Exam IV sample questions by PRM

[Anonymous]

Having studied the Exam IV material, I took a shot at the Study Guide 5 of 5 which has sample questions for all exams. The questions are a bit disturbing. Out of the 9 questions, two are such that you cannot answer them based on PRM case materials (not to spoil your attempts., I will not reveal the answers which you can of course find at the end of the study guid).

Q2 about Nick Leeson’s “method of hiding losses”: search by the word and you will not find it in the case. Google it and you find that it was his method of doing arbitrage (not to hide losses).

Q5 about LTCM leverage: the figures are nowhere to be found in the PRMIA version of the case. Google it, and you can find SEC testimony http://www.sec.gov/news/testimony/testarchive/1998/tsty1498.htm
which gives a different figure both for assets and leverage.

For those who have taken Exam IV, does this reflect the nature of the questions in the actual exam? In other words, reading the PRMIA versions of cases is not enough but you need to study background for each case – and even then, the questions are sloppy and contain errors…

[Anonymous]

I took Exam IV in Feb passing with a comfortable margin. My experience was that ALL of the actual exam questions relating to cases could be answered based on the downloadable PRMIA case materials.

That said, there is indeed a mismatch between that material and some of the questions found in the study guide. IMO the reason for this is that some of the Exam IV questions in the current study guide are really old, in particular the ones you mention (I think from around 2003). Back then, the syllabus was quite different. The number of required case studies was smaller back then, but each had several recommended readings instead of just one. For example, for Barings back then candidates were asked to study a chapter from Jorion, a BOE report, and an IFRI paper. LTCM also had 1 chapter from Jorion + 2 papers. Nowadays, each case is covered by just one PRM paper, and there are a lot more case studies. So, in a nutshell the syllabus was updated, the sample questions apparently weren’t, and so do not reflect the nature of the questions of the actual exam.

Hope that provided some clarity.

[Anonymous]

Thank you – this clarifies it!

In some of the cases, one can also see that they are abbreviated versions but the learning objectives refer to a more complete version. For example, in the LTCM case one of the risks is “woes of investing too little in game theory”. At least to me, the sentence is ambiguous, as if taken out of the context. The case does not elaborate it and one can only speculate what it means.

[Author]

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