2022 2016-FRR dumps review - Professional Quiz Study Materials
2016-FRR Test Prep Training Practice Exam Questions Practice Tests
NEW QUESTION 137
Which one of the following four factors typically drives the pricing of wholesale products?
- A. Overall risk exposure
- B. Prevailing market price
- C. Long-term competitiveness
- D. Marketing considerations
Answer: B
NEW QUESTION 138
Which one of the following four statements on the seniority of corporate bonds is incorrect?
- A. Senior bonds typically have lower credit spreads than junior bonds with the same maturity and payment
characteristics. - B. In bankruptcy, holders of senior bonds are paid in full before any holders of subordinated bonds receive
payment. - C. Junior bonds always pay higher coupons than subordinated bonds.
- D. Seniority refers to the priority of a bond in bankruptcy.
Answer: C
NEW QUESTION 139
Company A needs to provide a risk probability/frequency score for its RCSA program. If the event is likely to
happen once in 2 years, then the frequency score will be equal to:
- A. 0.5
- B. 0
- C. 1
- D. 0.2
Answer: A
NEW QUESTION 140
BetaFin has decided to use the hybrid RCSA approach because it believes that it fits its operational
framework. Which of the following could be reasons to use the hybrid RCSA method?
I. BetaFin has previously created series of RCSA workshops, and the results of these workshops can be used to
design the questionnaires.
II. BetaFin believes that using the questionnaire approach should be more useful.
III. BetaFin had used the questionnaire approach successfully for certain businesses and the workshop
approach for others.
IV. BetaFin had already implemented a sophisticated RCSA IT-system.
- A. I and II
- B. I and III
- C. III and IV
- D. II, III, and IV
Answer: B
NEW QUESTION 141
In the United States, Which one of the following four options represents the largest component of securitized
debt?
- A. Lines of credit
- B. Education loans
- C. Real estate loans
- D. Credit card loans
Answer: C
NEW QUESTION 142
To estimate the price of gold forwards, an investment analyst focuses on the cost of holding physical gold
(bullion) and the cost of shorting the same. Given that physical gold spot price is $1,000, the annual risk-free
rate is 5%, and the gold lease rate equals 2% annually, the analyst's best estimate of the gold forward price to
equal
- A. $950
- B. $1070
- C. $1030
- D. $1100
Answer: C
NEW QUESTION 143
All of the following performance statistics typically benefit country's creditworthiness EXCEPT:
- A. Low unemployment
- B. High degrees of investment
- C. Low inflation
- D. Low degrees of savings
Answer: D
NEW QUESTION 144
When the cost of gold is $1,100 per bullion and the 3-month forward contract trades at $900, a commodity
trader seeks out arbitrage opportunities in this relationship. To capitalize on any arbitrage opportunities, the
trader could implement which one of the following four strategies?
- A. Short-sell physical gold and take a long position in the futures contract
- B. Take long positions in both physical gold and futures contract
- C. Take a long position in physical gold and short-sell the futures contract
- D. Short-sell both physical gold and futures contract
Answer: A
NEW QUESTION 145
Which of the following factors are typically included in standard operational risk definitions?
I. Human errors
II. Process failure
III. Systems failure
IV. Unexpected events
- A. I and IV
- B. I and II
- C. II and III
- D. I, II and III
Answer: D
NEW QUESTION 146
Which one of the four following statements regarding minimum loss data standards is not correct?
- A. The loss data program must comprehensively capture all material activities.
- B. The loss data entry should only include the date when the event was reported.
- C. The loss data entry may include descriptive information about the drivers or causes of the loss event.
- D. The loss data entry must include the actual loss amount.
Answer: B
NEW QUESTION 147
John owns a bond portfolio worth $2 million with duration of 10. What positions must he take to hedge this
portfolio against a small parallel shifts in the term structure.
- A. Short position worth $2 million with duration of 10.
- B. Long position worth $2 million with duration of 10.
- C. Short position worth $20 million with duration of 1.
- D. Long position worth $20 million with duration of 1.
Answer: A
NEW QUESTION 148
In early March, an energy trader takes a long position in natural gas futures for delivery in June, and hedges
this exposure by taking a position in futures for July delivery. These trades were executed on the expectation
that over time, the relative prices of the June and July contracts will come into alignment, the movement in
these two contracts will largely mirror each other, and as a result of this, the net exposure is minimized and the
position is protected against absolute price movements. However, if the two relative prices do not come into
alignment with each other due to the scarcity of any of the two traded contracts in the futures market, the
trader is likely to become exposed to the
- A. Calendar spreads basis
- B. Product basis
- C. Location basis
- D. Quality basis
Answer: A
NEW QUESTION 149
Which one of the four following statements about Basis point values is correct?
Basis point value:
- A. Provides a quick estimate of the sensitivity of the bank's banking book, to increasing volatility in interest
rates. - B. Refers to the change in the value of a fixed income position for a very small change yields.
- C. Is a risk sensitivity measure used to measure the point spread risk in the banking book.
- D. Is a widely used statistical tool used to measure market risk.
Answer: B
NEW QUESTION 150
Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year
no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate
spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both
interest and principal payments once at the end the year. Delta can only default at the end of the year. If Delta
defaults, the bank expects to lose 50% of its promised payment. What interest rate should Alpha Bank charge
on the no-payment loan to Delta Industrial Machinery Corporation?
- A. 8%
- B. 9%
- C. 12%
- D. 10%
Answer: D
NEW QUESTION 151
Which one of the following four metrics represents the difference between the expected loss and unexpected
loss on a credit portfolio?
- A. Credit VaR
- B. Modified duration
- C. Probability of default
- D. Loss given default
Answer: A
NEW QUESTION 152
Which of the following statements presents an advantage of using risk and control self-assessments (RCSA) in
the operational risk framework?
I. RCSA provides very accurate scoring of risks and controls due to its subjective nature.
II. RCSA program provides insight into risks that exist in a firm, but that may or may not have occurred
before.
III. RCSA program can produce biased but transparent operational risk reporting.
IV. RCSA program allows each department to take ownership of its own risks and controls.
- A. I and III
- B. I, II and III
- C. II and IV
- D. II, III, and IV
Answer: C
NEW QUESTION 153
Which one of the following is a reason for a bank to keep a commercial loan in its portfolio until maturity?
I. Commercial loans usually have attractive risk-return profile.
II. Commercial loans are difficult to sell due to non standard features.
III. Commercial loans could be used to maintain good relations with important customers.
IV. The credit risk in commercial loans is low.
- A. I, II and III
- B. II and IV
- C. III and IV
- D. IV only
Answer: A
NEW QUESTION 154
To improve the culture and awareness of the operational risk, Gamma Bank's CRO decides to promote three
activities within her organization. Which one of the following four activities is NOT typically used to develop
an operational risk framework?
- A. Training
- B. Auditing
- C. Marketing
- D. Planning
Answer: B
NEW QUESTION 155
Which one of the four following statements about the Risk Adjusted Return on Capital (RAROC) is correct?
RAROC is the ratio of:
- A. Profitability to the risk of a trading portfolio or bank business unit.
- B. Profitability to the expected return of a trading portfolio or bank business unit.
- C. Risk to the profitability of a trading portfolio or a business unit within the bank.
- D. Value-at-risk to the profitability of a trading portfolio or a business unit.
Answer: A
NEW QUESTION 156
A credit associate extending a loan to an obligor suspects that the obligor may change his behavior after the
loan has been originated. The obligor in this case may use the loan proceeds for purposes not sanctioned by the
lender, thereby increasing the risk of default. Hence, the credit associate must estimate the probability of
default based on the assumptions about the applicability of the following tendency to this lending situation:
- A. Speculation
- B. Adverse selection
- C. Short bias
- D. Moral hazard
Answer: D
NEW QUESTION 157
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