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PRMIA PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Sample Questions:
1. Employees shall be remunerated adequately for the roles that they perform, where 'adequately' is defined
A) as being the market norm for similarly situated personnel in competitive organizations
B) using external references and benchmarks, and in a framework which is consistent with the type of risk-taking behavior expected of employees
C) as commensurate with policies to attract and retain high income / revenue earners
D) using the risk reward profile for each business line in the organization
2. PRMIA is incorporated as:
A) A charitable trust
B) A non profit corporation with for profit subsidiaries
C) A non-profit corporation
D) A for-profit corporation
3. What was the main risk scenario on the Metallgesellschaft trading strategy?
A) Realized losses on short-term contracts against unrealized gains on the long-run contract
B) The final price of the underlying being higher than the initial price
C) The initial price of the underlying being higher than the final price
D) The short-term price of the underlying being higher than the long-run contract
4. Washington Mutual's acquisition of Long Beach Financial changed its business model and increased its credit loss profile because
A) Long Beach Financial had losses which it hadn't realized at the time of the takeover
B) the two banks were focussed in different markets
C) The resulting loss rate for Washington Mutual was more than 3 times higher than other mortgage lenders tracked by the FDIC
D) Of a general deterioration of credit quality generally
5. Which of the following does NOT relate to the Orange County case?
A) Strategies that are not possible to explain to third parties should not be employed by the risk averse
B) Where there are excess rewards, there must be risks
C) Fractured organisational structure and poor risk oversight mechanism make it easy for powerful individuals to hide risk in the gaps
D) The Know Your Customer rule
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: C | Question # 3 Answer: A | Question # 4 Answer: C | Question # 5 Answer: D |


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