New 2021 Realistic 2016-FRR Dumps Test Engine Exam Questions in here
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NEW QUESTION 45
Short-selling is typically associated with the following risks:
I. Potential for extreme losses
II. Risk associated with the availability of shares to borrow
III. Market behavior risk
IV. Liquidity risk
- A. II, IV
- B. I, III
- C. I, II, III, IV
- D. I, II
Answer: C
NEW QUESTION 46
Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with
another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As
prices fluctuate in either direction, one large bank will require additional collateral from the small bank, while
the risk of loss to the other large bank will increase. By running the trades through a clearinghouse, the small
bank can achieve all of the following objectives EXCEPT:
- A. Eliminating the collateral requirement
- B. Mitigating option hedging risks and altering margin requirement
- C. Protecting itself against increases in future collateral demands
- D. Protecting against the risk of the failure of one of the large banks
Answer: B
NEW QUESTION 47
James Johnson purchased a plain vanilla bond that has modified duration of 10 and convexity of 0.5. If yields
increase by 1%, its modified duration is expected to
- A. decrease by 1.5.
- B. increase by 1.5.
- C. decrease by 0.5.
- D. increase by 0.5.
Answer: C
NEW QUESTION 48
Why do regulatory standards impose formulaic capital calculations for all of the banks activities?
I. If the banks use different models it is difficult for a regulator to compare results across banks.
II. By imposing standardized calculations regulators can make sure that banks are not missing key risks in
their calculations.
III. By imposing standardized calculations regulators can make sure that banks do not use capital calculations
to game the banking regulation system.
- A. I,II, III
- B. I
- C. I,II
- D. II, III
Answer: A
NEW QUESTION 49
What does correlation between two variables measure?
- A. Symmetry of a joint distribution of the two variables.
- B. The proportion of variability in one of the variables that is explained by the other.
- C. Extreme returns of both variables.
- D. Association between the two variables and the strength of a possible statistical relationship.
Answer: D
NEW QUESTION 50
Which one of the following four statements regarding counterparty credit risk is INCORRECT?
- A. The exposure at default is variable due to fluctuations in swap valuations.
- B. Counterparty credit risk refers to the inability to realize gains in a contract with a counterparty due to its
default. - C. Dynamic collateral provisions often increase counterparty risk considerably.
- D. The exposure at default can be negatively correlated to probability of default.
Answer: A
NEW QUESTION 51
In the United States, foreign exchange derivative transactions typically occur between
- A. A few large internationally active banks, where the risks become concentrated.
- B. Thrifts and large commercial banks, where the risks become isolated.
- C. Regional banks with international operations, where the risks depend on the specific derivative
transactions. - D. All banks with international branches, where the risks become widely distributed based on trading
exposures.
Answer: A
NEW QUESTION 52
An associate from the finance group has been identified as an operational risk coordinator (ORC) for her
department. To fulfill her ORC responsibilities the associate will need to:
I. Provide main communication contact with operational risk department
II. Provide main reporting contact with audit department
III. Coordinate collection of key risk indicators in her area
IV. Coordinate training and awareness activities in her area
- A. I, II, III
- B. I, III, IV
- C. II, III, IV
- D. I, II
Answer: B
NEW QUESTION 53
Which one of the following four statements correctly defines a non-exotic call option?
- A. A call option gives the call option buyer the obligation, but not the right, to buy the underlying
instrument at a known price in the future. - B. A call option gives the call option buyer the right, but not the obligation, to buy the underlying
instrument at a known price in the future - C. A call option gives the call option buyer the obligation, but not the right, to sell the underlying
instrument at a known price in the future - D. A call option gives the call option buyer the right, but not the obligation, to sell the underlying
instrument at a known price in the future
Answer: B
NEW QUESTION 54
James Johnson bought a coupon bond yielding 4.7% for $1,000. Assuming that the price drops to $976 when
yield increases to 4.71%, what is the PVBP of the bond.
- A. $976.
- B. $26.
- C. $870.
- D. $76.
Answer: B
NEW QUESTION 55
To ensure good risk management which of the following should be true about the CRO role and function?
- A. The CRO should not be involved with the setting of risk limits.
- B. The CRO should receive compensation that is directly determined by the profit of the trading desk.
- C. The CRO should report to the CEO or the Board of Directors.
- D. To ensure efficient flow of information the CRO should not be independent of business units.
Answer: C
NEW QUESTION 56
Which one of the following four statements about regulatory capital for a bank is accurate?
- A. Regulatory capital is the lowest level of economic capital the bank should have to meet regulatory
requirement. - B. Regulatory capital is determined by rules imposed by an outside authority, such as a supervisor or
central bank. - C. Regulatory capital is less than the regulatory capital requirement.
- D. Regulatory capital reflects the economic tradeoffs of the bank as accurately as the bank can represent
them.
Answer: B
NEW QUESTION 57
Which one of the following four statements best describes challenges of delta-normal method of mapping
options positions?
Delta-normal method understates
- A. Risks of long and short positions for both calls and puts.
- B. Risks of short option positions and overstates risks of long option positions for both calls and puts.
- C. Risks of long option positions for calls and overstates risks of short option positions for puts.
- D. Risks of long option positions for puts and overstates risks of short option positions for calls.
Answer: B
NEW QUESTION 58
Which one of the following four statements on the seniority of corporate bonds is incorrect?
- A. Seniority refers to the priority of a bond in bankruptcy.
- B. In bankruptcy, holders of senior bonds are paid in full before any holders of subordinated bonds receive
payment. - C. Senior bonds typically have lower credit spreads than junior bonds with the same maturity and payment
characteristics. - D. Junior bonds always pay higher coupons than subordinated bonds.
Answer: D
NEW QUESTION 59
Mega Bank has $100 million in deposits on which it pays 3% interest, and $20 million in equity on which it
pays no interest. The loan portfolio of $120 million earns an average rate of 10%. If the rates remain the same
and Mega Bank is able to earn the same net interest income in perpetuity at a 5% discount rate, what will the
present value of this holding be?
- A. $200 million
- B. $150 million
- C. $100 million
- D. $180 million
Answer: D
NEW QUESTION 60
According to a Moody's study, the most important drivers of the loss given default historically have been all of
the following EXCEPT:
I. Debt type and seniority
II. Macroeconomic environment
III. Obligor asset type
IV. Recourse
- A. I
- B. II
- C. III, IV
- D. I, II
Answer: C
NEW QUESTION 61
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