2016-FRR Revolutionary Guide To Exam GARP Dumps
2016-FRR Free Study Guide! with New Update 345 Exam Questions
By taking and passing the GARP 2016-FRR Exam, you’ll earn the Financial Risk and Regulation (FRR) credential, which will set you apart from your peers and make you a more attractive candidate for a wide range of roles within the financial services industry. 2016-FRR exam covers a breadth of topics including market risk, credit risk, operational risk, and liquidity risk, among others, and provides a deep understanding of global regulatory processes that are meant to maintain stability within the financial services industry. You’ll also gain an appreciation for operational and reputational risks that are critical to managing any organization, but particularly those that specialize in the financial services industry.
NEW QUESTION # 119
Which one of the following four statements about economic capital of a bank is correct?
- A. Economic capital reflects the possible losses that could occur based on the bank's own estimates of the
risks it is taking. - B. Economic capital is the present value of the earnings generated by the bank in the future.
- C. Economic capital measures how the economy is doing compared to the bank.
- D. Economic capital is determined by rules imposed by an external authority.
Answer: A
NEW QUESTION # 120
Which statements correctly describe the features of using subscription databases for operational loss data
analysis?
Subscription databases
I. Provide central data repositories and benchmarking services to their members.
II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry.
III. Assist with mapping the events to the appropriate business lines, risk categories and causes.
IV. Reflect only events that are interesting to the press and are reported in the press.
- A. I and II
- B. I, II and III
- C. II, III, and IV
- D. II and III
Answer: D
NEW QUESTION # 121
Which of the following would a bank resort to as a "lender of last resort" in the event of an extreme liquidity
crisis?
- A. LIBOR markets
- B. Futures Markets
- C. U.S treasury markets
- D. Discount window
Answer: D
NEW QUESTION # 122
Which of the following statements explain how securitization makes the retail assets highly liquid and the
balance sheet easier to manage?
I. By securitizing assets any lack of capital can be accommodated by selling the securitized bonds.
II. Any need to diversify credit risk can be achieved by selling bank's own securitized bonds and buying other
bonds that increase diversification.
III. Securitization could be used to promote hedging by using limited market instruments.
- A. II
- B. I, II, III
- C. I, II
- D. II, III
Answer: C
NEW QUESTION # 123
Which one of the following four factors typically drives the pricing of wholesale products?
- A. Overall risk exposure
- B. Long-term competitiveness
- C. Prevailing market price
- D. Marketing considerations
Answer: C
NEW QUESTION # 124
Which one of the following four formulas correctly identifies the expected loss for all credit instruments?
- A. Expected Loss = Probability of Default x Loss Given Default / Exposure at Default
- B. Expected Loss = Probability of Default x Loss Given Default + Exposure at Default
- C. Expected Loss = Probability of Default x Loss Given Default - Exposure at Default
- D. Expected Loss = Probability of Default x Loss Given Default x Exposure at Default
Answer: D
NEW QUESTION # 125
Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly
approximates the yield on a risk-free instrument:
- A. Bond + CDS
- B. Bond - CDS - Market spread
- C. Bond + CDS + Market Spread
- D. Bond - CDS
Answer: A
NEW QUESTION # 126
All of the following factors generally explain the equity bid-offer spread in a market EXCEPT:
- A. Interest rates
- B. Market depth
- C. Market volatility
- D. Competition among market makers
Answer: A
NEW QUESTION # 127
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. $500 million
- C. $550 million
- D. $508 million
Answer: A
NEW QUESTION # 128
Forward rate agreements (FRA) are:
- A. Exchange traded derivative contracts that allow banks to take positions in forward interest rates.
- B. Exchange traded derivative contracts that allow banks to take positions in future exchange rates.
- C. OTC derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term
interest rates by relying on long-term funding. - D. OTC derivative contracts that allow banks to take positions in forward interest rates.
Answer: D
NEW QUESTION # 129
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. I, III
- B. II, IV
- C. I, II, III, IV
- D. I, II
Answer: C
NEW QUESTION # 130
A risk analyst is considering how to reduce the bank's exposure to rising interest rates. Which of the following
strategies will help her achieve this objective?
I. Reducing the average repricing time of its loans
II. Increasing the average repricing time of its deposits
III. Entering into interest rate swaps
IV. Improving earnings capacity and increasing intermediated funds
- A. I, II, IV
- B. I, II
- C. III
- D. IV
Answer: A
NEW QUESTION # 131
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. Junior bonds always pay higher coupons than subordinated bonds.
- C. In bankruptcy, holders of senior bonds are paid in full before any holders of subordinated bonds receive
payment. - D. Senior bonds typically have lower credit spreads than junior bonds with the same maturity and payment
characteristics.
Answer: B
NEW QUESTION # 132
Which of the following risk types are historically associated with credit derivatives?
I. Documentation risk
II. Definition of credit events
III. Occurrence of credit events
IV. Enterprise risk
- A. II, III, IV
- B. I, IV
- C. I, II
- D. I, II, III
Answer: D
NEW QUESTION # 133
US-based BetaBank have accumulated Japanese yen, Japanese government bonds, options on Japanese yen,
and positions in commodities that have a positive correlation with yen. Which one of the four following
non-statistical risk measures could be used to evaluate the BetaBank's exposure to the Japanese economy?
- A. Position volatility
- B. Position sensitivities
- C. Position concentrations
- D. Position turnover
Answer: C
NEW QUESTION # 134
Which of the following statements is a key difference between customer loans and interbank loans?
- A. Customer loans are easier to sell than interbank loans
- B. Interbank loans are more customized than commercial loans
- C. Customer loans are of shorter duration than interbank loans
- D. Customers are less credit-worthy than banks on average and hence yields are higher on average for
customer loans as compared to interbank loans
Answer: D
NEW QUESTION # 135
Bank Omega is using futures contracts on a well capitalized exchange to hedge its market risk exposure.
Which of the following could be reasons that expose the bank to liquidity risk?
I. The bank may not be able to unwind the futures contracts before expiration.
II. Prices may move such that a loss results on the hedge.
III. Since futures require margins which are settled every day, the bank could find itself scrambling for funds.
IV. Exchange margin requirements could change unexpectedly.
- A. I, II, III, IV
- B. I, IV
- C. III, IV
- D. I, III, IV
Answer: C
NEW QUESTION # 136
For two variables, which of the following is equal to the average product of the deviations from their
respective means?
- A. Standard deviation
- B. Covariance
- C. Kurtosis
- D. Correlation
Answer: B
NEW QUESTION # 137
Which of the following statements about the interest rates and option prices is correct?
- A. If rho is positive, rising interest rates decrease option prices.
- B. As interest rates rise, all options will rise in value.
- C. If rho is positive, rising interest rates increase option prices.
- D. As interest rates fall, all options will rise in value.
Answer: C
NEW QUESTION # 138
A risk associate is trying to determine the required risk-adjusted rate of return on a stock using the Capital
Asset Pricing Model. Which of the following equations should she use to calculate the required return?
- A. Required return = risk-free return + beta x market risk
- B. Required return = risk-free return + beta x (1 - market risk)
- C. Required return = (1-risk free return) + beta x market risk
- D. Required return = risk-free return + 1/beta x market risk
Answer: A
NEW QUESTION # 139
James Johnson bought a 3-year plain vanilla bond that has yield of 4.7% and 4% coupon paid annually, for
$87,139. Macauley's duration of the bond is 2.94 years. Rate volatility is 20% of the yield. The bond's
annualized volatility is therefore:
- A. 2.64%.
- B. 3.15%.
- C. 2.90%.
- D. 2.81%.
Answer: A
NEW QUESTION # 140
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As the financial industry continues to grow and expand, so too does the need for qualified professionals who possess specialized knowledge in financial risk and regulation. The Global Association of Risk Professionals (GARP) recognizes this need and has developed the GARP 2016-FRR (Financial Risk and Regulation Series) certification exam to ensure that those working in the industry possess the necessary skills and knowledge.
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