PRMIA 8009 Exam Questions Free Practice Test

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Questions # 1:

Select the one correct statement relative to Barings Bank.

Options:

Proprietary and agency trading were combined and therefore did not increase risk.

Proprietary and agency trading were separate and therefore did not increase risk.

Proprietary and agency trading were combined and therefore did increase risk.

Proprietary and agency trading were separate and did increase risk.

Expert Solution

Questions # 2:

The problems at Bankers Trust can best be characterized as failures related to:

Options:

Market Risk

Credit Risk

Operational and Regulatory Compliance Risk

All of the Above

Expert Solution

Questions # 3:

John Smith wants to run for election to the Board of Directors of PRMIA. To be nominated, he needs:

Options:

The backing of three other members

To go through a screening process conducted by the Nominations Committee

The backing of 6% of local members

The backing of five other members and to be serving on at least one PRMIA Committee

Expert Solution

Questions # 4:

Which of the following was a key problem in the Barings Bank case?

Options:

Having the back office and front office operations under the same person

Difference in the contract sizes in the OSE and SIMEX

The different time zones that the office was trading in

Leeson was executing an arbitrage strategy even though he was not authorized to do so

Expert Solution

Questions # 5:

What is (are) the lesson(s) of the Barings' failure?

Options:

Incentive plans have risk management implications

Front and back offices need to be independent

Large profits can be an indicator of risk

All of the above

Expert Solution

Questions # 6:

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

Options:

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

Expert Solution

Questions # 7:

Finite insurance is reinsurance which

Options:

transfers only a limited amount of risk at the usual reinsurance price

transfers the total risk at less cost than traditional reinsurance

transfers the total risk at the usual reinsurance price

transfers only a limited amount of risk at less cost than traditional reinsurance

Expert Solution

Questions # 8:

Which of the following was not cited within the chain of miscalculations and deferred decisions for the downfall of Fannie Mae and Freddie Mac

Options:

Extreme exposure to foreign currency exposures and losses from non-US$ mortgages

Lawmakers postponed strenghtening regulatory oversight due to partisan infighting

Under-management and under-measurement of market and liquidity risk

They did not raise enough capital to weather the storm as the housing slump expanded

Expert Solution

Questions # 9:

The Fortress Re finite reinsurance model

Options:

allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability

allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid annual premiums to cover these policies, and as the risks were spread out over the year the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability

allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the future premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability

allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, but as the risks were spread out over time the future premiums were not accounted for as current liabilities on the books of the pool members, thus giving a false impression of profitability

Expert Solution

Questions # 10:

A risk assessment report generated by a PRMIA member creates an apparent conflict of interest between the PRMIA standards and those of the client organization.

Of the following, which is the correct hierarchy to follow to resolve the conflict?

I. The decision of a superior within the organization

II. PRMIA Standards

III. Guidelines from the regulators in which the organization operates

IV. The laws of the country

Options:

I, II, III, and IV

IV, III, II, and I

II, I, IV, and III

III, II, IV, and I

Expert Solution

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