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P3 – Risk Management

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Showing 10–12 of 15 questions

Question 10

H has a floating rate loan that it wishes to replace with a fixed rate. The cost of the existing loan is LIBOR + 4%. H would have to pay a fixed rate of 8% on a fixed rate loan. H's bank has found a potential counterparty for a swap arrangement.

The counterparty wishes to raise a variable rate loan. It would pay LIBOR + 1% on a variable rate loan and 9% on a fixed rate.

The bank will require 10% of the savings from the swap and H and the counterparty will share the remaining saving equally.

Calculate H's effective rate of interest from this swap arrangement.

Select an option, then click Submit answer.

  • ○

    H would pay 6.2%
  • ○

    H would pay 6%
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    H would pay Libor + 1%
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    H would pay 6.4%
Question 11

Under the COSO Enterprise Risk Management Framework who is responsible for risk management?

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  • ○

    Every member of the entity.
  • ○

    The board of directors only.
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    Managers and directors only.
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    The shareholders.
Question 12

YGH has recently completed a post completion audit on a five year contract that has only recently come to a conclusion. The main finding was that the project delivered most of the expected benefits but that it cost significantly more to implement than had been anticipated at the project appraisal stage. YGH would not have proceeded if the true cost had been known at that stage.

The project was the responsibility of the production department which is presently managed by G.

When the project was proposed the production department was managed by H. H is now YGH's Director of Operations.

How should the finding from this post completion audit be interpreted?

Select an option, then click Submit answer.

  • ○

    YGH should consider introducing more detailed checking of the assumptions underlying the costs of future projects.
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    The production department should not be granted funding for future projects unless there are compelling reasons to proceed.
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    G should be held accountable for the overspend on the project.
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    H should be held accountable for the overspend on the project.