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Updated Jan-2024 Pass 8004 Exam - Real Practice Test Questions
NEW QUESTION # 28
Metallgesellschaft's retail contracts were
- A. unhedged
- B. hedged using exchange-traded futures with longer maturities than the retail contracts
- C. fully hedged using exchange-traded futures of the same maturities as the retail contracts
- D. hedged using exchange-traded futures with shorter maturities than the retail contracts
Answer: D
NEW QUESTION # 29
The "normal" credit loss profile of Washington Mutual was increased by which of the following?
- A. Acquisitions like Long Beach and Providian
- B. The general downturn in the economy of the US
- C. By lowering its own credit underwriting standards
- D. Catastrophic losses in its own credit card division
Answer: A
NEW QUESTION # 30
Metallgesellschaft's retail contracts were
- A. unhedged
- B. hedged using exchange-traded futures with longer maturities than the retail contracts
- C. fully hedged using exchange-traded futures of the same maturities as the retail contracts
- D. hedged using exchange-traded futures with shorter maturities than the retail contracts
Answer: D
NEW QUESTION # 31
The condition where futures prices of an underlying asset are lower than cash (spot) prices is known as:
- A. Conchacha
- B. Contango
- C. Backwardation
- D. Reverse backwardation
Answer: C
NEW QUESTION # 32
Which of the following CANNOT be counted as a reason why LTCM was given a rescue package and not left to default?
- A. Many of the banks in the rescue consortium were among LTCM's counterparties
- B. Untimely unwinding of some LTCM positions would lead to large market fluctuations and possible turmoil
- C. The consortium wanted to keep this out of the regulators' eyes
- D. Some of the banks in the rescue consortium were LTCM investors
Answer: C
NEW QUESTION # 33
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
- A. I only
- B. I and II
- C. I, II and IV
- D. I, II and III
Answer: B
NEW QUESTION # 34
The Chair of the PRMIA Board of Directors may hold the following offices:
- A. Secretary
- B. Chair only
- C. Parliamentarian
- D. Vice Chair
Answer: B
NEW QUESTION # 35
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. Respect local rules and regulations
- C. Modify the interpretation of local rules and regulations to meet the situation
- D. Ignore local rules and regulations
Answer: A
NEW QUESTION # 36
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. Respect local rules and regulations
- C. Modify the interpretation of local rules and regulations to meet the situation
- D. Ignore local rules and regulations
Answer: A
NEW QUESTION # 37
Employees shall be remunerated adequately for the roles that they perform, where 'adequately' is defined
- A. using external references and benchmarks, and in a framework which is consistent with the type of risk-taking behavior expected of employees
- B. as commensurate with policies to attract and retain high income / revenue earners
- C. using the risk reward profile for each business line in the organization
- D. as being the market norm for similarly situated personnel in competitive organizations
Answer: A
NEW QUESTION # 38
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 weak backwardation to strong backwardation
- C. the oil market went from backwardation to contango
- D. the oil market went from contango to backwardation
Answer: C
NEW QUESTION # 39
For the sentence
"The organization shall encourage all employees to keep abreast of the latest developments in their particular areas of expertise, through ____________, _____________, and _____________ and shall make adequate resources available to enable this to occur," Choose the correct combinations of words from the following options:
- A. courses, educational certification, journals
- B. journals, courses, compliance mandates
- C. courses, conferences, journals
- D. conferences, discussion groups, blog sites
Answer: C
NEW QUESTION # 40
Which of the following was not cited within the chain of miscalculations and deferred decisions for the downfall of Fannie Mae and Freddie Mac
- A. They did not raise enough capital to weather the storm as the housing slump expanded
- B. Extreme exposure to foreign currency exposures and losses from non-US$ mortgages
- C. Lawmakers postponed strenghtening regulatory oversight due to partisan infighting
- D. Under-management and under-measurement of market and liquidity risk
Answer: B
NEW QUESTION # 41
The Basic Knowledge a PPRMIA member should comply with, as stipulated within the PRMIA Standards of Best Practice, Conduct & Ethics, is to
- A. learn from a qualified risk management practitioner
- B. maintains and improve their professional competence and strive to maintain and improve the competence of other risk professionals
- C. only improve their PERSONAL professional competence
- D. only possess the required skills and/or certification to complete the risk assessment / management work at hand
Answer: B
NEW QUESTION # 42
The financial intermediary services provided by Fannie Mae and Freddie Mac were designed to
- A. Buy mortgage-backed loans for banks and keep them all on their books, using them as collateral for the US government to borrow
- B. Offer loans directly to the consumer
- C. Compete directly with banks in selling mortgaged to would-be home owners
- D. Repackage mortgage loans made by banks and sell them on to investors as asset backed securities
Answer: D
NEW QUESTION # 43
Several clients, including Procter and Gamble took legal action against Bankers Trust, claiming Bankers Trust
- A. was involved in accounting fraud
- B. did not honour its contractual obligations to pay
- C. hid profits
- D. sold them derivative products without properly advising them of the relevant risks
Answer: D
NEW QUESTION # 44
According to the Group of 30 Report, important risks associated with dynamic hedging are:
- A. Sudden gaps in market prices
- B. Greater volatility than expected over the life of an option
- C. Both A and B
- D. Neither A nor B
Answer: C
NEW QUESTION # 45
The problems in the Orange County case can best be characterized as failures related to:
- A. Operational and Regulatory Compliance Risk
- B. All of the Above
- C. Credit Risk
- D. Market Risk
Answer: D
NEW QUESTION # 46
Boards, including Audit and Risk Committees must:
I.Clearly articulate the corporate risk appetite to senior management
II.Thoroughly review compensation plans of potentially "highly compensated positions" for consistency with corporate risk appetite, competitive market conditions and fiduciary responsibility to shareholders
III.Have a single member formally given responsibility for understanding and reporting the effectiveness of the corporation's risk management infrastructure
IV.Be fully accountable to shareholders and work to the benefit of public good and financial stability
- A. All of these are responsibilities of Board and Audit Committees
- B. I, II and III only
- C. I and II only
- D. I, II and IV only
Answer: A
NEW QUESTION # 47
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