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8009 PRMIA Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition Free Practice Exam Questions (2025 Updated)

Prepare effectively for your PRMIA 8009 Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition certification with our extensive collection of free, high-quality practice questions. Each question is designed to mirror the actual exam format and objectives, complete with comprehensive answers and detailed explanations. Our materials are regularly updated for 2025, ensuring you have the most current resources to build confidence and succeed on your first attempt.

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Total 110 questions

The condition where futures prices of an underlying asset are lower than cash (spot) prices is known as:

A.

Backwardation

B.

Contango

C.

Reverse backwardation

D.

Conchacha

According to the Group of 30 Report, option contracts:

A.

Always generate credit risk to both counterparties

B.

Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation

C.

Create no credit risk, since the buyer need not exercise the option

D.

Usually create credit risk only for the seller (to default by the buyer)

A PRMIA member is offered a highly paid work assignment on the condition that some aspects of assignment are not to be done according to PRMIA standards.

What should they do?

A.

Perform the assignment, noting in the final report the standards to which the assignment was done

B.

Accept the assignment, produce and deliver two reports according to both standards

C.

Accept the assignment, and prior to doing any work, report the conflict of interest to the organization's compliance department

D.

The PRMIA member should place the integrity of the risk management profession and users of risk management above their own personal interests, and refuse the work

Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:

I. competitive market conditions

II. ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders

III. ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators

IV. reporting all such personnel to the local regulator

A.

II, III and IV only

B.

I, II and IV only

C.

All of the above

D.

I and II only

The sensitivity analysis required under IFRS would have done what for China Aviation Oil?

A.

Provided investors and analysts with insight into the dynamics of value changes, and the sensitivity of fair value to the underlying drivers of interest rates, exchange rates, and commodity prices

B.

Only provided the intrinsic value of its outstanding option positions

C.

Only provided the time value of its outstanding option position

D.

None of the above

Barings failed to recognize that Nick Leeson's losses were increasing because:

A.

Leeson ran the front office

B.

The London office did not ask for any reports

C.

Leeson hid his trades in a suspense account

D.

The margin report sent to London did not show the true margin needs

Boards, including Audit and Risk Committees must:

I. Clearly articulate the corporate risk appetite to senior management

II. Thoroughly review compensation plans of potentially "highly compensated positions" for consistency with corporate risk appetite, competitive market conditions and fiduciary responsibility to shareholders

III. Have a single member formally given responsibility for understanding and reporting the effectiveness of the corporation's risk management infrastructure

IV. Be fully accountable to shareholders and work to the benefit of public good and financial stability

A.

I and II only

B.

I, II and IV only

C.

I, II and III only

D.

All of these are responsibilities of Board and Audit Committees

The Fortress Re accounting risk transfer procedures

A.

made it straightforward for TFMI to determine whether risk had actually been transferred and they decided not to take out more catastrophe insurance cover

B.

made it difficult for TFMI to determine whether risk had actually been transferred so they had to take out additional catastrophe insurance cover

C.

made it straightforward for TFMI to determine when the risk had been transferred and to take out additional catastrophe insurance cover

D.

made it difficult for TFMI to determine whether risk had actually been transferred and whether it had sufficient catastrophe insurance cover

The Risk Management Infrastructure of an organization must:

I. To the extent possible, avoid silos of control and oversight

II. Have budgets set by the business unit leaders

III. Actively provide ongoing professional development for risk management staff and require them to be committed to standards of best practice, conduct and ethics in their work

IV. Provide general risk management and related corporate governance training for employees of the organization as a Whole

A.

I only

B.

I, III and IV only

C.

I and III only

D.

All of these are expected of the Risk Management Infrastructure

Which of the following are PRMIA Governance Principles?

I. Sufficiency of Key Resources and Process

II. State of the Art Risk Management Technology

III. Ongoing Education and Discernment

IV. Sufficiency of Key Competencies

A.

I, II and IV only

B.

I and II only

C.

I, III and IV only

D.

All of these are PRMIA Governance Principles

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

A.

Volume growth at the expense of margin

B.

Excessive reliance on volatile and sophisticated derivatives

C.

A failure to try to protect their clients' interests

D.

Over exposure to the property market

Corporate Governance …

A.

Eliminates risk to the greatest extent possible

B.

Is defined as the assembled knowledge and wisdom of the collective stakeholders in the organization, set to maximize shareholder value

C.

Is defined as business decision making predicated on a belief in potential rewards, balanced with the knowledge, understanding and appreciation of the risk taken to pursue those potential rewards

D.

Is defined as that which is best practiced within an enterprise risk management framework, guided by the PRMIA Standards of Best Practice, Conduct and Ethics above all else

According to the Northern Rock Case Study, what is Forced Insolvency?

A.

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

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 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

D.

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

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