Pass4guide 2016-FRR Exam Questions | Real 2016-FRR Practice Dumps
Verified 2016-FRR Exam Dumps Q&As - Provide 2016-FRR with Correct Answers
NEW QUESTION 185
A bank considers issuing new capital to increase its Tier 1 capital levels. Which of the following financial
instruments would most likely to be considered?
- A. Long-term and callable debt convertible to equity
- B. Short-term debt convertible to non-cumulative preferred shares
- C. Convertible preferred shares
- D. Short-term callable debt
Answer: C
NEW QUESTION 186
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,
what is the net interest income of Mega Bank?
- A. $9 million per year
- B. $2 million per year
- C. $5 million per year
- D. $12 million per year
Answer: A
NEW QUESTION 187
What is the explanation offered by the liquidity preference theory for the upward sloping yield curve shape?
- A. The short term rates must fall enough to get some borrowers to borrow long-term and some lenders to
lend short-term. - B. The long term rates must rise enough to get some borrowers to borrow long-term and some lenders to
lend short-term. - C. The long term rates must rise enough to get some borrowers to borrow short-term and some lenders to
lend long-term. - D. The short term rates must rise enough to get some borrowers to borrow short-term and some lenders to
lend long-term.
Answer: C
NEW QUESTION 188
Over a long period of time DeltaBank has amassed a large equity option position. Which of the following risks
should be considered in this transaction?
I. Counterparty risk on long OTC option positions
II. Counterparty risk on short OTC option positions
III. Counterparty risk on long exchange-traded option positions
IV. Counterparty risk on short exchange-traded option positions
- A. II, III
- B. II, III, IV
- C. I, II
- D. I
Answer: D
NEW QUESTION 189
To reduce the variability of net interest income, Gamma Bank can swap positions that make its duration gap
equal to
- A. 0
- B. 0.5
- C. 1
- D. 2
Answer: D
NEW QUESTION 190
A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to buy Australian
dollars and sell Brazilian reals. Alpha bank does not hold reals so it asks for a quote to buy Brazilian reals in
the market. The market rate is 100. The bank quotes a selling rate of 101 to its customer and sells the reals at
this quoted price. Then the bank immediately buys the real at the market rate and completes foreign exchange
matched transaction. What is the financial impact of this transaction for Alpha bank?
- A. This transaction leaves the bank a profit of BRL 10,101.
- B. This transaction leaves the bank a profit of AUD 10,101.
- C. This transaction leaves the bank a loss of BRL 10,101.
- D. This transaction leaves the bank a loss of AUD 10,101.
Answer: B
NEW QUESTION 191
When considering the advantages of operational risk function owned by the Chief Compliance Officer in a
financial institution, an operational risk manager consultant suggests that this governance approach will have
all of the following advantages except:
- A. This governance structure maintains an independent operational risk function.
- B. The operational risk function quickly inherits an existing reporting structure, established meeting
schedules and functional reporting cycles from the compliance function. - C. The operational risk function is closely linked in a partnership with the compliance function to leverage
data and assessment activities. - D. In accordance with Basel II Accord, the operational risk function should report directly into the audit
function and strengthen that function.
Answer: D
NEW QUESTION 192
To protect the oranges harvest price level, a farmer needs to take a hedge position. Provided that he produces
the amount he hedged, which one of the following four strategies will allow the farmer to accomplish his goal?
- A. Entering into a customized forward contract with the bank
- B. Going long on oranges futures contacts
- C. Negotiating a credit line facility
- D. Going short on oranges futures contracts
Answer: D
NEW QUESTION 193
Mega Bank holds a $250 million mortgage loan portfolio, which reprices every 5 years at LIBOR + 10%. The
bank also has $150 million in deposits that reprices every month at LIBOR + 3%. What is the amount of Mega
Bank's rate sensitive assets?
- A. $200 million
- B. $100 million
- C. $150 million
- D. $250 million
Answer: D
NEW QUESTION 194
Which of the following statements regarding collateralized debt obligations (CDOs) is correct?
I. CDOs typically have loans or bonds as underlying collateral.
II. CDOs generally less risky than CMOs.
III. There is a correlation among defaults in the CDO collateral which should be considered in valuation of
these complex instruments.
- A. II and III
- B. I and III
- C. I, II, and III
- D. I only
Answer: B
NEW QUESTION 195
According to the largest global poll of foreign exchange market participants, which one of the following four
global financial institutions was the most active participant in the global foreign exchange market?
- A. Deutsche Bank
- B. UBS AG
- C. Citibank
- D. Barclays Capital
Answer: A
NEW QUESTION 196
Alpha Bank estimates that the annualized standard deviation of its portfolio returns equal 30%; The daily
volatility of the portfolio is closest to which of the following?
- A. 2.0%
- B. 1.0%
- C. 3.0%
- D. 2.5%
Answer: A
NEW QUESTION 197
Which of the following statements describes correctly the objectives of position mapping ?
- A. I and II
- B. I, II and III
- C. II and IV
- D. Position mapping groups similar positions into one group based on the closeness of their respective
VaR. - E. For VaR calculations, mapping converts positions based on their deltas to underlying factor risks.
- F. Position mapping models risk factors affecting the value of a position as combination of core risk factors
used in the VaR calculations. - G. II, III, and IV
- H. Position mapping reduces the possible number of risk factors to a computationally manageable level.
Answer: F
NEW QUESTION 198
When operating in a heavily traded currency, a commercial and retail bank's treasury is likely to focus on
cover operations. Which one of the following four commercial and retails treasury's operations is known as a
cover operation?
- A. Mitigating liquidity risk, or effectively managing the balance sheet and its funding.
- B. Managing the net interest rate risk in the banking book directly with market counterparties by operating
a derivatives trading desk. - C. Ensuring that the risks generated by the bank's business are mitigated in the market.
- D. Effectively transferring the interest rate risk in the banking book to the investment bank at a fair transfer
price.
Answer: C
NEW QUESTION 199
Which one of the following four options correctly identifies the core difference between bonds and loans?
- A. These instruments have different pricing drivers.
- B. These instruments are subject to different credit counterparty regulations.
- C. These instruments receive a different legal treatment.
- D. These instruments cannot be used to estimate credit capital under provisions of the Basel II Accord.
Answer: C
NEW QUESTION 200
Bank Muri has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate
of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that
settles in two days and pays off $8 million in commercial paper in three days that is not expected to renew. On
day 2, $1 million in loans is coming in with an expected default rate of 1% and on day 3, $2 million in loans is
coming in with expected default rate of 2%. How much should the bank plan to raise in order to avoid liquidity
problems?
- A. $510 million
- B. $508 million
- C. $550 million
- D. $500 million
Answer: A
NEW QUESTION 201
In analyzing the historical performance of a financial product, you are concerned about "fat tails", the
probability of extreme returns compared to realized returns. Which of the following measures should you use
to determine if the product return distribution of the product has "fat tails"?
- A. Kurtosis
- B. Standard deviation
- C. Mean
- D. Skewness
Answer: A
NEW QUESTION 202
A corporate bond was trading with 2%probability of default and 60% loss given default. Due to the credit
crisis the probability of default increased to 10% and the loss given default increased to 100%. Assuming that
the risk premium remained the same how did the credit spread change?
- A. Increased by 1000 basis points
- B. Decreased by 880 basis points
- C. Increased by 1120 basis points
- D. Increased by 880 basis points
Answer: D
NEW QUESTION 203
Bank Zilo has $2 million in cash and $10 million in loans coming due tomorrow with an expected default rate
of 1%. The proceeds will be deposited overnight. The bank owes $ 10 million on a securities purchase that
settles in two days and pays off $9 million in commercial paper in three days that is not expected to renew.
How much money should the bank plan to raise so as to avoid a liquidity problem?
- A. $650 million
- B. $710 million
- C. $700 million
- D. $712 million
Answer: B
NEW QUESTION 204
The operational risk policy should include:
I. The firm's definition of risk
II. The governance of operational risk including who owns it, what it owns, and how issues should be
escalated
III. The main activities and elements that are managed by the operational risk function
- A. I, II, III
- B. II, III
- C. I, III
- D. I, II
Answer: A
NEW QUESTION 205
Which one of the following four statements correctly identifies disadvantages of using the economic capital?
- A. Since banks are putting their money at risk they have an incentive to increase economic capital.
- B. Economic capital estimates the level of expected losses.
- C. Economic capital may do not take into consideration the regulatory requirements.
- D. The economic capital models used by banks may be subject to significant model risk.
Answer: D
NEW QUESTION 206
Which one of the following four statements describes the advantage of using delta-gamma method of mapping
options positions over delta-normal method?
Delta-gamma method
- A. Converts options into underlying factor risks according to their deltas and the gammas to those factors.
- B. Fully captures option price risk, particularly for extreme price movements.
- C. Approximates more accurately the non-linear relationship of option values and risk.
- D. Overstates the risk of long option positions, but understate the risk of short option positions.
Answer: C
NEW QUESTION 207
Which one of the following four statements regarding floating rate bonds is incorrect?
- A. Floating rate bonds are very sensitive to changes in interest rates.
- B. Floating rate bonds only have a small degree of interest rate risk.
- C. Floating rate bonds have coupon payments tied to floating interest rates or floating interest rate indexes.
- D. Floating rate bonds typically have less price risk than fixed rate bonds.
Answer: A
NEW QUESTION 208
......
Get Top-Rated GARP 2016-FRR Exam Dumps Now: https://prepcram.pass4guide.com/2016-FRR-dumps-questions.html