8009 PRMIA Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics

Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition

Last Update 23 hours ago Total Questions : 110

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Question # 21

A risk manager is asked to analyze the credit risk of a convertible bond. The risk manager has never analyzed convertible bonds, but does have significant expertise in credit risk. The risk manager accepts the assignment, finds a paper on the subject through the PRMIA web site and copies the method used there. The risk manager completes the assignment and delivers a report to his or her direct supervisor and the supervisor is quite pleased.

According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), this was acceptable behavior if the following conditions were met:

I. The risk manager disclosed the lack of knowledge about convertible bonds

II. The methodology employed is disclosed and explained

III. The report was just to be used for analysis and not in practice

IV. The risk manager was sure of his/her understanding of the paper found on the web

I and II

I, II and IV

I, II and III

I only

Question # 22

A PRMIA member is offered a highly paid work assignment on the condition that some aspects of assignment are not to be done according to PRMIA standards.

What should they do?

Perform the assignment, noting in the final report the standards to which the assignment was done

Accept the assignment, produce and deliver two reports according to both standards

Accept the assignment, and prior to doing any work, report the conflict of interest to the organization ' s compliance department

The PRMIA member should place the integrity of the risk management profession and users of risk management above their own personal interests, and refuse the work

Question # 23

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

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

Question # 24

Which US regulatory authority resolved the restructuring of Washington Mutual?

The Office of Thrift Supervision

Federal Deposit Insurance Corporation

The Federal Reserve Bank

None of the above

Question # 25

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

Trying to borrow more money from major money centre banks

Issuing Subordinated Debt

Returning capital to the general partners before others

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

Question # 26

Which of the following was not received by Northern Rock as official support from the UK banking and government authorities?

A covert money market support operation designed to cover up the difficulties Northern Rock was facing

The Bank of England ' s role as Lender-Of-Last-resort was activated at a penalty interest rate of 150 basis points above the Bank Rate

The UK government offered to guarantee all existing and new retail deposits, and to most other creditors

The Bank of England provided an additional unlimited facility secured on the collateral of all Northern Rock assets

Question # 27

The Bankers Trust Case Study is about:

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

Question # 28

The Basic Knowledge a PPRMIA member should comply with, as stipulated within the PRMIA Standards of Best Practice, Conduct & Ethics, is to

only improve their PERSONAL professional competence

maintains and improve their professional competence and strive to maintain and improve the competence of other risk professionals

only possess the required skills and/or certification to complete the risk assessment / management work at hand

learn from a qualified risk management practitioner

Question # 29

Which of the following is NOT part of the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct) Guidance on Ethical Behavior?

Ensure globally accepted standards are adhered to at all costs

Respect local customs

Respect local laws and regulations

Take responsibility for your work

Question # 30

An Organization as a Whole must:

I. Provide an environment in which an Escalation Policy can be effective

II. Commit itself to actual enforcement of corporate governance policies

III. Provide ongoing education and training to all employees on the role of risk management and corporate governance in the organization

IV. Publish an external auditor ' s opinion that the corporation is in compliance with the Board ' s publicly stated Standards of Corporate Governance

I, II and III only

I, III and IV only

I, II and IV only

All of these are expectations of the Organization as a Whole