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

1. According to LTCM managers:

A) Stress Testing was not conducted
B) Stress Testing looked at the 12 biggest deals with each of their top 20 counterparties
C) Stress Testing was not necessary because their trades were hedged
D) Stress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations


2. The Chair, Vice Chair, Secretary and Treasurer of the PRMIA Board of Directors are elected by:

A) All PRMIA Fellow Members
B) The Regional Directors
C) The Blue Ribbon Advisory Panel
D) A two-thirds affirmative vote of all members


3. The multi-dimensional risk problem at Northern Rock did not include which one of the combinations of the following?

A) Corporate Governance; Moral Hazard; Role of Government; and Credit Risk
B) Deposit Protection; Moral Hazard; Business Model; and LPHI Risk
C) Business Model; Corporate Governance; Moral Hazard; and Deposit Protection
D) LPHI Risk; Business Model; Solvency vs. Liquidity: and Deposit Protection


4. 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) Catastrophic losses in its own credit card division
D) By lowering its own credit underwriting standards


5. Which of the following best characterize the problems that developed at Bankers Trust?

A) Over exposure to the property market
B) Volume growth at the expense of margin
C) A failure to try to protect their clients' interests
D) Excessive reliance on volatile and sophisticated derivatives


Solutions:

Question # 1
Answer: B
Question # 2
Answer: B
Question # 3
Answer: A
Question # 4
Answer: A
Question # 5
Answer: C

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