PRMIA 8009 Case Studies; Standards: Governance, Best Practices and Ethics - 2015 Edition Exam Exam Practice Test Questions

• Question 1

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

  • 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
  • Only provided the intrinsic value of its outstanding option positions
  • Only provided the time value of its outstanding option position
  • None of the above

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• Question 2

  Boards, including Audit and Risk Committees must:I, Clearly articulate the corporate risk appetite to senior managementII. Thoroughly review compensation plans of potentially 'highly compensated positions' for consistency with corporate risk appetite, competitive market conditions and fiduciary responsibility to shareholdersIII. Have a single member formally given responsibility for understanding and reporting the effectiveness of the corporation's risk management infrastructureIV. Be fully accountable to shareholders and work to the benefit of public good and financial stability

  • I and II only
  • I, II and IV only
  • I, II and III only
  • All of these are responsibilities of Board and Audit Committees

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• Question 3

  According to PRMIA governance principles, boards and audit committees should ...

  • Review compensation plans to ensure consistency with corporate risk appetite, competitive market conditions, and fiduciary responsibility to shareholders
  • Collectively assume responsibility of understanding and reporting the effectiveness of the firm risk management infrastructure
  • Be composed of key business unit representatives
  • Leave shareholder accountability to senior management who decides strategic direction

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• Question 4

  Which of the following was a key problem in the Barings Bank case?

  • Having the back office and front office operations under the same person
  • Difference in the contract sizes in the OSE and SIMEX
  • The different time zones that the office was trading in
  • Leeson was executing an arbitrage strategy even though he was not authorized to do so

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• Question 5

  The hedging strategy employed by MG Refining & Marketing has been called:

  • Dynamic hedging
  • A stacked hedge
  • A differential hedge
  • Nothing because MG Refining & Marketing did not hedge its position

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