FRM Financial Risk Manager Practice Test - Question List

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81. Sarbanes-Oxley (SOX) might keep a firm from going public for which of the following reasons?
  1. Compliance cost.
  2. Health care costs.
  3. Liquidity requirements.
  4. ARPU.
  5. All of the above.
82. True or false: Income elasticity of demand is a measure of how demand for a good changes with people’s income.
  1. True
  2. False
83. You are a consultant brought in to help Torrance Electronics, a global conglomerate. Among the companies they own are Torrance's Televisions and MegaMonitors. Mega makes the screens for the TVs and both are considered profit centers. Recently, Torrance's profits have fallen as their competitor has been able to outprice them. This could be an issue of:
  1. Synergies.
  2. Economies of scope.
  3. Transfer pricing.
  4. Licensing.
  5. Cost-based accounting.
84. You are a consultant brought into help Bo's Television, a global conglomerate. ScreenMaster is a separate company that makes the screens for Bo's TVs. If Bo's acquired ScreenMaster, this would be an example of what?
  1. Conflict of interest.
  2. Horizontal integration.
  3. Transfer pricing.
  4. Vertical integration.
  5. Cost-based accounting.
85. You are a hedge fund and you enter a contract which involves 3 players: You, the American Bank and WePro Ltd. The American Bank lends $1,000 to WePro and they want you to share the risk in case WePro fails to pay back. If you give the American Bank $1,000, you will get a fixed monthly payment worth 10% of $1,000 for the duration of the contract-as long as WePro doesn’t default. However, if WePro defaults on its debt, you will have to pay $1,000 to the American Bank and the contract is terminated. What type of contract is this?
  1. Credit default swap.
  2. Long-term loan.
  3. Hedging.
  4. Insurance.

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