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PRMIA PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Sample Questions:
1. PwC concluded that the accounting policy adopted by China Aviation Oil was incorrect because it
A) only took into account the time value of the option (which includes recognizing the time left to maturity of the option, the volatility of the spot price of the underlying commodity, interest rates and other factors)
B) took into account both the intrinsic value and the time value
C) used neither the intrinsic value nor the time value
D) only regarded the intrinsic value (i.e. the difference between the strike price and the forward price of the underlying commodity) as the fair value of its options
2. As LTCM started to have major losses, it compounded its problems by doing what?
A) Returning capital to the general partners before others
B) Trying to borrow more money from major money centre banks
C) Unwinding its' more liquid trades thereby creating more liquidity risk overall
D) Issuing Subordinated Debt
3. The multi-dimensional risk problem at Northern Rock did not include which one of the combinations of the following?
A) Deposit Protection; Moral Hazard; Business Model; and LPHI Risk
B) Business Model; Corporate Governance; Moral Hazard; and Deposit Protection
C) LPHI Risk; Business Model; Solvency vs. Liquidity: and Deposit Protection
D) Corporate Governance; Moral Hazard; Role of Government; and Credit Risk
4. What was the main risk scenario on the Metallgesellschaft trading strategy?
A) The initial price of the underlying being higher than the final price
B) The final price of the underlying being higher than the initial price
C) Realized losses on short-term contracts against unrealized gains on the long-run contract
D) The short-term price of the underlying being higher than the long-run contract
5. The Chair of the PRMIA Board of Directors may hold the following offices:
A) Parliamentarian
B) Chair only
C) Secretary
D) Vice Chair
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: C | Question # 3 Answer: D | Question # 4 Answer: C | Question # 5 Answer: B |
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