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PRMIA PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Sample Questions:
1. According to the PwC report China Aviation Oil, in order to avoid recording and reporting losses, the company adopted which approach covering up its losses?
A) selling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
B) selling short-term options with extremely low-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 long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
2. The early 2003 trading strategy of China Aviation oil was
A) to sell calls and buy puts
B) to buy calls and sell puts
C) to sell puts and buy calls
D) to buy puts and sell calls
3. Up until 2006, which of the following was not a primary driver for Washington Mutual's earning?
A) Lending to consumers and small businesses.
B) Deposit taking activities which generated net interest income.
C) Complex derivative trades based on volatility indices.
D) The provision of fee based services to its customers.
4. The failure of Washington Mutual was NOT due to which one of the following?
A) A run on its deposits by bank customers
B) Using a combination of subprime mortgage loans and credit cards
C) Low lending standards and bad quality acquisitions
D) It failed due to the poor quality of its assets
5. The Fortress Re accounting risk transfer procedures
A) made it difficult for TFMI to determine whether risk had actually been transferred so they had to take out additional catastrophe insurance cover
B) made it straightforward for TFMI to determine whether risk had actually been transferred and they decided not to take out more 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
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: B | Question # 3 Answer: C | Question # 4 Answer: A | Question # 5 Answer: D |






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