Free 8004 – PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Practice Test Question

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  Can have their own offices, bylaws and regulations provided they do not conflict with those of PRMIA

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  Can have meetings that only local members are allowed to attend

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  Can sign contracts on behalf of PRMIA without prior approval from the Board of Directors

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  All of the above
  

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  to buy puts and sell calls

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  to buy calls and sell puts

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  to sell puts and buy calls

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  to sell calls and buy puts
  

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  Greater volatility than expected over the life of an option

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  Sudden gaps in market prices

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  Both A and B

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  Neither A nor B
  

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  Dynamic hedging

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  A stacked hedge

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  A differential hedge

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  Nothing because MG Refining & Marketing did not hedge its position
  

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  Basis Risk

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  Currency Settlement

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  Interest Rate

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  Inflation
  

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  I and II only

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  I, II and IV only

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  I, II and III only

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  All of these are responsibilities of Board and Audit Committees
  

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  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
  

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  Always generate credit risk to both counterparties

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

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

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

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  LPHI Risk; Business Model; Solvency vs. Liquidity: and Deposit Protection

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  Corporate Governance; Moral Hazard; Role of Government; and Credit Risk

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  Deposit Protection; Moral Hazard; Business Model; and LPHI Risk

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  Business Model; Corporate Governance; Moral Hazard; and Deposit Protection
  

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  At least 100 members live within 50 miles

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  A local business sponsors the chapter

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  Approved by the Board of Directors

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  All of the above
  

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  I and II

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  I, II and IV

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  I, II and III

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  I only
  

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  The risk manager disclosed the lack of knowledge about convertible bonds
  II. The methodology employed is disclosed and explained
  III. The report was just to be used for analysis and not in practice
  IV. The risk manager was sure of his/her understanding of the paper found on the web