by equity. The company generates an annual cash surplus of $28.8 million.
The expansion will cost $50 million and will generate future cash flows of $12 million in perpetuity. This new business will reduce RFG's beta to 1.4.
Calculate the adjusted present value of the expansion.

A project requires a capital investment of £2.7million. The project will save £450,000 each year after taxation.
Assume the savings are in perpetuity. The business risk of the venture requires a 15% discount rate. The company has to borrow £1million to finance the project at a rate of 9% and the net tax shield is 30%, the project supports debt which generates an interest tax shield of 0.30 x 0.09 x £1million, which is £27,000 per year in perpetuity.
Calculate the project's adjusted present value.

TLY sell building materials such as bricks sacks of concrete and paving slabs to builders Materials are kept in a large yard Customer orders are fulfilled by a team of 30 employees who use forklift trucks to move sold items to the loading bay, from where they are loaded onto lornes for dispatch to the customer The sales office prepares dispatch notes, which are used by the yard employees to identify the items that have been ordered Which TWO of the following controls would be cost-effective ways to prevent the theft of inventory by TLY's staff?

Which THREE of the following form part of the role of Internal Audit?

BCD has recently experienced a cyber security breach which fortunately was carried out by someone more interested in demonstrating the weakness in its defence than by someone malicious This has made BCD realise that its cyber defence is inadequate BCD has engaged a cyber security consultant who has advised BCD to set up a Computer Incident Response Team (GIRT) What THREE of the following activities would this CIRT have responsibility for?
Recruit specialist security staff to avoid an incident

Select the correct ethical principle that corresponds to each ethical dilemma described.

Which of the following is the major advantage of Cloud storage for an enterprise?

A project has a net present value of $2 million.
Total cash outflows of this project have a present value of $14 million, which includes staff costs of $10 million.
What is the project's sensitivity to staff costs?