2016-FRR Exam Info and Free Practice Test All-in-One Exam Guide Jan-2024
Pass GARP 2016-FRR Actual Free Exam Q&As Updated Dump Jan 10, 2024
The FRR Series Certification Exam offered by GARP is a comprehensive and rigorous assessment of the skills and knowledge required to effectively manage financial risks. Financial Risk and Regulation (FRR) Series certification is globally recognized and respected in the industry, providing professionals with a valuable asset for career advancement. With the increasing importance of risk management in the financial industry, obtaining the FRR Series Certification is a wise investment in one's career.
Preparing for the FRR exams requires a significant amount of time and effort. GARP provides study materials and resources, including textbooks, online courses, and practice exams. Many candidates also choose to enroll in a review course, which can help them better understand the material and prepare for the exam. It is important to note that the FRR exams are challenging, and candidates should be prepared to dedicate significant time and effort to studying.
NEW QUESTION # 172
According to the principles of the Basel II Accord, the implementation and relative weights of the elements of
the operational risk framework depend on:
I. The culture of the financial institution
II. Regulatory drivers
III. Business drivers
IV. The bank's reporting currency
- A. II, IV
- B. I, II, III
- C. II, III
- D. I, IV
Answer: B
NEW QUESTION # 173
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. Hence, the loss rate in this case will be
- A. 5%
- B. 1%
- C. 10%
- D. 3%
Answer: B
NEW QUESTION # 174
A credit analyst wants to determine if her bank is taking too much credit risk. Which one of the following four
strategies will typically provide the most convenient approach to quantify the credit risk exposure for the
bank?
- A. Analyzing distribution of bank's credit losses and mapping credit risks at various statistical levels
- B. Assessing aggregate exposure at default at various time points and at various confidence levels
- C. Simplifying individual credit exposures so that they can be combined into a simplified expression of
portfolio risk for the bank - D. Using stress testing techniques to forecast underlying macroeconomic factors and bank's idiosyncratic
risks
Answer: B
NEW QUESTION # 175
For two variables, which of the following is equal to the average product of the deviations from their
respective means?
- A. Correlation
- B. Covariance
- C. Standard deviation
- D. Kurtosis
Answer: B
NEW QUESTION # 176
Which one of the following four attributes would likely help a trader using exchange-traded options to
establish a leveraged position?
- A. Unlimited losses for long option positions
- B. Option positions have the same cash risks as a margined short futures purchase.
- C. Option positions have the same credit risks as a margined long forward.
- D. Higher degrees of exposure at less cash cost
Answer: D
NEW QUESTION # 177
Which of the following attributes are typical for early models of statistical credit analysis?
- A. The underlying default assumptions failed to develop relatively simple formulas for the determination of
portfolio credit risk. - B. These models assumed the default of any obligor was independent of the default of any other.
- C. These models effectively incorporated herd behavior.
- D. The underlying default assumptions were analytically inconvenient.
Answer: B
NEW QUESTION # 178
Securitization is the process by which banks
I. Issue bonds where the payment of interest and repayment of principal on the bonds depends on the cash flow
generated by a pool of bank assets.
II. Issue bonds where the bank has transferred its legal right to payment of interest and repayment of principal
to bondholders.
III. Sell illiquid assets.
- A. I
- B. I, III
- C. I, II, III
- D. I, II
Answer: C
NEW QUESTION # 179
Which one of the following statements regarding collateralized mortgage obligations (CMO) is incorrect?
- A. CMOs are asset-backed securities that have pools of collateralized debt obligations (CDOs) as
underlying collateral. - B. CMOs are pools of mortgages that are divided according to the timing of cash flows.
- C. CMOs have senior tranches which are considered short-term, low-risk instruments by banks
- D. CMOs are generally less risky investment than CDOs.
Answer: A
NEW QUESTION # 180
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 # 181
Which one of the following four parameters is NOT a required input in the Black-Scholes model to price a
foreign exchange option?
- A. Option exercise price
- B. Underlying exchange rates
- C. Underlying interest rates
- D. Discrete future stock prices
Answer: D
NEW QUESTION # 182
AlphaBank's management is evaluating how changes in its business environment could materially impact risk
categories. As a result, bank's management decides to implement the structure, which facilitates the discussion
in an integrative context, spanning market, credit, and operational risk factors, and encourages transparency
and communication between risk disciplines. Which one of the following four approaches should the
management choose to achieve this strategic goal?
- A. Taxonomy-based risk management approach
- B. Regulatory risk management approach
- C. Scenario-based risk management approach
- D. Enterprise risk management approach
Answer: D
NEW QUESTION # 183
Which of the following statements about parametric and nonparametric methods for calculating Value-at-risk
is correct?
- A. Parametric methods make no assumptions about return distributions, and non-parametric methods
assume returns are normally distributed. - B. Parametric methods generally assume returns are normally distributed, and non-parametric methods
make no assumptions about return distributions. - C. Both parametric and nonparametric methods assume returns are normally distributed.
- D. Both parametric and nonparametric methods make no assumptions about return distributions.
Answer: B
NEW QUESTION # 184
To estimate the interest charges on the loan, an analyst should use one of the following four formulas:
- A. Loan interest = Risk-free rate + Probability of default x Loss given default - Spread
- B. Loan interest = Risk-free rate - Probability of default x Loss given default + Spread
- C. Loan interest = Risk-free rate - Probability of default x Loss given default - Spread
- D. Loan interest = Risk-free rate + Probability of default x Loss given default + Spread
Answer: D
NEW QUESTION # 185
The pricing of credit default swaps is a function of all of the following EXCEPT:
- A. Loss given default
- B. Probability of default
- C. Duration
- D. Market spreads
Answer: C
NEW QUESTION # 186
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. Long position worth $2 million with duration of 10.
- B. Short 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: B
NEW QUESTION # 187
Which of the following statements represents a methodological difference between variance-covariance and
full revaluation methods?
- A. Variance-covariance approach prices positions more accurately than the full revaluation approach.
- B. Variance-covariance approach uses only historic data to compute the covariance matrix.
- C. Variance-covariance approach computes the VAR for each position separately, while the full revaluation
method computes the VAR on a portfolio basis. - D. Variance-covariance approach provides computational advantages over the full revaluation approach.
Answer: D
NEW QUESTION # 188
Unico Delta stock is trading at $20 per share, its annualized dividend yield is 5% and the 12-month LIBOR is
3%. Given these statistics, the 12-month futures contact will trade at:
- A. $40.08
- B. $20.04
- C. $30.04
- D. $10.08
Answer: B
NEW QUESTION # 189
Which of the following statements regarding CDO-squared is correct?
I. CDO-squared use other CDOs and CMOs as collateral.
II. Risk assessment of CDO-squared is almost impossible due to their complexity.
III. CDO-squared have lower credit risk than CMOs but higher than CDOs.
- A. II and III
- B. I, II, and III
- C. I only
- D. I and II
Answer: D
NEW QUESTION # 190
The potential failure of a manufacturer to honor a warranty might be called ____, whereas the potential failure
of a borrower to fulfill its payment requirements, which include both the repayment of the amount borrowed,
the principal and the contractual interest payments, would be called ___.
- A. Market risk; credit risk
- B. Credit risk; performance risk
- C. Performance risk; credit risk
- D. Credit risk; market risk
Answer: C
NEW QUESTION # 191
The Basel II Accord's operational risk definition excludes all of the following items EXCEPT:
- A. Legal risk
- B. Geopolitical risk
- C. Reputational risk
- D. Strategic risk
Answer: A
NEW QUESTION # 192
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. II, III, IV
- B. I, II, III
- C. I, III, IV
- D. I, II
Answer: C
NEW QUESTION # 193
Gamma Bank has $300 million in loans and $200 million in deposits. If the modified duration of the loans is
estimated to be 2, and the modified duration of the deposits is estimated to be 1, then the change in Gamma
Bank's equity value per 1% change in yield will be:
- A. -$3 million
- B. -$2 million
- C. -$1 million
- D. -$4 million
Answer: D
NEW QUESTION # 194
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GARP 2016-FRR exam is one of the most important exams in the FRR Series. 2016-FRR exam covers a wide range of topics related to financial risk and regulation, including risk management, financial markets and institutions, and regulatory compliance. 2016-FRR exam is designed to test the candidate's understanding of these topics and their ability to apply this knowledge in real-world scenarios.
Online Questions - Valid Practice 2016-FRR Exam Dumps Test Questions: https://vceplus.practicevce.com/GARP/2016-FRR-practice-exam-dumps.html