Question No. 1

Several clients, including Procter and Gamble took legal action against Bankers Trust, claiming Bankers Trust

Asold them derivative products without properly advising them of the relevant risks

Bdid not honour its contractual obligations to pay

Cwas involved in accounting fraud

Dhid profits

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Correct Answer: A

Question No. 2

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

AVolume growth at the expense of margin

BExcessive reliance on volatile and sophisticated derivatives

CA failure to try to protect their clients' interests

DOver exposure to the property market

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Correct Answer: C

Question No. 3

According to the Group of 30 Report, deriving aggregate potential credit exposure for a counterparty by adding up the potential exposure of multiple transactions:

AGives an accurate result in most cases

BCaptures portfolio effects but not tenor differences

CCan easily reflect the impact of netting

DOverstates exposure in most cases

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Correct Answer: D

Question No. 4

Employees shall be remunerated adequately for the roles that they perform, where 'adequately' is defined

Aas being the market norm for similarly situated personnel in competitive organizations

Busing external references and benchmarks, and in a framework which is consistent with the type of risk-taking behavior expected of employees

Cusing the risk reward profile for each business line in the organization

Das commensurate with policies to attract and retain high income / revenue earners

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Correct Answer: B

Question No. 5

Which of the following was the key contributory risk factor to the problems at LTCM in the summer of 1998?

I Model Risk

II Lack of Transparency

III Breakdown of Historical Correlations

IV Over Regulation by Federal Regulators

AI and III only

BIII only

CIII and IV only

DAll of these were key elements of the problems at LTCM

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Correct Answer: B

Free PRMIA 8004 Exam Actual Questions

The questions for 8004 were last updated On Jan 31, 2025