CIMA P3 Exam Questions Free Practice Test

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Questions # 1:

A hospital is part of a government provided health service which is free to patients. The management of the hospital is concerned with the need to minimise the risks to which the hospital is exposed from patient litigation.

In this context, which TWO of the following are appropriate steps to manage this risk?

Options:

Ensuring that patients undergoing procedures sign documentation to confirm that the risks have been explained to them and that they understand.

Allocating a risk score to patients depending on age, general heath and similar consideration and refusing to admit patients whose risk score exceeds a certain threshold.

Ensuring that a policy is in place to transfer or discharge critically ill patients so as to minimise fatalities in the hospital.

Ensure that proper documentation is in place for all patients showing such details as symptoms, treatments, and test results.

The management refuses to allow the hospital to participate in the Major Accident Plan for the city in which it is located. It believes the Plan could expose the hospital to excessive risk.

Questions # 2:

T has its computer facilities in a building adjacent to its headquarters Severe structural problems have been discovered with this building and T has been advised that the only option is demolition and rebuild This leaves T with strategic decisions to make about its IT provision and it has decided to investigate the outsourcing of its services.

Which TWO of the following factors should T consider as most important at this stage?

Options:

A supplier who can act as a partner in considering all its business needs

A supplier who can act as its agent in choosing the cheapest options

A supplier who provides a wide range of services

A supplier with a long history of providing outsourcing services

A supplier who has facilities conveniently located close to its headquarters

Questions # 3:

Which of the following best describes the relevance of value at risk (VaR) as a decision tool?

Options:

VaR quantifies past volatility

VaR quantifies future volatility

VaR quantifies the maximum loss that could ever be incurred

VaR can only measure downside risk

Questions # 4:

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.

Options:

$81 million

$131 million

$321 million

$59 million

Questions # 5:

Which of the following scenarios might be relevant stress tests for a potential lender to conduct? Which TWO of the following answers are correct?

Options:

The potential borrower could be involved in an accounting scandal

The potential borrower might have manipulated the figures in the loan application.

The potential borrower might lose its three main customers.

The potential borrower might seek further debt in the future.

The potential borrower might have to agree to a major wage increase for its employees.

Questions # 6:

JNH is a major corporation that stores its customer database in the Cloud JNH has suffered a data breach that has led to customer credit card details being made available for sale on the internet JNH's Head of Security wishes to analyse network traffic at the cloud-based server in order to gain a better understanding of the manner in which the data was intercepted, but has been refused access.

Which of the following is the most likely explanation for the third-party owner's refusal to assist JNH's Head of Security?

Options:

The Cloud is impregnable and so the breach must have been elsewhere

The network data will not have been stored by the server's owner

The server will contain data belonging to other clients

Admitting the breach would harm the reputation of the Cloud

Questions # 7:

H Ltd is a logistics company which is likely to be seeking a Stock Exchange listing shortly. The directors wish to strengthen the company's internal controls.

Which of the following statements are valid?

Options:

The Board should take direct responsibility itself for all organisational control and avoid delegating.

The Board should ensure that the internal accounting system provides accurate and relevant information.

The Board should ensure that there is regular assessment of the financial impact of contingencies.

The Board should communicate organisational policies only to members of staff who are part of the management team.

Internal Audit should be used to check on the detailed operation of controls in the operating departments.

Questions # 8:

Which of the following are true of an effective risk management culture?

Options:

Staff should be penalised for being associated with negative events.

All risk should be eliminated.

Responsibility for risk management should be devolved to a risk manager.

All staff should be aware of risks affecting the entity.

Risk management should be regarded as part of the overall business strategy.

The directors should take an active interest in risk management.

Questions # 9:

Risk management involves all parties in an organisation.

Which of the following describe the Board's responsibilities for risk management?

Options:

The Board is responsible for choosing the least risk products to promote.

The Board is responsible for maintaining a robust system of internal controls.

The Board is responsible for addressing any weaknesses in internal controls.

The Board is responsible for considering whether weaknesses in internal controls need to be addressed.

The Board is responsible for safeguarding the company's assets.

Questions # 10:

Which of the following are true of interest rate swaps?

Options:

Risk of default is high from the floating interest rate payer if interest rates rise.

An interest rate swap is an external hedging technique.

When interest rates are falling, the risk of default by the fixed interest rate payer is low.

Some companies use interest rate swaps to deliberately increase their risks because they believe that they are better at predicting future interest rates than the market.

An interest rate swap is an internal hedging technique.

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