PRMIA Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition - 8009 Exam Practice Test

A. to buy puts and sell calls

B. to sell puts and buy calls

C. to buy calls and sell puts

D. to sell calls and buy puts

A. Both losses were eventually exposed by massive margin calls.

B. Both losses grew over time, but were not discovered by management until too late.

C. Both relied on a star manger, supposedly in a low risk business.

D. Both traded in illiquid and obscure markets that were easy to manipulate.

A. Alerted senior management to the problems before the major losses occurred

B. Been used if senior management had ever seen it

C. Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics

D. Helped very little as Nick Leeson hid many trades

A. courses, educational certification, journals

B. journals, courses, compliance mandates

C. conferences, discussion groups, blog sites

D. courses, conferences, journals

A. Nick Leeson also ran the back office for his trading area

B. Nick Leeson claimed to be running an arbitrage book

C. Nick Leeson dealt in complex derivatives lacking transparency of pricing

D. SIMEX made inquiries to Barings Bank about large margin calls on its positions

A. selling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

B. selling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

C. selling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

D. selling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

A. The general downturn in the economy of the US

B. Acquisitions like Long Beach and Providian

C. Catastrophic losses in its own credit card division

D. By lowering its own credit underwriting standards

A. A for-profit corporation

B. A non profit corporation with for profit subsidiaries

C. A charitable trust

D. A non-profit corporation

A. credit risk caused by a diversified portfolio of poor-quality loans

B. credit risk caused by overexposure to the property market

C. both A and B

D. none of the above

A. The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital

B. The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)

C. The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors

D. The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors